Kenya is vying to become the manufacturing hub for American companies seeking to relocate or diversify out of China in fresh trade talks Washington opened with Nairobi in July.
Industrialisation and Trade Cabinet Secretary Betty Maina said Nairobi will be negotiating a deal that will lay ground for a manufacturing base for the US firms with a key focus on tech factories.
“With all the changes globally, the US firms are looking at identifying new production bases for their products. They are diversifying out of their traditional production places in the Far East, particularly China,” Ms Maina told the Business Daily.
“This gives us an opportunity as a country to attract these new investments. That is why it [proposed deal] is called trade and investment partnership that is informed by the need for US firms to diversify their production bases and for us to find new products [for export].”
US manufacturers operating in China are escalating decade-long plans to relocate production after being rattled by strict Covid-19 lockdowns in April and May, which further disrupted supply chains and bit into their profits.
Rising cost of wages and on-and-off trade tiffs between Washington and Beijing have seen US manufacturers in labour-intensive sectors such as textiles and furniture migrate production lines to other countries such as Indonesia and Bangladesh over the last decade.
Recent reports have suggested US firms that produce electronic products such as smartphones and tablets are the latest to slow down fresh investment in China, and are considering shifting production lines to other countries.
“If it is going into Internet of Things and the products of Internet of Things or digital products, this is an opportunity for Kenya to showcase it by attracting investments out of the US, making digital products that are geared towards the US market but utilising the trade agreement to facilitate better access and better framework,” Ms Maina said.
“I have given the example of digital trade and opportunities because Kenya has distinguished itself in this space of e-commerce and digital. It is a regulated partnership with a large party [the US]. It has potential for great growth.”
The two parties are keen on a deal such as the US-Dominican Republic-Central America FTA (CAFTA-DR) which “facilitates trade and investment and further regional integration by eliminating tariffs, opening markets, reducing barriers to services and promoting transparency”.
Kenya has long sought a full free trade agreement with the US, and discussions started in earnest in August 2018 when President Uhuru Kenyatta made a visit to the White House.
Mr Kenyatta and then US President Donald Trump at the time identified economic development and trade as the pillar of the “strategic relationship” between Kenya and the US.
The visit came on the back of Mr Trump’s slur on Africa, describing certain immigrants as being from ‘shithole’ nations on the continent.
It was not until two years later in July 2020 that the two countries launched formal negotiations for a free trade agreement. The Trump-era talks were, however, slowed down by Covid restrictions before being temporarily put on the ice when the current administration of Joseph Biden took power in January 2021.
The Biden administration has now given the green light for the bilateral talks — which will form the benchmark for the rest of Africa — to restart following a review of the Trump-era document.
Washington consequently launched the “rejigged” strategic trade and investment partnership with Kenya on July 14 after multiple interactions with trade officials in Nairobi.
The negotiating teams are to regroup in mid-October under a new administration which will succeed Mr Kenyatta’s after August 9 polls.
The October meeting is expected to come up with a roadmap for engagement on 10 pillars, including agriculture, digital trade, action on climate change, and trade facilitation and customs procedures, according to an earlier communique.
“What we are negotiating is a differently-named creature, but the objectives of the US and Kenya haven’t changed in pursuit of this agreement,” Ms Maina said.
“Trade is a fairly complex matter, it is also a very sensitive matter in any country, not just in Kenya. We will negotiate a lot of the pillars that we had started with the Trump administration.”