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Updated July 7, 2021
U.S.-Kenya FTA Negotiations
The United States and Kenya began free trade agreement
largest trading partner, China, accounted for 2% of Kenya’s
(FTA) negotiations in 2020 under then-President Trump
exports in 2020 ($138 million of Kenya’s reported $6.0
and President Uhuru Kenyatta of Kenya. Negotiations are
billion total) while supplying 22% of its reported imports
currently on hold as the Biden Administration reviews its
($3.4 billion of $15.3 billion). In 2020, the United States
trade policy priorities. Some Members of Congress have
reported a goods trade deficit with Kenya, with U.S. exports
pressed the Administration to proceed with the talks, but the
of $371 million and imports of $569 million. U.S. exports
July 1 expiration of U.S. Trade Promotion Authority (TPA),
were concentrated in petroleum products ($58 million),
under which President Trump had notified Congress of his
aircraft ($57 million), and machinery ($52 million). Imports
intent to enter into the bilateral FTA negotiations, and the
consisted mostly of apparel ($385 million), macadamia nuts
planned 2022 presidential elections in Kenya may
($42 million), and coffee ($44 million). U.S. imports from
complicate the path forward. A U.S.-Kenya FTA would be
Kenya have grown by more than 10% annually (avg.) since
the first U.S. FTA with a country in sub-Saharan Africa
2001, when AGOA’s tariff benefits took effect (Figure 1).
(SSA). Congressional interest may include (1) Congress’s
constitutional authority to regulate foreign commerce; (2)
Figure 1. U.S. Goods Imports from Kenya
the FTA’s potential effects on the U.S. economy, and trade
and foreign policy implications; and (3) statutory mandates
in the African Growth and Opportunity Act (AGOA, P.L.
106-200, as amended), which among other things directs
the President to seek African FTA partners.
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.
Source: Data from U.S. International Trade Commission.
Notes: African Growth and Opportunity Act (AGOA) figures
U.S.-Kenya Economic Ties
include imports under the Generalized System of Preferences (GSP).
In the decade leading to the Coronavirus Disease 2019
(COVID-19) pandemic, Kenya achieved an average GDP
Tariff Rates and Other Trade Restrictions
growth rate of 5.8%. However, it remains a lower middle-
As members of the World Trade Organization (WTO),
income country, with GDP per capita of roughly $2,000,
trade between the United States and Kenya is governed by
and more than 80% of employment in the informal sector.
WTO commitments, including each country’s most-favored
Given the economic vulnerability of much of the population
nation (MFN) tariff rates—uniform rates applied to all other
and limited government resources, the country’s 2020
WTO members. The United States, however, provides
economic contraction (estimated at 0.1-0.3% of GDP, and
unilateral preferential tariff treatment (below MFN rates) to
Kenya’s first since the 1990s) has generated significant
most Kenyan exports through AGOA. AGOA is similar to
hardship for households and firms. A primary concern is
the Generalized System of Preferences (GSP), but builds on
human capital development; with almost 40% of its
GSP by providing duty-free treatment to a broader range of
population of roughly 50 million under age 14, a coming
U.S. imports. Kenya is a member of the East African
surge in the labor force will present challenges and
Community (EAC) customs union and shares a common
opportunities for growth prospects for Kenya.
external tariff schedule with the other EAC members
(Burundi, Rwanda, South Sudan, Tanzania, and Uganda),
Currently, Kenya’s economic relationship with the United
although it applies its own tariff rates on a limited number
States is concentrated in trade in goods. The U.S. Bureau of
of products.
Economic Analysis does not provide official statistics on
U.S.-Kenya services trade due to its low value. Nearly all
U.S. Tariffs. In 2020, more than 75% of U.S. imports from
bilateral investment activity is comprised of U.S. foreign
Kenya entered duty-free under either AGOA or GSP, and
direct investment (FDI) in Kenya, valued at $353 million in
remaining imports were largely duty-free on an MFN basis.
2019. Majority-owned foreign affiliates of U.S.
The U.S. average effective applied tariff (total duties
multinational firms employed 5,900 people in Kenya in
divided by imports) on Kenyan imports was 0.1% in 2020.
2018 (latest data available), with total sales of $1.0 billion.
Kenya’s Tariffs. According to the WTO, Kenya’s average
Kenya is a relatively small U.S. trading partner (93rd largest
applied MFN tariff rate for all partners was 13.4% in 2019.
in 2020), but the United States is a major trading partner
Several top U.S. exports, such as machinery and aircraft,
(4th largest) and second-largest export market for Kenya
however, face low or zero tariffs. Kenya’s agriculture sector
(absorbing 8% of Kenya’s exports). In contrast, Kenya’s
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
Moving Beyond AGOA
(51.7%), animal products (23.1%), and cereals (22.2%).
