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Updated May 28, 2020
U.S.-Kenya FTA Negotiations
On February 6, President Trump and President Uhuru
billion total) while supplying 21% of its reported imports
Kenyatta of Kenya announced their intent to begin free
($3.6 billion of $17.1 billion). In 2019, the United States
trade agreement (FTA) negotiations. If successful, it would
reported a goods trade deficit with Kenya, with U.S. exports
be the first U.S. FTA with a country in sub-Saharan Africa.
of $375 million and imports of $667 million. U.S. exports
Congressional interest may include (1) Congress’s
were concentrated in plastics ($58 million), machinery and
constitutional authority to regulate foreign commerce, such
electrical machinery ($58 million), aircraft ($55 million),
as setting U.S. trade negotiating objectives, and considering
and wheat ($27 million). Imports consisted mostly of
FTAs through implementing legislation; (2) the FTA’s
apparel ($454 million), macadamia nuts ($55 million),
potential effects on the U.S. economy, and trade and foreign
titanium ores ($52 million), and coffee/tea ($41 million).
policy implications; and (3) mandates in the African
U.S. imports from Kenya have grown on average by more
Growth and Opportunity Act (AGOA, P.L. 106-200, as
than 10% annually since 2001, when AGOA’s tariff
amended), in which Congress directed the President to seek
benefits took effect (Figure 1).
African FTA partners and granted the region tariff benefits.
Figure 1. U.S. Goods Imports from Kenya
Kenya is not a major U.S. trade partner in global terms, but
it is one of Africa’s most dynamic economies and the
second-largest beneficiary of AGOA’s tariff benefits,
excluding crude oil. The United States views Kenya as a
strategic partner in the region: the country is a major
beneficiary of U.S. security and foreign assistance, and a
hub for U.S. security initiatives in the region. Kenya hosts
the largest U.S. diplomatic mission on the continent.
On March 17, the United States Trade Representative
(USTR) notified Congress of its intent to begin negotiations
with Kenya, as required under Trade Promotion Authority
(TPA) at least 90 days before negotiations commence. This

means talks may begin as early as mid-June under TPA
Source: Data from U.S. International Trade Commission.
rules. USTR outlined four goals for the agreement: to serve
Notes: African Growth and Opportunity Act (AGOA) figures
as a model for future U.S. FTAs in Africa, to contribute to
include imports under the Generalized System of Preferences (GSP).
regional integration efforts, to build on AGOA objectives,
and to expand U.S. trade and investment ties with Africa.
Tariff Rates and Other Trade Restrictions
As members of the World Trade Organization (WTO),
U.S.-Kenya Economic Ties
trade between the United States and Kenya is governed by
Kenya has achieved an average GDP growth rate of 5.9%
WTO commitments , including each country’s most-favored
over the past decade. However, it remains a lower middle-
nation (MFN) tariff rates —uniform rates applied to all other
income country, with GDP per capita of just under $2,000
WTO members. The United States, however, provides
in 2019, and 83% of employment in the informal sector as
unilateral preferential tariff treatment (below MFN rates) to
of 2017. With almost 40% of its population of roughly 50
most Kenyan exports through AGOA. AGOA is similar to
million under age 15, a coming surge in the labor force will
the Generalized System of Preferences (GSP), but builds on
present challenges and opportunities for growth prospects.
GSP by providing duty-free treatment to a broader range of
U.S. imports. Kenya is a member of the East African
Currently, Kenya’s economic relationship with the United
Community (EAC) customs union and shares a common
States is concentrated in trade in goods. The U.S. Bureau of
external tariff schedule with the four other EAC members
Economic Analysis does not provide official statistics on
(Burundi, Rwanda, Tanzania, and Uganda), although it
U.S.-Kenya services trade due to its low value. Nearly all
applies its own tariff rates on a limited number of products.
bilateral investment activity is comprised of U.S. foreign
direct investment (FDI) in Kenya, valued at $380 million in
U.S. Tariffs. In 2019, nearly 80% of U.S. imports from
2018. Majority-owned foreign affiliates of U.S.
Kenya entered duty-free under either AGOA or GSP, and
multinational firms employed 5,900 people in Kenya in
remaining imports were largely duty-free on an MFN basis.
2017 (latest data available), with total sales of $1.0 billion.
The U.S. average effective applied tariff (total imports
divided by duties) on Kenyan imports was 0.1% in 2019.
Kenya is a relatively small U.S. trading partner (96th largest
in 2019), but the United States is a major trading partner
Kenya’s Tariffs. According to the WTO, Kenya’s average
(5th largest) and second-largest export market for Kenya
applied MFN tariff rate for all partners was 13.5% in 2018.
(absorbing 9% of Kenya’s exports). In contrast, Kenya’s
Several top U.S. exports, such as machinery and aircraft,
largest trading partner, China, accounted for 3% of Kenya’s
however, face low or zero tariffs. Kenya’s agriculture sector
exports in 2019 ($147 million of Kenya’s reported $5.8
presents the highest barriers to U.S. exports, with an
https://crsreports.congress.gov

