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2015Kenya and USA sign a Memorundum of Understanding (MOU) for US to invest in Kenya's priority infrastructure projects

June 2018The MOU is updated to reflect emerging development priorities and support the Government's Big Four Agenda

August 2018H.E. President Uhuru Kenyatta and H.E. President Donald Trump agree on a Strategic Partnership between Kenya and USA, based on 5 thematic pillars

February 2020H.E. President Uhuru Kenyatta and H.E. President Donald Trump jointly announce intentions to initiate negotiations for a Free Trade Agreemeent between Kenya and USA

Kenya and the United States of Amer-ica (USA) today launch negotiations for a landmark Free Trade Agree-ment (FTA) that will bring immense bene-fits to the two countries.The success of the negotiations is par-ticularly critical because of the need to secure trade and investment relations between the two countries ahead of the anticipated lapse of the Africa Growth and Opportunities Act (AGOA) on Sep-tember 30, 2025. The proposed FTA, the first of its kind for Sub-Saharan Africa, will provide contin-ued market access for Kenyan goods to the expansive US market at the end of AGOA. Negotiations for the FTA are founded on the initiative announced jointly by Ken-ya’s President H.E Uhuru Kenyatta and US President H.E Donald Trump when they met at the White House in Washington DC on February 6, 2020. The two Pres-idents had earlier on August 27, 2018, during President Kenyatta’s first visit to the US, announced elevation of Kenya’s diplomatic relations with the United States to a strategic partnership premised on four pillars, namely economic pros-perity; trade and investment; defence

cooperation; and democracy, governance and civilian security as well as multilateral and regional issues. The FTA will be a milestone for Kenya and the US, says Kenya’s Cabinet Secretary for Industrialisation, Trade and Enterprise Development, Ms Betty Maina. She will simultaneously launch the negotiations with the United States Trade Represen-tative Amb Robert Lighthizer, during a virtual meeting between Nairobi and

Washington DC. “The successful negotiations for an FTA between Kenya and the US are important not just for us but for other African coun-tries,” says CS Maina. “It will expand trade and investment opportunities that will enhance the prosperity of our national and regional economies.”The FTA negotiations put Kenya in the lead and anchors the country for the emerging US trade and investment policy for Africa. The US has indicated it will use Kenya as a model to negotiate future FTAs with other African countries.

Why the FTA is important for KenyaThe proposed FTA is a trading arrange-ment under which both Kenya and US commit themselves to increase trade between them by reducing trade barriers, including tariffs and import quotas. It also creates an enabling and predictable environment for US businesses to invest in Kenya’s strategic sectors, expanding opportunities for job creation and eco-nomic prosperity.Like other AGOA eligible countries in Sub-Saharan Africa, Kenya has enjoyed duty and quota free access to the US mar-ket. This has greatly helped diversification of our export base. Over 70 percent of Kenya’s exports are in horticulture, apparels and textile category. This has enabled USA to become Kenya’s third most important export destination and fifth largest trading partner. Between 2009 and 2019, Kenya’s exports to USA expanded from Ksh17.4 billion to Ksh51.9 billion. Textiles and apparel are

Kenya and US Launch Negotiations for Landmark Free Trade Agreement

The successful negotiations for an FTA between Kenya

and the US are important not just for us but for other African countries,” says CS Maina. “It will expand trade and investment opportunities that will enhance the prosperity of our national and regional economies.”

The proposed FTA, the first of its kind for Sub-Saharan Africa, will provide continued market access for Kenyan goods to the expansive US market at the end of AGOA

A Free Trade Agreement (FTA) has significant benefits for Kenya and the US, including the following:It enables the two countries to develop sustainable, pre-dictable preferential trade relations and strengthens their economic and diplomatic ties: An FTA assures investors of a sustainable and predictable trading environment. This is an important consideration for investors and key players in inter-national trade. The FTA is much more beneficial than AGOA, which is a unilateral programme with limitations arising from its legislation. Unlike AGOA which can be modified or terminated at the discretion of the US government, an FTA binds both countries to the terms and conditions they have negotiated and signed. The long lifespan of the FTA will also benefit Kenya by creating a stable and predictable environment for investors to support Kenya’s long-term investment needs, including the Big Four priority programmes. It upholds the principle of equal partnership and enhances mutual respect between the two countries: A negotiated reciprocal market access arrangement enables both parties to negotiate and agree on trading terms as equal partners. Kenya and the US will negotiate trading instruments, including Rules of Origin, that are acceptable to both countries. It is easier to negotiate an FTA because it involves two parties: Kenya and the US will be the only parties negotiating the FTA. This will motivate them to expedite and conclude their deliber-ations. The pace will certainly be much faster than negotiating agreements with multiple countries. The two countries will avoid the lengthy processes, delays and suspicions that have frustrated multi-country trade negotiations and ratifications such as the Economic Partnership Agreement (EPA) between the EAC and EU. It is in harmony with continental and regional trade agree-ments: The proposed FTA is not in conflict with the EAC and African Union’s African Continental Free Trade Area (AfCFTA) agreements. The two agreements do not bar any member countries from negotiating bilateral trade agreements with other countries and organisations. Kenya is free to negotiate an FTA with the US, provided the arrangement does not un-dermine the EAC and AfCFTA pacts. Kenya will notify the other member countries once a draft agreement is available from the negotiating parties.

