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Proposed Kenya-United States FTA Agreement: Negotiation Principles, Objectives and Scope

Proposed Kenya-United States FTA Agreement: Negotiation Principles, Objectives and Scope

25 Jun 2020

Kenya and the United States, in February 2020, jointly announced their intent to initiate negotiations on a Free Trade Agreement (FTA) between themselves.

Towards this end, the Ministry of Industrialization, Trade and Enterprise Development (Republic of Kenya), having consulted and heard from from various stakeholders, developed Negotiating Objectives and Principles to guide the negotiations for this first bilateral FTA between Kenya and the US. This is now made available for public review.

INTRODUCTION

Kenya and United States of America (USA) have strong and deep-rooted diplomatic relations which have existed since 1964. This is demonstrated by Kenya hosting one of the largest US diplomatic missions in Africa. Similarly, Kenya has an Embassy in Washington DC.

On the trade front, USA and Kenya have strong trade relations demonstrated by growing exports and imports which have grown over the years. USA is the third significant destination market for Kenya, a position that has been sustained over the years after the East Africa Community (EAC), European Union (EU) and Common Market for Eastern and Southern Africa (COMESA). Kenya’s excellent export performance in the USA is mainly attributed to the duty-free market access preferential treatment under Africa Growth Opportunity Act (AGOA).

As AGOA expires in 2025, Kenya’s option for trading with the USA will be in accordance to the WTO, to be either under Generalized System of Preferences (GSP) because of Kenya’s status as a developing country or a trade arrangement under Free Trade Area as provided under WTO’s Article xxiv of General Agreement on Tariffs and Trade (GATT) 1994.

Sustaining current export performance to the USA will require a trade arrangement that would guarantee duty free quota free market access for Kenyan products to the USA.

It is in this spirit that on 27th August 2018 His Excellency President Uhuru Kenyatta and President Trump, announced the commencement of negotiations leading to a conclusion of a Free Trade Area Agreement (FTA). As a first step, both countries set up a Trade and Investment Working Group (TIWG) to spear head the negotiations

The TIWG came up with the four objectives coving the following thematic areas

  1. Maximizing the remaining years of AGOA;

  2. Strengthening commercial cooperation between the two countries;

  3. Development of short-term solutions to reduce barriers to trade and investment; and

  4. Exploratory talks on future Kenya – U.S.A. bilateral trade and investment relations

Pursuant to the above development, the proposed FTA is based on the thematic area on ‘exploratory talks on future Kenya – U.S.A. bilateral trade and investment relations’.

On 6th February 2020, H.E President Uhuru Kenyatta and H.E. President Donald Trump in Washington, DC jointly and publicly announced the intent for Kenya and USA to negotiate and conclude and FTA. Ahead of the announcement, both sides had identified Trade in Goods, Trade in Services, Intellectual Property Rights, including investment and other trade related areas as possible areas for negotiations.

Kenya-USA FTA negotiations provide the country with a unique opportunity to enter into a bilateral trade and development cooperation negotiations with one of the global economic powerhouses -the United State of America which is Kenya’s third largest export market and seventh overall trading partner.

The negotiations will also make good use of the fraternal relationship between Kenya and USA and especially for Kenya as one of key non-oil African trading partner of United States.

PRINCIPLES

The following principles will be articulated and guide the negotiation

  1. The FTA will be WTO compatible and will allow for application of the ‘Special and Differential Treatment’

  2. The FTA will be an instrument for economic and trade development.

  3. The FTA negotiations shall respect the commitments that Kenya has taken at Multilateral (WTO), Continental (AfCFTA), Regional (EAC, COMESA, TFTA) and Bilateral level

  4. The FTA will preserve and build on AGOA acquis

  5. The Negotiations shall cover substantially all trade

  6. Any EAC Partner State that did not participate in these negotiations at the outset should be allowed to join the negotiations, subject to terms and conditions already agreed or accede to the concluded FTA

NEGOTIATING OBJECTIVES

General Objectives

  1. To initiate, negotiate and conclude a WTO compatible Free Trade Area (FTA) Agreement based on the International and WTO General principles and one that promotes preferential and mutually beneficial trade, investment and economic relations; The negotiations shall also be consistent with GATT 1994 Article XXIV, Part IV on Trade and Development and GATS Article V.

  2. To ensure that Kenya benefits from the American foreign policy towards Africa and Kenya in particular with a view to reaping the benefits of first mover advantage of such trade agreement with USA

  3. To ensure that the FTA agreement pays fidelity to Kenya’s commitments and obligations with existing Multilateral, Regional and Bilateral trade agreements for which Kenya has signed and ratified.

  4. To make sure that the FTA provides for safeguards, and exceptions to protect Kenya’s nascent industrial and agricultural sectors.

  5. To increase the inflow of USA Foreign Direct Investment into Kenya that will improve vertical and horizontal linkages in the Kenyan economy.

  6. To take advantage of the opportunities created within the negotiations to provide market access for identified goods and services.

  7. To take advantage of the opportunities created within the negotiations that provide for national and regional advantages arising from foreseen commercial consequences associated with global health, economic and social dynamics

  8. To promote Kenya’s position as a transit hub for goods and services that has been availed by the expansion of land sea and air transport infrastructure to attract investments.

  9. To ensure the expansion of value chains, especially in production, value addition and transit trade and to create demonstrable economic benefits to the Kenyan economy especially creation of decent jobs and sustainable livelihoods.

  10. To make sure that the outcome of the negotiations will become the basis of future FTAs with other African Countries, Kenya and the USA will endeavour to brief interested African Countries periodically.

  11. To make sure that the outcome of the negotiations contains provisions for technical assistance and capacity building which will be made available to enable Kenya to fully participate in the negotiations, implement obligations under the FTA.

  12. To make sure that the negotiations on trade in goods, trade in services, investment and other areas will be conducted in an agreed sequence to ensure a balanced outcome.

  13. To create a framework through which any EAC Partner State that did not participate in these negotiations at the outset is allowed to join the negotiations, subject to terms and conditions that would be agreed between the USA and Kenya.


Additional resources and analyses

Source Ministry of Industrialization, Trade and Enterprise Development, Republic of Kenya
Website Visit website
Date 25 Jun 2020
 
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