tralac’s Daily News selection

Sam Smith News 19 June 2020

News

tralac’s Daily News selection

19 Jun 2020

A special feature on the Kenya-USA FTA:

The United States-Kenya Free Trade Area (FTA): insights into the bilateral trade relationship and early progress on setting terms for an FTA (tralac)

This working paper looks at the planned Kenya-US FTA mainly from the perspective of the current trade relationship, reviewing developments and growth in Kenya’s US-bound exports since 2000 when the African Growth and Opportunity Act (AGOA) began to offer expanded preferences to Kenyan exporters, and also the extent to which Kenya utilises and perhaps relies on such preferences. It also analyses patterns in US exports to Kenya, which take place on standard Most Favoured Nation (MFN) terms, and for some context provides a snapshot of Kenya’s imports from other global sources as well as the EU with which it has previously concluded a reciprocal free trade agreement, albeit not yet fully operational. Finally, it looks at the legislative framework and related guidelines for the US to conclude new free trade agreements with third countries, and the manner in which such policy objectives relate to the planned US-Kenya FTA. [Author: Eckart Naumann]
Kenya’s president says talks on trade deal with US delayed (Reuters)

Kenya has delayed talks on a trade deal with the United States until a pan-African trade bloc comes into force, President Uhuru Kenyatta said on Thursday, likely holding up what would be Washington’s first such pact in sub-Saharan Africa. Kenyatta said Kenya, East Africa’s richest economy, had delayed discussions with Washington until the Africa free trade arrangement comes into force, originally set for July 1 but now delayed until later by the coronavirus pandemic. “When we met with the United States we made it clear that negotiation would have to be done on the basis of, and without undermining, the Africa free trade arrangement,” Kenyatta said. “This works not just for Kenya and Africa, but I also believe it works for the United States, because it gives that wider market access,” he added during a webinar hosted by the Atlantic Council. It was not immediately clear how long the delay to the talks would last.
Inside Trade: However, USTR Robert Ligthizer told US lawmakers (Wednesday) the talks would begin the week of 6 July. “So long as that trade agreement with the United States does not interfere with [AfCFTA] and that is why we actually delayed our discussions until the [AfCFTA] came into place,” he said, calling the initiation of talks with the US a “win-win” for everyone “because it gives them wider market access and secondly … we are going to be able to go through all of the preliminaries, which tomorrow could be copied and imitated by others.”

”We’ve had preliminary discussions. We expect that to be as ambitious on FTA as you would have under the circumstances with the country with their level of institutional development, so we’re excited about that and I know the Kenyans are excited about it and I know that President Kenyatta’s hope is that we can get this done in enough time so it comes in under his term,” he testified. “So that’s where we are on that.”
Financial Times: President Kenyatta told the FT that Nairobi had made it “very clear” to Washington it would not undermine Africa’s nascent free trade area. The paper said the FTA could take two years to negotiate.
The Star: On the revitalization of the East African Community, the President regretted the slow pace at which the integration process is unfolding and assured of his commitment to see a more cohesive and prosperous region. He warned against historical suspicions and barriers which he said serves to derail the EAC integration process.
Multimedia:

- Atlantic Council’s Africa Center: Kenyan President Uhuru Kenyatta on Strengthening US-African ties through trade
- US Senate: US Trade Representative Robert Lighthizer testifies on trade policy

Diarise: The Corporate Council on Africa Leaders Forum takes place next week as a four day virtual events (23-26 June). The conference theme: Resilient US-Africa business engagement to drive post covid-19 recovery. Daily session themes:

The global financial response to COVID-19 in Africa
Economic and health innovations in response to COVID-19 in Africa
Drivers of post-COVID 19 growth in Africa
Sustaining regional and bilateral trade in Africa post-COVID-19
African Presidents confirmed to speak: President Nana Akufo-Addo, President Uhuru Kenyatta, President Filipe Nyusi.

The British Trade Commissioner for Africa, Emma Wade-Smith, recently made a virtual visit to Kenya during which she discussed with government officials and business leaders how the UK and Kenya are working together to respond to the Covid-19 pandemic and shape a strong economic recovery. She spoke to Business Daily about the visit and other aspects of the UK-Kenya relations:

Transnational cartels dictate what’s for breakfast in Kenya (ENACT)

Kenya can boast of being a regional hub for many things, but food sovereignty isn’t one of them, as the latest import dependency ratio on its food balance sheets shows. And not all of these imports are legal, or safe to eat. The trade of substandard foodstuffs is controlled by criminal cartels that run from Kenya with regional links to Uganda, Tanzania and Somalia. While genuine traders follow Kenya’s import regulations, criminals are bringing food products such as sugar, maize, rice, milk powder, vegetables and pulses full of mercury, lead and other insoluble matters unfit for human consumption into the country.

