The negotiations for a Free Trade Area (FTA) between Kenya and the United States of America (‘USA’) are ongoing.
This article provides a summary of a podcast discussion hosted at Africa iShare on the topic. You can listen to the full podcast at – https://54ishare.com/podcasts-africa-ishare/.
What are the motivations for both countries in negotiating an FTA.
The motivations for FTA from the Kenya perspective are largely:
- The African Growth and Opportunity Act (‘AGOA’) will expire in 2025. It is not certain that the USA Congress will renew AGOA. The AGOA has been effective since 2000. It offers a preferential trade regime for select countries in sub-Sahara Africa. Kenya wants to secure the access it has to the USA market through a FTA should the AGOA not be renewed.
- USA is the third largest export market for Kenya. The main exports from Kenya to USA consist of, coffee, tea, apparel and nuts. Bearing the AGOA in mind and the access it grants to Kenya, the imminent expiry of the AGOA worries Kenya. Thus, the prospects of an FTA look appealing to Kenya.
For the USA side, the motivation for having an FTA in Kenya has been subject to debate and is seen as questionable. This is especially in view of the fact that, the AGOA has been used by the USA as leverage for negotiating for US interests within Sub-Sahara Africa. Moreover, the AGOA has largely been of greater benefit to the US than the African countries party to the agreement. That said, some of the likely motivations for USA are:
- China has been increasing its influence within Africa through the Belt and Road Initiative (‘BRI’) and through loans made to Africa. The USA, especially under the Trump administration, has been a strong opponent to domination of China. Kenya, being a pioneer in the China BRI becomes a good target for US to dilute China’s growing influence.
- To protect any other USA interests in Kenya and Africa. The interests being economic and political.
What are some reactions to the negotiations?
The negotiations have generated quite some heat within Africa. This is especially because Kenya is within the East Africa Community (‘EAC’) that is already operating a customs union. Additionally, Kenya is part of the Africa Union (‘AU’) and Common Market for Eastern and southern Africa (‘COMESA’). Moreover, the Africa Continental Free Trade Afrea (‘AcFTA’) which is aimed at creating a Free Trade Area in Africa is set to quick off in 2021 and Kenya is part of the AcFTA.
A number of sources have questioned the benefits that Kenya may derive from the FTA with USA. This is especially in view of the difference in development levels between USA and Kenya. Being at different development levels means that US companies are likely to flood the Kenyan market. This will pose a threat to domestic industries which largely comprise of Micro Small and Medium Enterprises (MSMEs).
Have a listen to the whole podcast for the full discussion on Kenya Free Trade Area with USA here.
Listen to all our past discussions on our YouTube Channel.