US Looks for African Trade

Possible Trade Deal With Kenya Could Open Up More Exports in Africa

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
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A Kenyan farmer sells rice at Nice Rice Millers in Mwea, Kenya, in 2012. Kenya has high import tariffs on most agricultural commodities, which could come down under a trade deal. (DTN file photo by Chris Clayton)

OMAHA (DTN) -- The U.S. Chamber of Commerce is touting the prospects of a U.S. trade agreement with Kenya that could eventually open the doors for more trade in other African countries as well.

"The rumor around the potential of a U.S.-Kenya FTA, especially one that has high standards and is comprehensive, has really gotten the attention of the private sector," said Scott Eisner, president of the U.S.-Africa Business Center at the U.S. Chamber of Commerce, on a call with reporters.

Such a deal could dramatically lower tariffs for U.S. agricultural commodities. Right now, the U.S. sells just $37 million in agricultural products to Kenya.

President Donald Trump will host Kenyan President Uhuru Kenyatta on Thursday at the White House. On Wednesday, Kenyatta told the Atlantic Council that he wants to see closer ties to both the U.S. and China.

"We don't want to be forced to choose. We want to work with everybody, and we think there is an opportunity for everybody," Kenyatta said, according to Reuters.

The U.S. has been looking for an African partner to create trade deal that would become a blueprint for the U.S. to set other agreements in Africa. The Trump administration wants to replace the Africa Growth and Opportunity Act (AGOA), which allows as many as 39 African countries to export into the U.S. duty free. AGOA right now is set to expire in 2025. AGOA provides the African countries preferential treatment selling into the U.S., but does not offer any reciprocity.

Kenya ideally will be a good market to enter into the broader African market for the U.S. to expand bilateral FTAs with other African countries.

About a year ago, Kenya and the U.S. Trade Ambassador's office launched a working group to discuss trade and investment options. Kenya's leaders had more aggressively sought to negotiate a free-trade deal with the U.S. than some other African countries.

"This is a will of the (Kenyan) president and he sees this as a huge priority for their economy," Eisner said.

Right now, Kenya and the U.S. only do about $1 billion in total trade, while Kenya has about $5 billion in trade with China, which also spends heavily on Kenyan infrastructure. Still, Chamber leaders are optimistic about the potential to sell more products in Kenya. "There's a lot of room to grow and there some big numbers over the next six to 10 years, should a deal come to completion," Eisner said.

Agriculture is part of Kenyatta's major agenda for the country's economic development growth. Further, U.S. agricultural companies are poised to increase various investments in Kenyan agriculture. Eisner pointed to John Deere bringing precision-agriculture technology to the country, as well as Cargill working areas such as cocoa development in the country.

"There's a huge potential here for American companies to have a big impact and big inputs into the agricultural sector throughout the Kenyan market" Eisner said. "I do see this as a big upside and a big win down the road for U.S. agricultural inputs into the Kenyan supply chain."

A report released last year by the U.S. Trade Representative's Office on barriers to trade globally showed Kenya maintains high tariffs in areas where U.S. agriculture would likely want to sell. Rice tariffs are 70% while dairy products and wheat flour face 60% tariffs. Corn products face a 50% tariffs. Kenya's overall tariff averages 12.8%, but the country takes on another 10% duty for processed or manufactured inputs, and 25% added duty for finished products.

"That is definitely the motivation (for the U.S.) that you want to secure those trade lines now rather than give up something on the other side of the equation," Eisner said. "So I fully expect that's going to be a very robust part of the conversation is bringing down those tariff lines."

Kenya's government does waive tariffs on agricultural products when domestic prices reach a certain level.

Currently, the USTR reports the U.S. exported $37 million in agricultural products to Kenya in 2018. That consisted of corn, wheat, pulses, vegetable oils and planting seeds. Yet Kenya sold $154 million in agricultural products to the U.S., of which tree nuts accounted for roughly half the sales. Coffee, tea, essential oils and vegetable oils also were top products.

Overall, the U.S. in 2018 carried at $279 million trade deficit with Kenya.

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on Twitter @ChrisClaytonDTN

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Chris Clayton