Kenya’s trade agenda needs better public articulation

In his famous 1996 Harvard Business Review article A Country is not a Company, economist Paul Krugman makes two economic points that he argues sit uncomfortably with business audiences. First, that an increase in world exports does not necessarily lead to an increase in world jobs. Second, that an increase in foreign investment necessitates increased trade deficits.

Without getting into the policy economics, the simple accounting argument for the former is that every export (and new job) is someone else’s import (and lost job), while the principle underpinning the latter is that a country’s balance of payments (current and capital accounts) must actually balance.

Keeping it simple, Mr Krugman suggests that this contradiction is a function first of the fact that business is about specific experiences rather than broad (economic) principles (theory), and second, of the idea that the economy, in and of itself, is a complex closed (input=output) system whereas business isn’t.

I offer this reflective opening as context to a question we don’t seem to spend too much time on: What is Kenya’s actual international trade agenda? As opposed to what our big business corporate strategies are. Not in specifics, but broadly. Twenty years ago, our corporate titans were lamenting that Kenya had become a “trading nation”, clearly with one eye on the lack of growth in our manufacturing base.

Twenty years later, what does our trade agenda mean for our counties and regional economic blocs? And I don’t mean the “jua kali sheds” every county loves to claim as its main trade achievement. I am thinking more broadly; what’s the international space we are pursuing for what the EU calls the four freedoms (of movement): goods, services, labour and capital, plus intellectual property? And the emergent freedom of our times, data? Consider this the opening question to our Trade people.

At which point, we then have a position on which to reflect upon all manner of free trade agreements and opportunities currently sitting in our laps, and what they actually mean for us.

By example, how well is Kenya positioned as regards the African Continental Free Trade Area? Forget raw materials, are we ready with intermediate or finished goods (manufacturing, anyone?) in the way that South Africa and Ethiopia seem to be? Is our transport and logistics infrastructure an advantage?

Does our deep financial and business (including professional) service base offer a winning formula? On the former, it is said that trade financing will be a core enabler of AfCFTA’s success. Are we there yet? Then there’s capital. The smart money positions South Africa, Kenya, Nigeria/Ghana/Senegal/Cote d’Ivoire and somewhere in the Maghreb as key hubs of domestic and foreign direct investment. On innovation hubs, think Kenya, South Africa, Mauritius, Morocco and Rwanda. Ready or not?

Back to the agenda. What does all of this mean for our agenda within the East African Community(EAC) and the Common Market for Eastern and Southern Africa(Comesa) (plus the South Africa Development Community(SADC), the Economic Community of West African States(ECOWAS) and the rest)? Or the proposed Free Trade Area (FTA) that combines EAC, COMESA and SADC?

In a roundabout way, this brings us to three agreements on which Kenya is now “going it alone”. First, the post-Brexit Kenya-UK (or is it UK-Kenya?) Trade and Economic Partnership Agreement. Here are the contradictory press headlines we are reading. “UK-Kenya trade agreement may threaten regional integration”. “Kenyan firms get 12 years to shape up under UK deal”. “EAC secures unlimited access to Kenya-UK trade deal”. “Kenyan MPs refuse to ratify trade pact between Kenya and UK”. Now there’s even a court case demanding public participation before this agreement is ratified. Confusing, right? Throw in the separate agreement that Kenya, as a lower middle income country, is pursuing with the European Union (headline: “Region okays Kenya’s proposal to go it alone with European Union”).

Then there’s the proposed post-AGOA Kenya-US (or US-Kenya) Free Trade Agreement, held in abeyance due to the US Presidential Election, but now apparently back on track. I’m not one for suspicion, but beneath Kenya’s fairly general and America’s pretty specific negotiating objectives is the simple question of market access (remember – goods, services, labour, capital, intellectual property, data).

Though space does not permit a more specific look at what is at stake in these agreements, there is a permanent truism in the notion that the devil is always in the detail. Our highly competent senior trade officials – both CS Betty Maina and PS Johnson Weru - have stated publicly that these agreements are good for Kenya. They argue that the public participated (public participation is a weird animal in Kenya). We need more.

More isn’t just the detailed, and most likely convoluted, text of the agreements; or promises that every agreement respects every other agreement; it’s about what the agreements really mean – in a truly visionary sense - for Kenya’s future trade (and related sector) pathways (again, goods, services, labour, capital, intellectual property, data). Basically, the country’s trade agenda. Then we can talk companies.