New Bill proposes tax-free entry of tea and coffee into US

Kenya’s top foreign exchange earners— tea, horticulture and coffee —are lined up for access into the US market in a fresh bid to boost exports under preferential trade with African countries.

The proposal to include all agricultural products in the list of products exported to US duty-and-quota -free under the African Growth and Opportunity Act (Agoa) is contained in a Bill that is already before the US Congress.

If passed, the changes in the legal text of Agoa will allow African exporters to bypass stringent quality screening that have traditionally slowed the sale of their produce in the US market.

“Sanitary and Phytosanitary Standards, though important for maintaining food quality and protecting human, plant and animal health, do impose additional demands on exporters, and can limit agricultural market access for Agoa-eligible products.” says a new report on Agoa .

The report titled the African Growth and Opportunity Act: Looking Back, Looking Forward — is written by Mr Witney Schneidman, a key drafter of Agoa law during Bill Clinton’s administration.

Since Agoa’s inception 10 years ago, agriculture—which accounts for a quarter of Kenya’s Sh2.7 trillion GDP and employs more than 70 per cent of population— has not made any noticeable impact on Kenya’s (mainly textile) Agoa exports.

Trade ministry officials together with private industry players and top officials of Export Processing Zones (EPZ) Authority are the US to lobby the Congress to put the Bill in its priority list.

Despite low level of value addition in agriculture, the current legal text of Agoa envisages processed products as the basis for sustaining the preferential trade relationship.

The report released ahead of last week’s Agoa forum which took place in Washington attributes low contribution to agriculture in the Agoa trade to the fact that the products are subjected to same conditions that exporters from developed economies face.

The report adds, “Although the US provides a great deal of capacity- building support to Africa, more support is needed to help countries meet these standards and export agricultural goods to the US market—as well as coordinate the activities of the US agencies that provide this support.”

For Kenya, revising Agoa text to include agricultural products means increased inflow of hard currencies from tea, horticulture and coffee industries— the top foreign exchange earners which exporters have aggressively been scouting for new market outlets.

Last year, Kenya earned Sh109 billion from tea exports— mainly to Asian countries with the earnings from US falling below five per cent.

The country also earned Sh98 billion from exports of horticultural products but more than 80 per cent of this receipt came from Europe. Coffee export also relies mainly on European countries despite the early inroads it had made into the US market.

Easing entry of these top foreign exchange earners into world’s largest economy is likely to come in handy in addressing the widening gap between imports (which hit 1.3 billion in 2011) and exports (Sh511 billion)

This mismatch—which worsened Kenya’s trade balance by 49.7 per cent in 2011 compared to 21.3 per cent in 2010 — had earlier been cited for piling pressure on shilling to record 107 against the dollar in October last year.