Leveraging on our export potential in priority products The US has given Kenya an opportunity and technical support to meet the stringent conditions of the US consumer market. It is our responsibility as Government, private sector and other actors in Kenya’s global trade and investment value chain to position ourselves to reap the benefits that will accrue from the FTA.The Government will use the National Export Development and Promotion Strategy to expand the market potential for priority exports that have a huge potential in the US market. These priority value chain exports, including horticulture and floriculture products, coffee, tea, herbs and spices, fish, food and beverages, mineral products and handicraft, earned $593 million (Ksh59.3 billion) for Kenya in 2019, but accounted for a mere 0.17 percent of the US market. If Kenya were to raise its market share in these products to five percent, it would earn Ksh1.8 trillion, a significant amount that would meet its commitment to raise export earnings from Ksh597 billion to Ksh2 trillion by 2025. As part of this ambitious strategy, the Government will strengthen key inspection agencies, including the Kenya Bu-reau of Standards, Kenya Plant Health Inspectorate Service and Kenya Revenue Authority to ensure they have the capacity to enforce quality global standards for our exports. This is im-portant, not just for the US market. It will be the springboard for Kenya to expand its access to other developed markets in Europe and Asia.The Government will also deepen business climate reforms to attract FDI from the US and other developed financial markets. Investor interest is already growing from “early harvesters”. These include US corporations that have the potential to en-gage over 2,000 of our young science and technology graduates annually. The successful conclusion and implementation of the FTA will certainly lay a strong foundation for Kenya’s future economic and social transformation.

Mutual Benefits Envisaged for Kenya and USA

The Roadmap to the FTA

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KENYA - USAFREE TRADE AGREEMENT

currently the most important goods for US market access, accounting for 85 percent of AGOA exports and two thirds of all exports from Kenya. During the same period, imports from the US to Kenya increased from Ksh50 billion to Ksh62 billion. The key US exports to Kenya include aircraft, mechanical and electrical machinery, plastic and coarse grains. The trade balance is in favour of the US, though the deficit is small compared to Kenya’s other major trading partners. Unfortunately, the benefits of free market access will cease when AGOA expires on September 30, 2025. The current US Administration has indicated that it is unlikely to renew AGOA but will instead consider balanced and reciprocal FTA with important trading and strategic partners, including the United Kingdom, European Union (EU) and Kenya. This message is explicit in President Trump’s 2019 and 2020 Trade Policy Agenda.

The end of AGOA presents a significant problem for Kenya due to its recently updated economic status to low mid-dle-income country. While least developing countries (LDCs) will continue to enjoy preferential market access to the US due to their disadvantaged economic status, Kenya’s exports will no longer qualify for duty waivers. Without an FTA, Ken-yan exports to the US will be subjected to duty under the World Trade Organisation’s (WTO) Most Favoured Nation (MFN) principle. Kenya’s textiles and apparel that now enjoy free duty and quota access to the US market will be subject to import duties of 15-28 percent. This will substantially in-crease the cost of Kenya’s exports and dampen its potential for growth in the US market. Moreover, a duty regime for Kenyan products will have serious ramifications for the East African Community (EAC) customs union because all the other partner states are clas-sified as LDCs and will continue to enjoy free market access. This risk of market loss underlines the urgency for Kenya to negotiate a robust FTA with the US to safeguard its market position. The proposed FTA will also enable Kenya to build on its strategic trade and investment interests with US, which is a major source of Foreign Direct Investment (FDI) for Kenya. Furthermore, Kenya is home to nearly 200 American corpo-rations that have invested over $2 billion in the past 20 years in social impact and technology projects. Many of these firms use Nairobi as their regional hubs and employ lots of Kenyans, helping reduce unemployment pressure from young graduates. With a predictable trade and investment regime, they will retain their earnings and profits in Kenya, rather than repatriate them back to the US.Moreover, thousands of Kenyans study in US universities. It is well known that these students are self-financed and con-tribute greatly to both the US and Kenyan economies. So do many other Kenyans who work in the US and regularly remit home nearly $500 million annually to uplift their families and invest in viable economic opportunities. The US is the second largest source of Diaspora remittances, according to a June 2020 report by a US research and innovation lab, AIDDATA at William and Mary. The FTA will enhance Kenya’s development partnership with the US. AIDDATA estimates that the US government and its people contribute Ksh310 billion annually to Kenya’s prosperity through bilateral and multilateral development assistance, remittances, FDI, trade, investment guarantees, tourism, civil society operations, scholarships and other spending areas. This underlines the importance of the US as a key ally for Kenya in realising its Vision 2030 development aspirations.

The proposed Kenya-United States Free Trade Agreement (FTA) is a culmination of a friendship of more than 60 years.

