US, Britain pacts ‘to boost Kenya’

Kenya’s proposed trade deals with the US and UK, once achieved, will boost its economic activities in coming years, economists have argued, even as the private sector urge caution.

Nairobi and the two global allies have separately opened talks on bilateral trade pacts, each expected to be concluded by December.

The talks have, however, raised eyebrows among East African Community (EAC) peers with which Kenya shares a customs territory. The EAC’s customs union binds individual nations such as Kenya to a common external tariff.

Although talks between Nairobi and London post-Brexit are still largely informal, Washington made it clear in February it will use Kenya as a “model” for pursuing bilateral trade agreements with African countries ahead of expiry of 20-year-old Africa Growth and Opportunity Act in 2025.

London-based Citi Bank chief economist for Africa David Cowan said potential trade deals with the US and UK will be a “plus” for Kenya’s economic growth, which the lender has forecast to remain flat at 5.3-5.5 per cent this year compared to 2019.

“Although we don’t have them in our (economic) forecast, it strikes me that a trade deal with the UK post-Brexit and also US trade deal could both be potentially supportive of growth for Kenya,” he told the Business Daily.

“The reason we didn’t include them is because we don’t have the details and no idea when the agreements will be signed.”

Here at home, the private sector as asked Nairobi to tread carefully on the trade pacts, saying they risk exposing infant industries to unbridled competition while also hurting regional economic integration.

The United Nations Conference on Trade and Development said in a report on February 25 a trade deal between Nairobi and London could add 0.005 per cent to Kenya’s gross domestic product (GDP) and grow its exports by 3.851 per cent.

The report assumed the prevailing tariffs and trade policies under the 27-member European Union (EU) bloc will remain intact in the proposed trade deal post-Brexit.

Kenya, on the other hand, became the first African country to launch formal bilateral trade talks with Washington during President Uhuru Kenyatta’s visit early February.

“A Kenya-US deal might create strains within the East African Community’s customs union, which is Kenya’s most important economic relationship,” William Jackson, chief economist for emerging markets at UK’s Capital Economics Ltd, wrote in a report on Africa on February 27.

Nairobi has struggled to rally Tanzania, Uganda and Burundi to sign a free-trade agreement between EAC and EU, a deal which has been on the table since 2007.