The International Business Transactions Blog

Revived Negotiations for a U.S.-Kenya Bilateral Trade & Investment Treaty

By Yuki Taylor
Law Student Editor

On July 14, 2022, the United States initiated a bilateral Strategic Trade and Investment Partnership (STIP) with Kenya.  Despite the present lack of tariff talks, the partnership facilitates enhanced engagement between the two countries in a wide range of subjects, including agriculture, anticorruption measures, digital trade, climate change, and customs procedures.  The two states will cooperate to develop new approaches in trade policy to broaden and solidify mutually beneficial economic growth, founded upon strengthened trade commitments.  

U.S. House Ways and Means Committee Chairman Richard E. Neal has applauded the launch of the bilateral program, commenting “this initiative will lay the groundwork for a comprehensive free trade agreement that includes market access, builds off AGOA, and complements both regional and continental integration.”  AGOA (the African Growth and Opportunity Act) is a unilateral U.S. trade preference program that currently provides duty-free treatment on a variety of imports from 49 sub-Saharan countries for over 1,800 products.

AGOA benefits have become especially important for African states since the largest unilateral preference program, the Generalized System of Preferences (GSP), expired on December 31, 2020.  GSP has not been renewed due to a deadlock in Congress over its eligibility criteria.  Despite the GSP expiration, AGOA beneficiaries continue to receive preferential treatment for an additional 5,100 products. However, to qualify for AGOA benefits, a country must satisfy rigorous criteria concerning such issues as anticorruption, poverty reduction, and human rights, in addition to the GSP eligibility requirements.  Further, AGOA compliance of each country is given detailed assessment annually along with biennial reports compiled by the Office of the U.S. Trade Representative.  As the result, while 47 of the sub-Saharan African countries were eligible for GSP when it was active, 36 countries have qualified for AGOA benefits in 2022.  Kenya is the third-largest beneficiary of AGOA preferential treatment in 2021, after South Africa and Nigeria. 

U.S.-African Trade Stagnation under AGOA

AGOA was once lauded by a former Assistant U.S. Trade Representative for Africa, as a “phenomenal success,” based on the threefold growth of U.S. imports from AGOA countries, reaching $82 billion in 2008 from $22 billion in 2000, and job creation in Africa resulting in over 300,000 new jobs in sectors such as apparel, benefitting women in particular.  However, after peaking in 2008, U.S. imports from sub-Saharan African countries have regressed to the pre-AGOA level.  As for U.S. exports to AGOA countries, after reaching a record in 2014 of approximately $24 billion, they have since languished in the range of $12-16 billion.  Meanwhile, China-Africa trade has increased over the last 20 years by twentyfold, and now amounts to $254 billion annually, of which African to exports to China comprise $106 billion. 

China has now risen as the continent’s biggest trade partner, accounting for 18% of all imports into sub-Saharan Africa and 11% of all exports from the region in 2019.  With growing economic powers at its command, China has influenced African foreign policy in its favor.  Further, on the same day as AfCFTA’s commencement, China’s first FTA with an African state (Mauritius) entered into force.  Located in the Indian Ocean, the island state is geopolitically significant for maritime trade.  China aims to leverage the agreement, coupled with the African state’s extensive network of double-taxation avoidance agreements across the continent, to dominate trade with mainland Africa. 

The United States and the EU have pressured the continent with rigid human rights standards as a prerequisite for various deals.  Without such constraints, China and Russia are rising as favorable partners, gaining influence over politics and foreign affairs in Africa.  Shifting from unilateral tariff concessions to a bilateral approach, the United States’ new trade initiative with Kenya, one of the key countries in the continent, may become the turning point for reinvigorating U.S. trade with Africa. 

Initial negotiations towards an ultimate bilateral FTA between the two states began in 2020 under the previous U.S. administration, but were halted temporarily under the new presidency.  The Kenyan ruling political party had been seeking a trade agreement with the United States to signal its commitment to liberal economic policies, prior to its own presidential election in August 2022.  On August 15th, chaos and fights erupted as the election results were announced.  William Ruto, the deputy president of Kenya since 2013, was declared the winner in a close race, suggesting that trade talks with the United States will continue.