The warm Kenya-US relations be-gan before Kenya’s independence, with young students seeking higher education across the Atlantic, lay-ing a firm foundation for a nation that today seeks to take that rela-tionship a notch higher.

In ‘Kenyan Student Airlifts to America: An Educational Odyssey’, Robert F Stephens captures the euphoria of those heady days six decades ago when hundreds of students beat great odds to join colleges and universities in the US.

While the move had started much earlier as a trickle right from Mbiyu Koinange, who became the first East African to get a higher ed-ucation, in 1931, after graduating from Ohio Wesleyan University, the exodus was to surge into a river in the five years between 1957 and 1961, thanks to the gallant efforts of Kenyan nationalist Tom Mboya and the then future US President J.F Kennedy.

“What makes the story unique is that this influx of Kenyans probably represented the largest wave of international students to arrive from a single country in so short a space of time,” writes Dr Stephens, who first arrived in Kenya as a Vice Consul and Cultural Affairs Officer at the US Embassy, and would make several subsequent visits in later years.

It is believed that the impact of these airlifts on Kenya before and after independence in 1963 set Kenya apart from “the chaos in other African countries at the time”, as the American-educated graduates played a pivotal role in the social, economic and political modernisation of the new inde-pendent nation.

Stephens writes: “The airlifts had an impact, not only on the students who made the almost unimag-inable transition from their rural

villages to the highest realms of government, business and aca-demia, but also on the develop-ment of the country itself.”

He says had hundreds of Amer-ican graduates not been available when independence came, Kenya would not have become the re-gional powerhouse that it became.

“Because of the efforts of Dr Ste-phens, Thomas J. Mboya, and Dr Julius Gikonyo Kiano, I and young men like me, including Barrack Obama senior (father of 44th US President), whom I knew well, found our way to America and subsequently helped establish a stronger bond between Kenya and the United States,” writes former University of Nairobi chancellor Joe B. Wanjui in the foreword to the book published in 2013 by East African Educational Publishers.

Dr Stephens’ assessment that Kenyan students’ odyssey into the US was perhaps the single largest from one country to another is borne by the fact that one of those students – an economist – was to be the father of a son, Barack Obama, who would ascend to the Presidency of the United States, a truly historic feat.

So key has the United States been throughout Kenya’s history that even during the challenging

decades of the 1980s and 1990s, Kenya retained its premier position as the anchor state in the region, a pedestal it shares with Nigeria and South Africa. During this period, Kenya continued to be the highest recipient of US development assis-tance in sub-Saharan Africa.

But Kenya and the US have not only shared in times of triumph and plenty; they have also stuck together during crises, such as the bombing of the US embassies in Nairobi and Dar es Salaam in

August 1998, and in the aftermath of the devastating September 11, 2001 attack on the World Trade Centre and The Pentagon.

One of the most enduring ges-tures of empathy with the Ameri-can people came from Kenya when Maasai herdsmen from Kilgoris donated 14 cows, which were re-ceived by then Deputy US Ambas-sador in Kenya, William Brancick. The donation, which captured world attention for its touching symbolism, was organised by Kimeli Naiyomah, a medical stu-dent in the US.

Today, Kenya formally launches its Free Trade Agreement negoti-ations with the US, which, if suc-cessful, will see the country boost its trade and investment volumes significantly.

The horticultural market poten-tial for Kenya in the US is esti-mated at $41 billion, yet currently it manages only $56 million. It is estimated that an increase of even five per cent, made possible by the deal, will see the forex earnings from horticulture alone jump to $1.8 billion.

For the US, Kenya is a strategic ally in the war on terror in the re-gion and as a crucial entry point for American companies to the east and central African region.

The success of the trade deal, a first in sub-Saharan Africa, will be a major boost to the shift in US policy towards Africa, which is currently in the tightening grip of China. The US is keen on the success of the deal, which it says will “serve as a model for additional agreements across Africa”.

It is only befitting that just as the pioneers blazed the trail with their early exploits in America that planted the seed which grew into today’s blossoming relationship between the two countries, a mu-tually beneficial deal should come out of the negotiations so as to bear the torch for the rest of the region.

A History of Kenya-US Relations

Workers at the United Aryan EPZ Ltd off Thika Road, Nairobi. PHOTO | FILE

Tom Mboya John F. Kennedy

Managing Director of Empire Kenya EPZ Mr Thushara De Silva supervises the packing of newly branded tea for export, on January 28, 2020. PHOTO | LABAN WALLOGA

KENYA - USAFREE TRADE AGREEMENT

Because of the efforts of Dr Stephens,

Thomas J. Mboya, and Dr Julius Gikonyo Kiano, I and young men like me, including Barrack Obama senior, whom I knew well, found our way to America and subsequently helped establish a stronger bond between Kenya and the United States,”

- Joe Wanjui, Former Chancel-lor, University of Nairobi

Kenya, US in new FTA talks

Ms Betty Maina, Cabinet Secretary for Industrialisation, Trade and Enterprise Development. PHOTO | FILE

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