There are three main value chains and routes used by criminals in smuggling or importing food into Kenya. The first is the Somalia-Kenya route where goods, mainly sugar, are smuggled into Kenya from Somalia’s port of Kismayo using lorries, vehicles and donkey carts. The second value chain works along separate smuggling routes through the Uganda-Kenya and Tanzania-Kenya border crossing points. The third value chain is through product-specific duty-free importation windows periodically announced by the Kenyan government. [The author: Mohamed Daghar]

Regional peace, security top of Kenya’s UN Security Council agenda (Capital FM)

The fight against terrorism and radicalization as well as regional peace and stability will shape Kenya’s agenda at the UNSC following the country’s victory on Thursday over Djibouti which was eyeing the two-year non-permanent slot. Foreign Affairs Chief Administrative Secretary Ababu Namwamba told Capital FM News, being one of the countries in the region that has experienced myriad terror attacks, Kenya will champion the anti-terrorism agenda at the global security council for the benefit of all countries in the region.

“This is a region that has had its fair share of terrorism and other conflicts therefore Kenya will have a very good opportunity to bring its very well-defined credentials as a peace maker. We have been a peace maker in Liberia, Sierra Leone, and Somali,” he said. Kenya won the UNSC non-permanent seat on Thursday night, after beating Djibouti having garnered 129 votes against Djibouti’s 62 in the second round of voting at the UN headquarters in New York. [Note: Kenya will hold the presidency of the UN Security Council in October 2021]

COMESA trade policy updates:

Region expected to grow at 0.6% in 2020. The COMESA regional economy is projected to grow at a paltry 0.6% this year down from 5.2% recorded in 2019 and 6.0% in 2018. The slight dip in 2019 was attributed to lower commodity prices while the expected slump in 2020 will result from the devastating impact of the Covid-19 pandemic suggesting a deeper economic contraction for the region. According to a report on macroeconomic developments in COMESA region in 2019, the slowdown in growth was experienced in most COMESA member countries except Egypt, Ethiopia, Malawi, Rwanda and Seychelles which registered improved economic growth compared to 2018. “The impressive growth of above 5% in both years reflected among others, improving growth fundamentals, with a gradual shift from private consumption toward investment and exports,” says the report prepared by the COMESA Monetary Institute. The projected contraction of the regional economy will be driven by the impact of containment measures, the decline in global demand and regional spillovers, the external financial constraint and the impact of multiple shocks.

Going forward, the report recommends that strengthening of continental value chains should be a priority given the uncertain global business environment. The report concludes: “In the medium-long term, the effective implementation of regional integration agenda of the Regional Economic Communities and the continental free trade area will be key to strengthening regional production networks and trade, reducing the continent’s vulnerability to external shocks, and consequently leading to improvements in external current account balances.”
Fifteen COMESA member states are ready to start piloting the COMESA Electronic Certificate of Origin (eCO) System. The eCO is one of the latest tools developed under the COMESA Digital Free Trade Area initiative. Burundi, DR Congo, Egypt, Eswatini, Ethiopia, Kenya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Sudan, Tunisia, Zambia and Zimbabwe have indicated their readiness to pilot the COMESA eCO system. The need to start implementing the eCo system has gained urgency given the challenges that movement of goods across borders is facing as a result of restrictive measures put in place in response to the Coronavirus pandemic. The eCO will replace the manual certificates and help to circumvent the onerous manual process.

COMESA Director of Trade and Customs, Dr Christopher Onyango noted that the region was currently facing two critical challenges: firstly, the COVID-19 pandemic, which has changed ways of conducting businesses across the world threatening to reverse the gains already made in fostering a liberalized trade regime. Secondly, the value of intra-COMESA trade has remained stagnant and does not mirror the instruments put in place, especially under the FTA trade regime adopted way back in 2000. “It is rather disheartening that despite the preferences offered under the FTA, intra-COMESA is at 8% of total trade, compared to Africa’s 15%, America’s 47%, Asia’s 61% and Europe’s 67%,” Dr Onyango noted. “We hope the recently adopted COMESA response guidelines will help restore order and safeguard existing trading arrangements.”

EU continues to open up markets outside Europe in midst of rising protectionism: Trade Barriers Report

Thanks to the European Union’s successful intervention, European companies generated €8bn in additional exports in 2019. The high number of new restrictions that hinder EU exports shows however that protectionism has become deeply ingrained in global trade. These are some of the findings of the Commission’s annual Trade and Investment Barriers Report (pdf) published on 18 June 2020. However, EU companies face also a multiplication of new unlawful barriers in sectors of strategic importance for the EU, notably in information and communication technology, electronics, auto and other high-tech industries. The total number of existing trade barriers around the word amounts to 438, out of which 43 were introduced last year by 22 different countries. The highest number of trade restrictions concern access to the Chinese and Russian markets (respectively 38 and 31 measures). China also imposed the highest number of new restrictions in 2019, followed by South Mediterranean and Middle East countries.

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