High Stakes for the U.S-Kenya Trade Agreement
May 19, 2020
This commentary is part of the Strategic Trade series supported by the Atlas Network.
When President Trump in February 2020 said a trade deal with Kenya “probably” would happen, he committed the United States and Kenya to undertake a politically fraught and precedent-setting negotiation. The United States currently does not have a free trade agreement (FTA) with a sub-Saharan African country, and when U.S. Trade Representative Robert Lighthizer let it slip that he intended to find a prospective candidate, it ignited a firestorm of equal parts acclaim and condemnation. The acclaim is easy enough to understand; U.S. trade with the region has been disappointing—rarely more than 1 percent of all U.S. foreign investment—despite three decades of unilateral trade preferences. The reasons for condemnation, or at least apprehension, are more complex. U.S. and African commentators suspect the deal is more about countering China than about sub-Saharan Africa, fear it presages the end of the Africa Growth and Opportunities Act (AGOA) benefits, and predict it will undercut recent moves to establish a continent-wide free trade zone. If the FTA (and future FTAs) are to succeed, the United States and Kenya will have to prove the critics wrong.
The United States started the FTA process on the wrong foot, framing it as part of its competition with China rather than about deepening trade links. In early 2018, Lighthizer was explicit that an FTA was about China, warning that “if we don't figure out a way to move them right then China and others are going move them in the wrong direction.” This statement was counterproductive, feeding Kenyan opinion pieces that warned about “U.S obsession with China” and advising Kenya to “watch its steps.” Kenyans have grown tired of hearing about China from the United States, including from an ambassador who rarely misses an opportunity to take a swipe at Beijing. It is true that Kenya imports more than double from China what it imports from any other country, and it owes Beijing lots of money— some 33 percent of the country’s external debt—for various infrastructure projects, including the Standard Gauge Railway. Kenyan president Uhuru Kenyatta, however, has insisted that “we want to work with everybody, and we think there is opportunity for everybody,” and rejects those countries who behave “like Africa is for the taking.” Substantively, the perception that the FTA is a response to Chinese activity in the region risks turning off other African states that are disinclined to choose sides to deal with the United States. Gerhard Erasmus, founder of the Trade Law Center, concludes the United States and Kenya will have to show it is possible to pull off this balancing act.
The announcement of U.S.-Kenya FTA negotiations spurred another round of handwringing over the fate of AGOA. U.S. officials routinely express their disappointment with the decades-old trade legislation, which provides tariff-free access on 6,500 products to 39 countries. In 2019, U.S. Trade Representative for Africa Connie Hamilton said AGOA has not been “a game-changer for many countries” and has talked about thinking beyond AGOA when the trade-preference regime expires in 2025. While there is a bipartisan consensus that it is time to graduate from AGOA, the administration’s bilateral approach to FTAs almost certainly will not move fast enough to cover the region’s 49 countries before AGOA’s expiration. A “network of agreements,” as envisioned by Assistant Secretary of State for African Affairs Tibor Nagy, similarly is unrealistic; some countries will not meet the rigorous standards for a reciprocal trade agreement with the United States. Mukhisa Kituyi, secretary general of the United Nations Conference on Trade and Development, worries that an FTA with Kenya will weaken the region’s collective bargaining power regarding AGOA. The United States and Kenya will need to assuage concerns that an FTA will not portend a premature end to AGOA without a plan for the other 48 sub-Saharan African countries.
Support the AfCFTA
The United States and Kenya have faced a barrage of criticism about the FTA’s negative implications for the African Continental Free Trade Area (AfCFTA) agreement. The AfCFTA—which has been signed by 53 out of 54 countries, as well as Western Sahara—has the potential to unite a market of more than 1.2 billion people and a combined GDP of more than $3.4 trillion, which would be the fifth largest economy in the world, larger than India’s nominal GDP. It is widely viewed as a cure for many of the region’s economic woes, especially its low level of intra-African trade. Many of its boosters, consequently, regard the FTA as a spoiler. Erastus Mwencha, a former African Union (AU) Commission deputy chairman and the first secretary-general of the Common Market for Eastern and Southern Africa, has been especially vocal. He points out that “under the AU, the African heads of state have discouraged member States from entering into bilateral free trade negotiations with third parties because they jeopardize the AfCFTA.” Washington and Nairobi have tried to challenge this interpretation, arguing that the FTA will complement Africa’s regional integration efforts. However, it is clear that the FTA poses significant challenges for all of the parties. A former senior African official explained that while the AfCFTA does not prohibit members from negotiating with other parties, the most-favored nation provisions means that “any advantage, concession or privilege granted to a Third Party under such arrangements is extended to other State Parties on a reciprocal basis.” The United States and Kenya will have to reconcile these issues, reassuring other African governments that their agreement will not undermine the region’s most historic FTA.
A High-Wire Act
There is more at stake in the U.S.-Kenya FTA negotiations than just increasing trade between the world’s largest economy and one of Africa’s largest economies. The United States has to demonstrate that its interests are broader than merely countering China’s rise in Africa. It also has to show that its negotiations with Kenya will not prejudice AGOA preferences for other countries or harm the AfCFTA’s progress. The path ahead is not an easy one, but if these challenges are resolved, the FTA has the potential to strengthen and reaffirm U.S. ties to sub-Saharan Africa.
Judd Devermont is director of the Africa Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C.
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