(PHOTO CREDITS: Courtesy THE STANDARD)

Kenya’s free trade deal with the United States of America (US) has been challenged before the East Africa Court of Justice days after the two countries opened negotiations on duty-free imports.Two lawyers, Christopher Oyieko and Emily Osiemo, want the regional court to invalidate the free trade agreement (FTA), claiming that it goes against Kenya’s treaty with the other East African Community (EAC) partners.According to the two, the agreement between Kenya and the US will lead to a flooded market, with Uganda and Tanzania being the biggest casualties.In the case filed against Kenya’s Attorney General Kihara Kariuki and EAC Secretary-General Liberat Mfumukeko, the applicants allege that the agreement exposes the region to a flood of imported goods from the US.

(PHOTO CREDITS: Courtesy BROOKINGS)

This paper uses Kenyan trade data published up through May 2020 to provide a preliminary evaluation of the impact of the COVID-19 crisis on regional trade in the East African Community (EAC). Paradoxically, given the prevailing pessimism surrounding the prospects for global trade, Kenya actually experienced a significant improvement in exports in the first quarter of the year, together with a moderation of imports, leading to a marked decline in the trade deficit. While the initial shock to Kenyan trade caused by the COVID-19 crisis initially looked dramatic in terms of the declines registered, this paper reveals that i) the shock is not so alarming when seasonality is taken into account; ii) re-exports and imports have been the primary foci of impact; and iii) domestic exports have actually performed extraordinarily well under the circumstances, with incremental growth since 2019.

Notably, not all supply chains were disrupted by the crisis, with some Kenyan exports like tea and fruit surpassing levels of years past. Rather, imports have been the principle victim of the crisis, declining by a quarter over the three months since the crisis began (between March and May 2020). Capital goods imports have declined markedly—a trend which, if sustained, could have implications for long-term economic growth. However, the fall in imports of consumer goods could also set the scene for a revitalization of national and regional industry, as local producers step up to fill the void created by the sharp lull in imports.

(PHOTO CREDITS: Courtesy ECONEWS AFRICA)

This letter is written to the AfCFTA Secretariat to reach out to the Kenyan Government to do the right thing and stop the negotiations with the United States of a Free Trade Agreement or at the very least postpone negotiations until proper stakeholder consultations have been done.

7th July 2020

To: The Head, AfCFTA Secretariat

Cc: The African Union
Cc: The East African Community Secretariat
Cc: The Presidency, Republic of Kenya
Cc: The Attorney General, Republic of Kenya
Cc: The Chairperson, The National Assembly Committee on Finance, Trade and Investment
Cc: The Chairperson, The National Assembly Committee on Regional Integration
Cc: The Ministry of Industrialization, Trade and Enterprise Development
Cc: The Office of the Registrar of Treaties, Republic of Kenya
Cc: The Law Society of Kenya

RE: OPPOSITION TO THE PROPOSED US-KENYA FREE TRADE AGREEMENT

We are writing to you today to strongly urge you to consider intervening to convince Kenya to abandon or, at the very least, postpone the United States-Kenya Free Trade Agreement (FTA) negotiations to a later date.

Domestic Kenyan Market

Kenya must be cognizant of its development strategy and how it fits into the overall picture. Reciprocal trade between Kenya and the US essentially puts two extremely unequal countries on a path of enhanced harmonization of rules and policies. This is a complete mismatch. For example, California alone is the fifth largest economy in the world. Kenya on the other hand is currently ranked 98th on the US trading partners list with exports of $365 million and imports worth $644 million.

The agreement portends the danger of crippling sectors such as agriculture and manufacturing and disintegrating of the Kenyan economy. In agriculture, for example, the US seeks to secure comprehensive market access for US agricultural goods, promote greater regulatory compatibility with US rules and establish specific commitments for trade in products developed through agricultural biotechnology. The likely outcome is that the agreement will likely negatively impact food security, as the ability of local farmers to produce will be limited by stiff competition from subsidized products from the US market. Further, it may limit the ability of the Kenyan government to regulate risky pesticides or agricultural technologies or even shelter local production from volatile prices or supplies.

(PHOTO CREDITS: Courtesy BUSINESS AND HUMAN RIGHTS RESOURCE CENTRE)

We are writing to you today to strongly urge you to consider intervening to convince Kenya to abandon or, at the very least, postpone the United States-Kenya Free Trade Agreement (FTA) negotiations to a later date. The agreement portends the danger of crippling sectors such as agriculture and manufacturing and disintegrating of the Kenyan economy. In agriculture, for example, the US seeks to secure comprehensive market access for US agricultural goods, promote greater regulatory compatibility with US rules and establish specific commitments for trade in products developed through agricultural biotechnology. The likely outcome is that the agreement will likely negatively impact food security, as the ability of local farmers to produce will be limited by stiff competition from subsidized products from the US market. Further, it may limit the ability of the Kenyan government to regulate risky pesticides or agricultural technologies or even shelter local production from volatile prices or supplies. 

The Kenyan domestic market is characterized with very high informality (Annex Table 1). Opening up the micro small and medium enterprises to external competition from American businesses, will not only worsen the performance of the MSMEs which currently contribute at least 28% of GDP, but will also worsen the gender disparities, given the low ownership of women owned enterprises.