Kenya and the US are this week expected to kickstart negotiations on a free trade agreement.
The US is an important trading partner and one of the most significant investors on the continent hence working towards securing a free trade pact is a big deal for Kenya since such partnerships are a means towards poverty alleviation, development and further integration into the world economy.
But it would be premature for Kenya to pop the champagne bottle to celebrate a free trade deal with the US because such negotiations, especially reciprocal trade pacts like this one, take time to materialise.
Though we should be hopeful that it will not take ten years since in five years’ time the African Growth and Opportunity Act (Agoa) deal – the current preferential trade agreement through which we access the US market – will be coming to an end and a second-generation trade pact has to be in place prior to that.
It’s for this reason that the Kenya-US free trade agreement, if achieved, will be used as a model that can be replicated in other African countries.
Now, its my belief that the negotiations will start against the backdrop of the Agoa as the starting where Kenya mostly pitching about what has worked for her under Agoa and how can the limitations be addressed in the free trade agreement. The Agoa is a nonreciprocal preferential trade agreement that came into force in 2000 with the explicit goal of providing sub Saharan Africa countries with the most liberal access to the US market.
Agoa’s goals are for the US and the member countries to improve trade, investment and economic co-operation but there are political and economic requirements for the African countries to qualify for eligibility.
So, has Agoa impacted African member countries? Yes. For the 20 years that the pact has been in place, exports to the US under Agoa have become the largest category of trade for members, making it arguably one of the most important trade agreements for those African countries.
Despite that impressive record, research shows that many African countries have underutilised the trade agreement. Some countries like Kenya, South Africa and Mauritius have immensely benefited and even reached a glass ceiling in exploiting the pact.
Under the Agoa deal, Kenya is a net exporter of cut flowers to the US. Lesotho is the leading exporter of textile and apparel followed by Kenya.
The textile industries in both countries have been transformed from domestic supplier to export-oriented. Mauritius leads in the sea food sector, apparel, sunglasses and jewellery segments while South Africa exports Mercedes Benz C-Class and BMW 3 series models to the US.
These are examples of impressive positive change through trade liberalisation and the countries that have performed dismally have done so because of infrastructure and local capacity challenges.
But despite Kenya boasting impressive trade facilitation in the textile and apparel market under the Agoa deal, critics have punched holes into the trade pact for failing to integrate the textile industry where cotton farmers and other local material suppliers at the bottom end are fully integrated in the supply chain for long-term success.
Now, the reason why Agoa has failed in this backward integration is because it is a preferential trade pact where the duty-free preference has limitations that are protectionist in nature, meaning exporters enjoy limited access unlike a free trade agreement.
So Kenya starting talks with US for a free trade agreement deal will be moving trade facilitation further into looking at such long-term opportunities that the US market promises.
We can only hope that Kenya will be able to secure a trade pact that integrates farmers with US supply chains for a long-term redistributive impact.