More than 65,000 jobs at Kenya’s low-cost export processing zones (EPZs) are at stake if the US fails to renew a deal allowing duty-free access for African goods, which expires at midnight on Tuesday, exposing exporters to high tariffs.
Some of the firms that operate under the expiring African Growth and Opportunity Act (Agoa), largely at the Athi River EPZ, reckon a sudden tariff shock threatens years of gains, and are fretful of losing market share in the US to competitive countries like Bangladesh and Vietnam.
The firms fear that tariffs for shipments of eligible products such as apparel, textiles and nuts under Agoa will surge to more than 30 percent from the current zero percent duty from October 1.
A Kenyan factory, United Aryan, which exports Wrangler and Levi’s jeans to US stores under the deal, says that it this week shed 1,000 or 10 percent of its workforce as duty-free access expires.
“The uncertainty is not only with buyers, but with lenders, the banks, and all that. Everybody’s very nervous,” Pankaj Bedi, who chairs the apparels manufacturers and exporters sector at the Kenya Association of Manufacturers (KAM), told AFP at meetings in New York last week between business representatives and US officials.
The tariff-free access offered by Agoa is credited with enabling manufacturing successes, such as the garment industry in the mountain kingdom of Lesotho, which is the largest African exporter of apparel to the US.
In Kenya, export earnings from Agoa jumped 41.9 percent to Sh60.5 billion since 2020 as employment increased by 21,210 over the period.
Any extension would need to be approved by Congress, which has not yet taken up legislation to extend the deal but has in the past retroactively extended expired trade legislation and refunded importers.
A White House official told the Financial Times on Friday that “the administration is supportive of a one-year extension of the programme”.
On Monday, the Ministry of Investments, Trade and Industry was confident a deal would be reached, adding that Nairobi was actively lobbying Washington to extend the 25-year duty-free access pact.
“The fears [over jobs] are unwarranted … you have seen the government effort to resolve the matter proactively. The President [William Ruto] has made deliberate steps to lobby USA authorities in the extension of Agoa,” Cabinet Secretary Lee Kinyanjui told the Business Daily on Monday.
“The response [from Washington] is reassuring. Keep cool, professional driver is in control.”
But Mr Bedi’s sentiment points to nervousness among industry players.
The lapse of the preferential trade scheme, first enacted by former President Bill Clinton in 2000 before being renewed in June 2015, has presented new uncertainty for Kenya’s manufacturing hubs in Athi River, Thika and other EPZs, where most of the Agoa-supported firms are located.
Latest data from the Kenya National Bureau of Statistics (KNBS) showed the 40 companies operating under the Agoa programme employed 66,804 people last year— 15.18 percent more than 58,002 in 2023 —and injected Sh38.27 billion in new capital investments.
“This sudden jump in tariffs could disrupt long-standing trade relations and severely disadvantage African exporters, particularly in highly protected sectors like textiles and apparel, where Agoa has so far provided critical market access,” United Nations Conference on Trade and Development (UNCTAD) said Monday.
For example, Kenya would see its trade-weighted average US tariff nearly triple, jumping from 10 percent to 28 percent.
The expiry of the pact will also put at risk earnings from Agoa exports, dominated by garments and apparel, which increased 19.20 percent in 2024 to Sh60.57 billion, up from Sh50.82 billion the previous year.
Mr Bedi was among the business leaders who accompanied Kenyan government officials to meetings with top American apparel retailers and importers under the American Apparel & Footwear Association (AAFA) on the sidelines of the 80th session of the United Nations General Assembly meetings in New York last week.
“Everybody we met from the US side is in agreement that, yes, Agoa should continue. But still there’s no champion... They’re all waiting for a sign from the White House, basically,” Mr Bedi, who could not respond to Business Daily on Monday as he was on a flight back from the US, told the AFP last week.
The delegation, under Kenya Private Sector Alliance (Kepsa), called for a transition period of one to two years to avoid sudden disruptions in supply chains and trigger job losses in Kenya’s apparel sector as well as America’s logistics, retail and distribution sectors.
Kepsa said the lapse of the Agoa pact will not only hit Kenyan apparel and garment producers and their workers, but also US supply chain resilience, consumer savings and influence in Africa.
The business lobby estimates that the zero-tariff pact delivers $200 to $250 million (Sh25.85 billion to Sh32.31 billion) in consumer savings in America annually by lowering the cost of everyday goods such as jeans and uniforms.
“We remain hopeful of a mutually beneficial outcome that secures the interests of both countries,” Mr Kinyanjui said. “Kenya-USA relations are strong and driven by strategic partnerships built over many years. We expect a reflection of this in trade relations.”
Agoa’s future now hinges on US politics because the Republican-controlled Congress must approve any extension.
But unlike in 2015 when then President Barack Obama signed the Trade Preferences Extension Act three months before the previous deadline after Congress’ nod for another decade, lawmakers and the protectionist Donald Trump’s administration have shown little urgency and are leaning towards allowing the deal to lapse.
A bipartisan effort by Congress to extend Agoa by 16 years to 2041 did not sail through the American parliament, and this was complicated by the return of Mr Trump to the White House in January.
The US President has repeatedly dismissed long-standing free trade deals as lacking “reciprocal terms”, and pushed for bilateral arrangements instead.
Kenyan exporters have as a result of the US policy shift been slapped with a baseline US tariff of 10 percent. In the absence of Agoa, industry players say, duties can climb above 30 percent—levels that manufacturers say will wipe out their price advantage.
“We are asking the US to seriously consider renewing and extending Agoa for at least five years because it is a platform that connects Africa and the US in a very fundamental way,” Dr Ruto said in New York last week. “It can go a long way in addressing trade deficits and challenges that exist at the moment. We believe that Agoa gives both Africa and the US the best chance to expand and deepen trade.”
