Key takeaway is that Bloomberg reports that trade talks have been underway between the United States and Kenya, with the Kenyan officials confirming progress and the US expecting to publicize status in conjunction with Uhuru Kenyatta visit to Washington next week.
The East African nation’s cabinet will probably approve discussions with the U.S. this week, Kamau [Permanent Secretary] said.
Kenya is America’s 11th largest trading partner on the continent and the sixth biggest in sub-Saharan Africa, with total trade between the two countries at $1.17 billion in 2018.
The U.S. currently has one free-trade agreement on the African continent — with Morocco. U.S. Assistant Secretary of State for African Affairs Tibor Nagy said in August that the nationwas pursuing a trade dealwith an unidentified country in sub-Saharan Africa, adding that it would be used as a model for others when AGOA expires.
The Trump Administration wants to use an agreement with Kenya as a template for other bilateral agreements in region, as opposed to the African Union’s expressed preference for a multilateral pact in the context of the new African Continental Free Trade Area. It is also somewhat unclear as to how this would integrate with the longstanding US support for the federation process among the members of the East African Community.
2/8 The Cabinet meeting held today at State House, Nairobi and chaired by President Kenyatta acknowledged that the negotiations will help Kenyan goods to have smooth access to the expansive US consumer market especially as the AGOA pact comes to an end. pic.twitter.com/ImglMhxmtp
Over the past five years, the US clout in the local economic scene has been declining as Kenya continues to look east, specifically to China, India and Japan for aid. Whereas the US continues to be a major source of development aid, disbursing an estimated $3 billion between 2008 and 2011, China, India and Japan have emerged as new sources of infrastructure funding.
China is currently carrying out improvements of roads in Nairobi, while Japan is actively supporting the country’s energy sector.
America’s support has largely focused on health and military funding, with the US government set to give Kenya $14 million in military help this year.
In trade, whereas imports from the US have stagnated at Ksh45 billion ($535 million) since 2007, Kenya’s imports from China and India have more than tripled, rising from Ksh46 billion ($547 million) and Ksh56 billion ($667 million) to Ksh144 billion ($1.7 billion) and Ksh148 billion ($1.8 billion) respectively.
Kenyans had been hoping that General Gration, who spent his childhood in Democratic Republic of the Congo and Kenya, and spoke fluent Kiswahili, would take US-Kenya relations to a new level given his knowledge of Kenya, its people, its language, and its culture. . . .
. . . As you know, many African countries are not taking full advantage of the benefits of AGOA. However, some AGOA beneficiary countries take good advantage of the provisions for fabric and apparel product lines. The third country fabric provision component of AGOA was designed to provide an opportunity for AGOA-qualified countries to be more competitive in labor intensive textile processes such as sewing, stitching, and cutting fabric.
It was widely recognized that most African countries were not able to compete in the more capital intensive process of producing fabric from raw cotton. African manufacturers have successfully used the AGOA third country fabric provision to create jobs, not just in the manufacturing countries but have used this provision to create cross-border pan-African supply chains. These supply chains also encourage regional integration – one of our key goals for the continent. Fabric and apparel exports are the second largest AGOA export after extractive industry products. However, these imports still account for less than two percent of U.S. imports.
I’d like to say a few words about what is likely to happen if third country fabric is not renewed. In our globally linked world, American buyers place orders six to nine to twelve months ahead. 95 percent of AGOA apparel and textile exports enter under the third country provision. And the AGOA third country fabric provision is the only way that African textile and apparel companies can remain competitive with larger producers such as China, Vietnam, and Bangladesh.
Without our help, jobs will continue to disappear in some of Africa’s most vulnerable economies, affecting primarily women and the families they support. Eighty-five percent of these imports come from just four countries: Lesotho, Kenya, Mauritius, and Swaziland.I know that diplomats from these countries have come to see you to emphasize the disproportionate effect that lack of renewal of this provision will have on their economies.
The effects of the loss of orders are troubling. At the AGOA Forum, the Swazi Minister for Trade told AGOA delegates that the loss of the provision will “shut the country down”. The textile and apparel sector is the largest formal sector employer with over 15,000 jobs and employment is already 41 percent in this small, landlocked country. Loss of just one of these jobs means that ten people lose their livelihood, since Swazi officials calculate that each textile job directly supports ten people. Lack of orders have already led to plants closures in Namibia, robbing people of their legitimate livelihoods and governments of much needed tax revenues. The Mauritians report that their orders are down 30 percent since January due to the uncertainty whether this provision will be renewed in a timely fashion.