U.S.-Kenya FTA Negotiations
average tariff of 20.3%, and relatively high tariffs on dairy
for AGOA’s third-country fabric rule, which allows Kenya
(51.7%), animal products (23.1%), and cereals (22.2%).
to export apparel made with imported fabrics to the United
States duty-free. In 2019, 97% of all U.S. apparel imports
Other Barriers. USTR’s national trade barriers report
under AGOA were assembled in LDBCs from third-country
notes concerns over Kenya’s broad ban on genetically
fabrics. By contrast, U.S. FTAs typically use a more
engineered food and feed products. It also highlights
stringent “yarn forward” rule of origin, requiring local or
Kenya’s 2019 Data Protection Act as potentially creating
U.S. sourcing of yarn and fabrics to qualify for duty-free
uncertainties for cross-border data flows. Kenya is not a
treatment. Negotiators must also set rules for allowable
member of the WTO Government Procurement Agreement,
levels of sourcing from other AGOA countries.
and grants exclusive preference to Kenyan companies for
procurements under roughly $500,000.
Relation to African Regional Trade Initiatives
Kenya’s membership in the EAC and the African
Motivations for Trade Talks
Continental Free Trade Area (AfCFTA)—and U.S. goals to
For the United States, an FTA could fulfill the shared goal
support these regional initiatives—will also likely factor in
of Congress (as stipulated in AGOA) and the
the trade talks. Kenya’s external trade policy is affected by
Administration to expand ties with trading partners in
its EAC commitments, and EAC interests may influence
Africa and transitioning them to a more reciprocal
Kenya’s negotiating positions. A U.S.-Kenya agreement
framework. An FTA could also help foster economic
could affect regional trade patterns (e.g., through rules of
growth in both countries and encourage Kenya’s efforts to
origin requirements) and set precedents for regional trade
continue to improve its business environment and domestic
and investment rules. Similar issues apply regarding the
economic reforms. Kenya’s World Bank Doing Business
AfCFTA, an Africa-wide trade agreement, originally set to
score has risen from 58 to 73 since 2016. U.S. officials may
to take effect this summer, but now delayed to 2021 due to
also see the trade talks as a strategic tool to counter growing
COVID-19. The AfCFTA’s MFN clause requires Kenya to
Chinese influence on the continent.
extend tariff concessions granted to the United States to
AfCFTA members on a reciprocal basis.
With AGOA set to expire in 2025, Kenya may see benefit
in securing permanent preferential access to its second-
Timeline and Next Steps
largest export market. The Kenyatta administration may
USTR intends to pursue talks with Kenya under TPA,
also see an FTA as supporting its economic agenda and
which sets parameters for the timeline and other conditions.
signaling commitment to liberal economic policies in order
TPA, currently set to expire on July 1, 2021, would allow
to attract FDI. Kenya likely also seeks to bolster its
for expedited congressional consideration of the FTA, if it
strategic relationship with the United States, potentially
makes progress toward achieving statutory negotiating
boosting its position vis-à-vis regional rivals.
objectives and the Administration satisfies TPA notification
and consultation requirements. In late May, following a
“… we look forward to negotiating and concluding a
public comment period, USTR issued its agreement-
comprehensive, high-standard agreement with Kenya
specific negotiating objectives, as required by TPA at least
that can serve as a model … across Africa.”
30 days before negotiations commence. The objectives
USTR Lighthizer, February 6, 2020
suggest the Administration may seek some of the same
novel provisions in the Kenya FTA as it sought in the U.S.-
Key Issues for Bilateral FTA Talks
Mexico-Canada Agreement (USMCA). These include,
The significant economic development disparities between
among others, language on third-country agreements with
the two countries suggest possible differences in
“non-market economies,” mechanisms to assess
negotiating priorities. A key challenge will likely be to
periodically the agreement’s benefits, and the prohibition of
establish a framework for the talks that can achieve the
imports produced with forced labor, regardless of origin.
ambitious level of commitments Congress directs the
Issues for Congress
Administration to seek in FTAs. At the same time, such a
framework must remain politically and economically viable
A U.S.-Kenya FTA would address congressional statutory
in Kenya amidst domestic pressure to maintain protections
objectives and represent a milestone in U.S.-Africa trade
for import-sensitive or nascent industries. Potentially
and economic relations. As negotiations unfold, Congress
contentious topics include the timing and extent of tariff
may seek to consider and advise the Administration on the
scope and extent of the agreement’s potential commitments;
liberalization including on agricultural goods; rules on

intellectual property rights, investment, and data flows; and
how to prioritize FTA talks among other U.S. policy
the level of labor and environmental protections. The
objectives in Africa, including responses to the COVID-19
Trump Administration describes the talks as an opportunity
pandemic; how to ensure the agreement and its rules of
to develop a “model” FTA, but has not specified what
origin support regional integration efforts; and the types of
changes from past practice this may entail. U.S. FTA talks
support (e.g., capacity building funds) and potential
with the South African Customs Union, which were
flexibilities (e.g., phasing of commitments) appropriate to
Kenya’s level of development
suspended in 2006 in part due to divergent views over
.
scope, highlight the importance of establishing clear
See Also: CRS In Focus IF10168, Kenya, by Lauren Ploch
parameters for the negotiations at the outset.
Blanchard; and CRS In Focus IF10149, African Growth
Moving Beyond AGOA
and Opportunity Act (AGOA), by Brock R. Williams.
Another challenge is how to successfully transition from the
Brock R. Williams, Specialist in International Trade and
current non-reciprocal bilateral trade relationship governed
by AGOA and GSP. Establishing new apparel trade rules
Finance
may be particularly complicated. As a lesser-developed
Lauren Ploch Blanchard, Specialist in African Affairs
beneficiary country (LDBC) under AGOA, Kenya qualifies
https://crsreports.congress.gov

U.S.-Kenya FTA Negotiations

IF11526

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https://crsreports.congress.gov | IF11526 · VERSION 3 · UPDATED