Ideas & Debate

Aim for better Kenya, US trade deals in Biden era

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President Uhuru Kenyatta and US leader Donald Trump at the White House in Washington, DC during an official visit August 27, 2018 . PHOTO | JOAN PERERUAN | NMG

Summary

  • The government must negotiate better terms with Joe Biden’s administration ensuring that Kenya maximises the remaining years of Agoa, negotiates duty-free quota-free market access for Kenyan products to the US, strengthen commercial cooperation between the two countries, reduce barriers to trade and investment and explore talks on future Kenya–US bilateral trade and investment relations under the FTA.

Kenya and the United States have strong and deep-rooted diplomatic relations, which have existed since Kenya attained self-rule.

On February 6, 2020, President Uhuru Kenyatta and President Donald Trump in Washington DC announced the intent for Kenya and the US to negotiate and conclude a Free Trade Area Agreement (FTA).

On July 8, the two countries officially launched negotiations for FTA. According to the World Bank, Kenya is one of Africa’s most dynamic economies and the second-largest beneficiary of Africa Growth Opportunity Act’s (Agoa) tariff benefits.

The US views Kenya as a strategic partner in the region not only in terms of trade but also security. If successful, this agreement would be the first US FTA with a country in sub-Saharan Africa.

The deal would, among others, ensure that there is no disruption of Kenya’s market access to the US after Agoa expires on September 30, 2025, enhance and diversify exports of goods and services into the US under predictable and preferential terms, ensure a market for goods and services in the US, support development of value chains, especially in production and value addition, creation of decent jobs and sustainable livelihoods and increase in the inflow of US foreign direct investment into Kenya.

Beyond Agoa in 2025, Kenya still needs much economic integration with developed economies like the US, Germany, France and China.

Trump’s administration was characterised by a lot of supply chain interruptions and non-commitment to international agreements.

President Trump’s rhetoric, attitude, and his “America First” campaign eroded the US’s hegemonic position and symbiotic ties with other powers and allies in the international scene.

Trump’s unilateral decision to announce the recognition of Jerusalem as the capital of Israel, pulling out of the Paris climate change talks and Huawei, Tik-Tok wars, among others, demonstrated a president who did not understand the importance of foreign relations and global integration.

Due to the technological advancement world over, the structure of the international business environment has changed significantly in recent years. Countries are advocating more integration than building trade walls.

The growth of trade blocs throughout the world has resulted in increasing global supply chain integration. This encourages more information sharing, planning, coordinating and controlling materials, parts and finished goods at the strategic, tactical and operational levels both internally and externally. To succeed in this digital era, organisations must manage the integration of their businesses, technology, people, and processes not only within the enterprise but also with other supply chain members.

According to the United Nations Conference on Trade and Development, an integrated approach in global supply chains can offer economies in cost, supply chain capacity, management, equipment inventory owning, holding and use, information and communication systems and facility requirements.

Supply chain professions, practitioners, consumers and stakeholders look up to the new US administration to enhance supply chain integration and globalisation that the Trump regime almost eroded.

According to Harvard Kennedy School, supply chain integration reduces barriers to the global movement of capital, goods, services, people and information and has facilitated increased trade and FDI.

Kenya’s foreign policy does not only aim to enhance regional peace and security and promote multilateralism but also promotes regional and global integration. For supply chain integration to be realised, Kenya must improve its ICT infrastructure.

Supply chain integration is feasible with well-developed ICT which would facilitate economic growth, having a positive impact on gross domestic product and increase in FDI.

Studies show that the growth of global supply chains integration has initiated industrialisation and high rates of economic growth in several developing economies.

The US and Kenya’s strong trade ties have over the years been demonstrated by the increased value of exports and imports. In 2018, Kenyan export under the Agoa represented 88 per cent of exports to the US. Among Agoa-eligible countries, Kenya is the second-largest exporter of textile and apparel products to the US with a market share of 23.2 per cent.

The government must negotiate better terms with Joe Biden’s administration ensuring that Kenya maximises the remaining years of Agoa, negotiates duty-free quota-free market access for Kenyan products to the US, strengthen commercial cooperation between the two countries, reduce barriers to trade and investment and explore talks on future Kenya–US bilateral trade and investment relations under the FTA.

Due to the change of guard in the White House, Kenya must sharpen its negotiation skills to get a better deal. Congratulations to President-elect Biden are in order.

Panya, Procurement and supply chain consultant, lecturer and researcher at the Jomo Kenyatta University of Agriculture and Technology.