Last week, interesting rumblings started pouring out of State House Nairobi and the White House in Washington DC. Global media firms from London to Tokyo to Cape Town to Berlin picked up on the story and trusted the dawning of a new era.
It appears that during President Uhuru Kenyatta’s trip to the United States this week, Kenya will start discussions with America regarding the first sub-Saharan African free trade agreement with Washington.
Since the US has never before entered into such a sweeping deal with a Sub-Saharan nation, it generates much excitement for investors and entrepreneurs in both countries.
These nations are indeed very close, making Kenya a logical choice for their first Sub-Saharan agreement. The US retains only one other free-trade deal on the continent with Morocco in North Africa. But America and Kenya are arguably closer psychologically, culturally, and linguistically and our two economies hold similar compositions proportionally of service sector, manufacturing, and agriculture.
Kenyans’ superb mastery of the English language endears us to many Americans. Further, due to wildly popular peer-to-peer lending websites like Kiva.org and former US President Obama’s Kenyan roots, Americans are more familiar with Kenya than ever before. The US does not even have free-trade agreements with the European Union or China.
More than 100,000 Kenyans live in the US. Further, due to the large number of Kenyan-born individuals having also lived in the US, the number of dual national citizens has pushed the number of Americans living in Kenya above 30,000 for the first time.
From a Kenyan perspective, free access to the world’s largest economy could provide significant gains to our business sectors. Standing at $19.39 trillion, America’s economy is 258 times the size of Kenya at $74.94 billion. But as Kenya continues to sustain rapid gross domestic product growth, the size difference number drops each year.
The existing African Growth and Opportunity Act (Agoa) between 39 African countries and the US allows duty-free access for roughly 6,500 products, mostly textile related. But the process of proving textile point of origin and the mountain of paperwork before Kenyan goods can arrive in America is truly time-consuming and overwhelming for many entrepreneurs. US embassies across the continent often have Department of Commerce personnel who help explain Agoa and processes for African businessmen and businesswomen. A free trade agreement would likely make the process simpler and dramatically widen the products allowed for duty-free export to the United States.
How could Kenya benefit specifically? Due to the lower cost of labour in Kenya, our manufactured products could boom in demand at lower prices points in the US. Then Kenyan wages would steadily increase at a faster rate.
Agricultural exports will likely not take off in high volume due to the large amount of subsidies that the American, just like European, government provides to their farmers. Kenya must negotiate into the agreement that it can charge tariffs on American agricultural goods to offset the exact amount of the subsidies.
Then here we could import drastically cheaper electronics, industrial supplies, and home goods at less than 30 percent the prices in the Kenyan market.
As President Kenyatta commences negotiations in Washington DC this week, US President Donald Trump is widely known to make important decisions based on his impulses rather than rational drawn-out processes.
President Kenyatta did exceedingly well building a strong rapport during his August 2018 trip to the US for bilateral talks with his American counterpart. So we expect further good outcomes from this week’s negotiations as President Trump will likely act on impulse based on how friendly the two leaders become.