TRADE

Mukhisa says planned Kenya-US trade deal unfavourable

The Donald Trump's administration is seeking abolition of import duty on agricultural exports to Kenya

In Summary
  • The Africa Growth Opportunity Act (AGOA) set to expire in 2025
  • Kenya exported goods worth $527 million in 2018, primarily apparels, coffee and nuts.

The Kenya-US trade deal is lopsided and will only benefit the latter, the United Nations Conference on Trade and Development (UNCTAD) undersecretary Mukhisa Kituyi has said.

The Kenya-US trade deal is lopsided and will  only benefit the latter, the United Nations Conference on Trade and Development (UNCTAD) undersecretary Mukhisa Kituyi has said.

In an exclusive interview with the Star, the UNCTAD head, said the US market is already open for Kenyan products under the Africa Growth Opportunity Act (AGOA) that expires in 2025.

Kituyi wondered what market Kenya is set to create in the US under the planed Free Trade Agreement, considering it is yet to exhaust existing market openings under AGOA.

 
 

''Kenya is currently permitted to export more than 1,000 items to the US market. It however exports only textiles and a few artifacts worth less than $500 million a year. It should address production and not market,’’ Kituyi said.

He added that Kenya should work towards producing more competitive products for the US market instead of tying itself to conditional market agreements that give much leeway to the US.

He said one of the proposals sent to the US Congress is seeking abolition of import duty on agricultural exports to Kenya, an aspect that is likely to erode the local market.

He asked the Kenyan delegation on FTA to effectively balance national offensive and defensive interest by constantly looking at the trade-off.

''How can I have an agreement where my offensive interests are economically more beneficial than the cost I incur on my defensive interest?’’ Kituyi asked.

He advised that Kenya should consider going with the rest of the continent to the negotiation table with the US on the renewal of Agoa as there was power in numbers.

He added that Kenya should not fall prey to the US government’s trade dominance policy where it is interested in replacing costly multilateral deals with bilateral deals that mostly work against smaller countries.

 
 

His views on the proposed trade deal currently under negotiation echo earlier ones by several trade bodies and lobby groups both locally and regionally.

In July, at least 27 trade lobby groups from Kenya, Nigeria, Uganda, Rwanda and Tanzania wrote to the Kenyan government, voicing their opposition to the proposed deal.

They argued that the FTA will stifle the growth of local industries and lead to the dumping of cheap US imports in the region.

“The agreement portends the danger of crippling sectors such as agriculture and manufacturing and disintegrating of the Kenyan economy,” the joint letter by the group said.

The African Union had earlier criticised Kenya for going alone despite active efforts to set up the African Continental Free Trade Area (AfCFTA).

According to Albert Muchanga, AU’s commissioner for Trade, AfCTA would be the preferred vehicle for a continent-wide trade deal with the US.

In March, the Brookings Institute said the motivations for the US trade deal with Kenya seem more symbolic than economic.

According to the body, Kenya offers the US an opportunity to develop a replicable model for future trade deals with Africa, limited risk in a country where China has tried and failed to secure an FTA.

''The outcome of a US -Kenya FTA will have significant consequences both to intra-African trade as well as countering China’s influence in Kenya,’’ it said.

Last week, the Financial Times claimed that an industry group representing the world’s largest chemical makers and fossil fuel companies is lobbying to influence US negotiations with Kenya, to reverse its strict limits on plastics — including a tough plastic-bag ban.

The claims, which have since been refuted by both Kenya and the US business community, attracted public uproar, with many social media users questioning the country’s urgency in signing a trade deal with the US against her regional peers' advice.

Kenya exported goods worth $527 million in 2018, primarily apparels, coffee and nuts.

Its imports were mainly commercial airplanes and other spacecraft, polymers and medicaments. Kenya has a slim trade surplus that the US will probably be keen to balance.

Trade CS Betty Maina says Kenya is keen to tap at least five per cent of the US market, which has the potential to earn the country more than Sh2 trillion in export revenues annually.