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Deal with US should benefit both parties

Saturday February 8 2020

EDITORIAL
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Kenya took another step towards a trade pact with the US during President Uhuru Kenyatta’s recent visit to Washington DC. Broadly, the negotiations seek to expand reciprocal trade between the two countries, which for Kenya means securing more business opportunities in the US and boosting export earnings.

Separately, there was also an amendment to the bilateral air services agreement to enable the two countries to transport cargo directly, expanding commodity trade. This follows the launch of direct passenger flights between Nairobi and New York in 2018 designed to ease travel and boost trade.

The US is one of the world’s biggest markets and many countries seek to enter into trade deals with it. But an analysis of the trade between Kenya— and for that matter the rest of Africa — and America reveals wide inequalities. So far, the main business engagement with the US is the African Growth Opportunity Act (Agoa) that allows selected countries in Africa easy access to the US market through preferential treatment, including tax waivers that lower product costs.

But the general trend is that Kenya’s and Africa’s engagement with the US is skewed against the continent. Kenya and the rest of Africa export largely raw materials to the US and other western economies, but that attracts marginal returns. In contrast, the West and big Asian economies export to Africa and other developing countries manufactured goods that attract high buyer-fee. This is modern-day exploitation that continues unabated even as Africa’s leaders pursue trade deals.

To this extent, trade agreements have to be critically evaluated to determine if they promote mutual benefits for the trading nations. Conversely, once Kenya signs a trade pact, the compulsion is to enhance the quality of products to sustain and expand consumption

At another level, there has been debate as to whether Kenya should pursue more bilateral or bloc trade agreements. This comes against the wisdom that since most of Africa’s economies are fragile and small compared to their foreign partners, there is merit in going for regional or continent-wide trade accords. Thus far, at the continental level, various countries have signed the African Continental Free Trade Area agreement. East African countries equally have common trade protocols. Experts argue that the continent stands to benefit more if the countries collectively enter into deals with the rest of the world rather than individually. However, it has to be pointed out that there is nothing wrong with pursuing the two sets of arrangements. What is pertinent is the nature and scope of trade deals.

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For Kenya, the agreements would make sense if they translated into real expansion of markets and enhanced quality of products that rake in substantial revenues.

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