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Let’s not become a bazaar for US products

By Ken Opalo | February 8th 2020 at 17:03:00 GMT +0300

Kenya is in talks with the US on a bilateral trade agreement. This comes on the back of the African Continental Free Trade Agreement (CFTA) scheduled to come into force this year. Kenya has formally ratified the CFTA treaty, and currently trades with the US under the African Growth Opportunity Act (Agoa) that is scheduled to expire in 2025. Established in 2000, Agoa grants qualified goods from eligible countries access to the US duty free. Thirty nine African countries currently qualify for Agoa benefits. In 2018, Africa-US trade (imports plus exports) totaled $40.9 billion. Africa-China trade in 2018 totaled $204.2 billion. The US has a lot of catching up to do on this front.

Having trade talks with the US raises questions about Kenya’s role in the CFTA. Like with Agoa, the expectation was that Africa would negotiate a joint trade agreement with the US and other major economies. In that light, Kenya might appear a spoiler against continental unity. While in Washington, DC for the trade talks, President Uhuru Kenyatta vowed that our objective is not to hobble the CFTA, but be a “pace-setter” for the rest of the continent.

Absent greater economic integration and enforcement of trade pacts within Africa, it would be hard for the entire region to negotiate trade agreements as a bloc. Therefore, it makes sense that leading economies in the region would pursue bilateral agreements with the hope of jumpstarting their own export markets. Stronger African cooperation is only possible on the back of strong African states.

If the trade agreement with the US serves to boost productivity in our export sector, our neighbours will stand to benefit from cheaper and higher quality products. About 40 per cent of our trade is with fellow African countries, with Uganda being our biggest trading partner.

All of the above is conditional on Kenya getting a good trade deal. We are America’s 85th largest supplier of goods imports, while they are our 7th largest export destination. The US is a lot more important to us than we are to them (we are their 110th biggest export destination). However, our wider relationship with Washington gives us some leverage. We have a strategic partnership with them on the security front and are an important economic and diplomatic hub in the region. Ethiopia or Tanzania might be alternatives in the future, but presently both have internal issues that limit the scope of their engagement with the US. We should not be satisfied merely by our recognition as a strategic partner. Instead, we should maximise our leverage and get important concessions from the US to the benefit our Kenyan workers.

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We must not simply become a bazaar for American products. Rather, we should have meaningful and complex economic relations that will see American firms invest in Kenya, transfer technological know-how to Kenyan workers, inspire Kenyan firms to elevate their management and technical skills, and create markets in the US for our products.

Overall, we are starting from a low base in trade relations, a fact that should inspire bold thinking among our negotiators. In 2018, Kenya-US trade barely broke the $1 billion barrier. We sold $644 million worth of goods to the US and took in $365 million worth of imports. For perspective, South Africa’s total trade with the U.S. was $18.9 billion in 2018. Clearly, we have a lot of room for improvement both in terms of volume and sectors. We must seek to strike the best deal possible for our workers and firms.

- The writer is an Assistant Professor at Georgetown University

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