Does the Kenya-US free trade agreement undermine the African Continental Free Trade Agreement whose implementation starts this June? 28 African countries ratified the pact with Kenya being among them.
That has been one of the hot topics after both Kenya and the US announced the commencement of negotiations.
Now, Africa ranks last in terms of regional trade among its members. Intra-African trade in goods remains low at around 10 percent of total trade of Africa. About 80 percent of African countries exports are to markets outside the continent and a similar amount of the continent’s imports come from external sources. Essentially, this is what the Africa Continental Free Trade Agreement seeks to cure.
In principle, the Kenya-US free trade agreement undermines the African Continental Free Trade Agreement (ACTFA). The continental agreement is a multilateral trade liberalisation pact designed to be a supra-national agreement that consolidates markets to encourage local, national and regional traders to expand their territories.
Nigeria provides a good example, the country imports half of its domestic rice consumption, the third top importer of rice in the world but much of it comes from Southern America. Now under ACFTA where tariff barriers are lowered or eliminated, African rice farmers and processors can easily access the lucrative Nigeria rice market ahead of South Americans.
So, when a country which has ratified that supra-national trade agreement breaks out to negotiate and sign an individual trade deal when a supra-national trade agreement basically means countries pooling interests simply means the country is putting its self-interest ahead.
Now away from the principle, the question whether the Kenya-US Free Trade Agreement undermines the Africa Continental Free Trade Agreement will be answered by looking at the substantive gives-and-takes compromise when the two countries finally strike a deal.
So it will be premature to answer that question at this stage in time but from the past trends, it has been observed that in the many Economic Partnership Agreements (EPAs) that African countries have entered into individually with non-African countries, they have been skewed heavily favouring the non-African countries hugely benefitting outsiders whose products have displace intra-African exports.
A good example that provides a better glimpse of how EPA’s negatively affect intra-African trade is that Kenyan traders cant export tea and flowers directly to Nigeria due to the high tariff barriers imposed on the products but the two products are transshipped through Europe to Nigeria after they are packaged as European products where they enjoy easy access to the Nigerian market because of their Economic Partnership Agreement, when in essence the products are originally from Kenya that is within the same continent as Nigeria.
So, in the Kenya-US free trade agreement, such a deal opens the Kenyan market to products continental traders cannot compete with. For example, US exports poultry products, so in such a deal, US poultry farmers will most likely have favourable access to Kenyan market compared to South African companies.
Now, one of the harshest critiques of such bilateral deals has been that they have failed to provide long-term positive effects. Despite African countries signing many bilateral economic partnership agreements that should integrate them to high value markets, African countries have failed to transition away from being agrarian economies.
On the other hand, intra-African trade is projected to have the long-term effect because it has the potential to bring in small scale farmers and traders into the agricultural supply chain where agricultural sector employs more than 75 percent of the workforce whose productivity is relatively low to structural transform economies
Kenya can look at Mexico for a favourable trade deal that can be a major contributor to export revenue and employment, where Kenya is able to secure access to the very protected US agricultural market.
Mexico has utilised its preferential access to the US market to build a success story of how agricultural trade offers real opportunities for the industrial sector as well as the services sector.