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Client Alert: Key Highlights of The United States-Kenya Strategic Trade and Investment Partnership (STIP)

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On July 14, 2022, the United States and Kenya launched a strategic trade and investment partnership (STIP) to pursue commitments to boost economic growth, support African regional economic integration and deepen trade cooperation. Both countries target to commence, within a three-month period, the development of a road map for engagement in trade and investment.

Kenya has long sought a full Free Trade Agreement (FTA) with the United States, and negotiations for such a deal to lower bilateral tariffs were initially launched by the Trump administration in 2020. However, the change of administration in the US government resulted in a shift in strategy by the Biden-led administration. They gave a wide berth to some of the pending deals that the Trump era administration had already commenced negotiations.

Background

Kenya is a bona fide beneficiary under the African Growth and Opportunity Act (AGOA). The aim of AGOA is to expand U.S. trade and investment with sub-Saharan Africa so as to stimulate economic growth, encourage economic integration and facilitate the region’s integration into the global economy.

AGOA (a trade preference program enacted in 2000) provides duty-free entry into the United States for African products. This has helped to expand and diversify African exports to the United States. In 2015, the U.S. Congress renewed AGOA through to 2025.

The total two-way trade between the United States and Kenya has been estimated to be more than $1.24 billion annually. For instance, in 2021, the United States exported $562 million worth of goods to Kenya, with oil and gas making up the largest export category at $137 million. This was followed by chemicals at $96 million and transportation equipment at $71 million. U.S. foreign direct investment (FDI) into Kenya totalled $339 million in 2020 (due to the after-shocks of the Covid-19 pandemic), while Kenyan FDI into the United States totalled $5 million according to the Bureau of Economic Analysis.

In July 2021, the United States announced that it would renew its Prosper Africa initiative, to increase reciprocal trade and investment between the US and African countries. The focus of the initiative would center on improving trade and investment in sectors such as infrastructure, energy and climate solutions, healthcare and technology.

The United States-Kenya Strategic Trade and Investment Partnership (STIP)

An impending trade agreement between the United States and Kenya would be the first between the United States and a sub-Saharan African country and would complement the African Continental Free Trade Area (AfCFTA). The proposed agreement presumably has a heightened focus on sustainability, innovation and good governance, and highlights the requirement that all measures introduced under the agreement must be advantageous to local communities, consumers and businesses in both countries.

The new STIP agreement will pursue high-standard commitments on a wide range of subjects, with several goals – to increase investment; promote sustainable and inclusive economic growth; benefit workers, consumers, and businesses; and support African regional economic integration. Set out below are the main focus areas where the United States and Kenya will develop an ambitious roadmap for enhanced cooperation with the goal of negotiating high-standard commitments in order to achieve economically meaningful outcomes:

1. Agriculture

 The U.S. and Kenya will pursue measures to facilitate agricultural trade through enhanced transparency and understanding of the application of Sanitary and Phytosanitary (SPS) measures. The main objective is to achieve food security goals and increase farm productivity and livelihoods while addressing climate change concerns.

2. Anti-Corruption

Both countries aim to commit in information sharing of best practices to combat bribery and corruption and will look into negotiating certain commitments.

3. Digital Trade

Both countries aim to foster trust in the digital economy by ensuring access to information, promoting development of secure digital infrastructure, promoting competition of small and medium enterprises (SMEs), and addressing discriminatory practices. The main areas of focus in this regard will be digital inclusion and online consumer protection.

4. Environmental and Climate Change Action

Through anchored principles of shared common values with respect to environmental conservation, the strategic partnership will aim to adopt measures that mitigate climate change including with sustainable use and management of each country’s natural resources.

5. Good Regulatory Practices

The U.S. and Kenya are committing to exploring the negotiation of high-level commitments on a variety of regulatory practices including appropriate timing for public consultations, posting of proposed regulations, and basing regulatory decisions on best available information. Both countries will also be negotiating on provisions on services domestic regulation.

6. Micro, Small and Medium Enterprises (MSMEs)

The U.S. and Kenya will discuss approaches to integrate MSMEs into international trade as they believe that the success of MSMEs (including women-owned enterprises) are key elements to promote sustained economic growth

7. Promoting Workers’ Rights and Protections:

The U.S. and Kenya will work together to advance and protect labour rights through enforcement of and compliance with labour laws, promotion of social dialogue and cooperation in other areas of mutual interest.

 8. Supporting Participation of Women, Youth, and Others in Trade:

The U.S. and Kenya will promote economic opportunities for women and youth that create high-quality jobs and sustainable livelihoods through international trade.

 9. Standards Collaboration

Both countries aim to discuss standards, conformity assessment procedures and technical regulations to reduce impediments on trade due to differences in their respective systems. This will hopefully be achieved by preparation, adoption, and application of technical regulations, standards and conformity assessment procedures based on mutually agreed best practices.

10. Trade Facilitation and Customs Procedures

The U.S. and Kenya will discuss opportunities to streamline procedures and accelerate the World Trade Organization’s Trade Facilitation Agreement implementation to better recover from the pandemic’s impact on supply chains. The two countries will also look at other practices such as the August 2014 Agreement between the Government of the United States and the Republic of Kenya Regarding Mutual Assistance between their Customs Administrations and the Authorized Economic Operator (AEO) program.

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