The potential impact of a delayed renewal of the third country fabric provision of AGOA is grave. Third country fabric is the most successful components of the AGOA legislation and can be credited with over 100,000 direct jobs in Sub-Saharan Africa. Apparel orders are drying up due to the uncertainty surrounding the provision. In Kenya alone, over 40,000 factory workers could very likely lose their jobs if third country fabric is not renewed in a timely manner. The apparel industry in SSA rely on the third country fabric provision; without it there is a very real possibility that the investors in the apparel factories will pack up and move production to some other part of the world as happened in Madagascar following its loss of AGOA eligibility in 2009. This would cause enormous economic strife in countries that are strong partners of the United States. On September 30, 2012, the third country fabric AGOA provision will expire. With barely six months to go, further delay threatens the lives of 1 Million people, mostly women who work in the apparel sector. We estimate that each factory worker supports ten additional people. If third country fabric is not renewed soon, these jobs will disappear and Africa’s poverty rate will sour by over 55%.
Representative Camp (R-MI) and Senator Baucus (D-MT) have introduced bills in the House and Senate respectively to provide for this extension under the African Growth and Opportunity Act of great interest in East Africa. With strong bipartisan support in Congress and from the Administration this would seem to be a timely step before the preference expires in August to show that we are serious about stepping up American trade with Africa to support private sector economic growth. The bills would also add South Sudan as an eligible country.
Briefly, my “macro” level observation is that this is an example of the choices confronting Americans in simply deciding who we want to be in Africa.
There is perhaps a certain irony that in 2012, all these years after the Cold War, the Chinese Communist Party government leads an expansive, rapidly growing commercial presence across Africa, while the U.S. does seem to be specializing more in the military/security area. “Comparative advantage”? Bureaucratic momentum and politics in Washington? Sound policy making reflecting that the U.S. sees itself as quite rich already and has a main priority of preventing future tragic “embassy bombings” and “9-11s”; whereas the Chinese government is relatively speaking “young and hungry”, and needs to build its economic power to hold power at home against any possible future “regime change” from democratization or other domestic pressures?
AFRICOM is an experiment of sorts and it is evolving. The Post story points out that AFRICOM is still doing “aid” projects–by which I assume they mean things like the traditional humanitarian and medical missions carried out by troops, and things like the fish farming program for the DRC military in Eastern Congo I noted some time back along with the military-focused democracy and governance and rule of law training, aside from the more usual military and security training assistance. At the same time, the budgetary pressure in Washington is hugely increased from anything that people would have had in mind back during the finance bubble when the decision to roll out AFRICOM as a “new kind” of combatant command was made. Spending on “development” and “diplomacy” are lowercase priorities when the budget axe swings, verses “the big D” on the traditional military side of a “three Ds” national security strategy.
On one hand, AFRICOM could provide a bureaucratic umbrella of sorts to help shelter some “development and diplomacy” efforts from the budget storm. On the other, it could suck up dollars to pay for programs that are neither efficient nor well coordinated, nor carried out by people who have development or diplomacy as their primary mission. Regardless, I think it is fair and appropriate to say that at least some people on both the civilian and military side of the effort, who believe in the concept of a “new kind” of command, are concerned about the staying power of the model as conceived and approved against the bureaucratic pressure for military homogenization in the context of the global war on terrorism formerly known as “the Global War on Terrorism”.
Yesterday at the Frontiers in Development program Jim Kolbe, former Republican Congressman and longtime IRI board member, emphasized the importance of development for U.S. national security. I agree. Having worked in the defense industry myself for 12.5 years, including the time of the USS Cole bombing (the ship was repaired at my workplace), 9-11 (I was in Washington), 7-7 (got the news of the London bombings as an election observer in Osh, Kyrgyzstan) I do not downplay terrorism or undervalue U.S. security–I just want very much for all of us as citizens to take responsibility for making good and deliberative decisions about our long term interests and ultimately the broader role we want to play in the world.
American products are relatively few and far between in East Africa. While there are a more substantial number of products from international companies headquartered in the U.S., actual export of goods from the U.S. is very limited. Here is a product manufactured right here in the deep Gulf South. While the peppers are grown at several locations globally now, as well as at Avery Island, Louisiana, all of the sauce making and bottling is done at the original Avery Island plant.