Kenya can breathe a sigh of relief after the US dropped plans to endorse a trans-pacific trade pact that would have exposed the country’s exports to America to stiff competition.
The Ministry of Trade has welcomed the move by President Donald Trump saying the Trans-Pacific Partnership Agreement (TPP), would have hit hard the Africa Growth Opportunity Act (Agoa) through which Kenya sells to America duty-free.
Last year, Kenya joined other African nations to lobby for the delay in the implementation of TPP, which would have resulted in stiff rivalry to the country’s textile industry as it would allow 12 pacific nations to export their goods to America duty free.
Trade Principal Secretary Chris Kiptoo says the withdrawal of this trade deal by Trump is good news for Kenya, especially for the country’s textile sector.
Kenya is a beneficiary of the preferential trade pact Agoa, which allows sub-Saharan African countries to export goods to the US tax-free.
Textiles and apparel account for about 80 per cent of Kenya’s total exports under the agreement.
“If the Trump administration would have moved on with implementation of TPP, then goods from Kenya heading to US under the Agoa treaty would have been affected significantly as a result of competition from other nations. Its withdrawal gives us a sigh of relief,” Dr Kiptoo said.
Dr Kiptoo said it would be difficult for Kenya to compete with countries such as Vietnam and other Asian States, which are not only part of the TPP deal but are big players in the textile field.
“Vietnam is a big producer of textile and this would have made it difficult for us to compete with them if they get duty and quota free access to the US market. Our cost of production is high compared to Vietnam and this would have made our goods uncompetitive in the market,” he said.
On Monday last week, Mr Trump fulfilled one of his campaign pledges and signed a statement formally abandoning the Pacific trade deal.
TPP eliminates or reduces all tariffs on goods traded between partner countries. The TPP agreement would have abolished many of these charges.
The United States remains Kenya’s major trading partner and was position three in the first 10 months of last year as the country’s export destination.
According to Kenya National Bureau of Statistics data, Kenya’s exports to the US grew seven per cent to Sh35.3 billion in the period under review.
In 2015, Kenya exported goods worth $580 million to the US market with 65 per cent of these items comprising textile from which the country earned $381 million.
Other items exported included fruits and nuts (18 per cent), coffee (8 per cent) and tea and flowers (1.4 per cent each).
Expand product list
Kenya says it is looking at ways of expanding the list of products that the country exports to America under Agoa as competition intensifies in the garment and apparel segment.
According to Dr Kiptoo, Kenya has to increase its share of the market to US as it currently exports 10 products out of a long list issued by America.
Newly-added Agoa products comprise previously excluded items such as footwear, luggage, handbags, watches, certain automotive components among others.
Africa is also opposed to a plan by the US to have their goods sold in Africa under the same terms as Agoa noting that it will affect the growing economies on the continent.
American negotiators have been piling pressure on African countries to allow the same preferential treatment to American exports to Africa following the extension of the tariffs in 2015, and which is due to expire in the next nine years.