Another potential challenge is how to transition from the
current non-reciprocal bilateral trade relationship governed
Other Barriers. Ongoing U.S. concerns include Kenya’s
by AGOA and GSP. Establishing new apparel trade rules
broad ban on genetically engineered food and feed
may be particularly complicated. As a lesser-developed
products. Kenya’s 2019 Data Protection Act also potentially
beneficiary country (LDBC) under AGOA, Kenya qualifies
creates uncertainties for cross-border data flows. Kenya
for AGOA’s third-country fabric rule, which allows Kenya
also is not a member of the WTO Government Procurement
to export apparel made with imported fabrics to the United
Agreement, and grants exclusive preference to Kenyan
States duty-free. In 2020, 98% of all U.S. apparel imports
companies for procurements under roughly $500,000.
under AGOA were assembled in LDBCs from third-country
Motivations for Trade Talks
fabrics. By contrast, U.S. FTAs typically use a more
stringent “yarn forward” rule of origin, requiring local or
For the United States, an FTA could fulfill the shared goal
of Congress (as stipulated in AGOA) and successive U.S.
U.S. sourcing of yarn and fabrics to qualify for duty-free
treatment. Negotiators could also need to set rules for
Administrations to expand ties with trading partners in
Africa and transition to a more reciprocal trading
allowable levels of sourcing from other AGOA countries.
framework. Reducing Kenyan trade barriers through an
Relation to African Regional Trade Initiatives
FTA could help U.S. firms maintain their competitiveness
Kenya’s membership in the EAC and the African
in the Kenyan market, especially with a new trade
Continental Free Trade Area (AfCFTA)—and U.S. goals to
agreement between Kenya and the United Kingdom (UK)
support these regional initiatives—are also likely to factor
now in effect, and one with the European Union (EU)
in potential trade talks. Kenya’s EAC commitments affect
awaiting ratification, giving tariff and other advantages to
its external trade policy, and EAC interests may influence
UK and EU exporters. An FTA could also help foster
Kenya’s negotiating positions. A U.S.-Kenya agreement
economic growth in both countries and encourage Kenya’s
could affect regional trade patterns (e.g., through rules of
efforts to continue to improve its business environment and
origin requirements) and set precedents for regional trade
domestic economic reforms. Kenya’s World Bank Doing
and investment rules. Similar issues apply regarding the
Business score has risen from 58 to 73 from 2016 to 2020.
AfCFTA, an Africa-wide trade agreement that took effect
U.S. officials may also see the trade talks as a strategic tool
in January 2021. The AfCFTA’s MFN clause requires
to counter growing Chinese influence on the continent.
Kenya to extend tariff concessions granted to the United
With AGOA set to expire in 2025 Kenya may see benefit in
States to AfCFTA members on a reciprocal basis.
securing permanent preferential access to its second-largest
export market. The Kenyatta administration may also see an
Timeline and Next Steps
FTA as supporting its economic agenda and signaling
The Biden Administration has not clarified its position on
commitment to liberal economic policies to attract FDI.
possible resumption of the FTA negotiations. For its part,
Kenya likely also seeks to bolster its strategic relationship
the Kenyatta government seeks a quick conclusion of the
with the United States, potentially boosting its position vis-
talks with the hope of achieving an agreement before the
à-vis regional rivals.
planned 2022 elections. From a congressional perspective,
the expiration of U.S. TPA on July 1 creates uncertainty
"...we’re assessing how those negotiations [with
regarding the path forward for the trade talks. In past TPA
Kenya] could fit into President Biden’s broader agenda
legislation, Congress allowed for expedited consideration of
for building back better and exploring the potential to
trade agreement implementing legislation, if the
build a new trade model and structure...”
Administration made progress toward achieving statutory
USTR Katherine Tai, May 13, 2021
negotiating objectives and satisfied TPA notification and
consultation requirements during the negotiations. Some
Key Issues for Bilateral FTA Talks
Members have urged the President to seek prompt renewal
of TPA, but the Administration has not stated a position.
The significant economic development disparities between
the two countries suggest possible differences in
Issues for Congress
negotiating priorities. A key challenge could be to establish
A U.S.-Kenya FTA would represent a milestone in U.S.-
a framework for the talks that can achieve the ambitious
Africa trade and economic relations, but its current
level of commitments Congress traditionally directs the
prospects are unclear. Congress may consider and advise
President to seek in FTAs, for which U.S. business
the Administration on how to prioritize FTA talks with
stakeholders have advocated in a potential U.S.-Kenya
Kenya among other U.S. trade policy objectives; whether
FTA. At the same time, such a framework must remain
and in what form to seek renewal of TPA; the scope and
politically and economically viable in Kenya amidst
extent of potential U.S.-Kenya FTA commitments to
domestic pressure to maintain protections for import-
pursue; how to ensure an FTA with Kenya and its rules of
sensitive or nascent industries. Potentially contentious
origin support regional integration efforts and U.S.
topics include the timing and extent of tariff liberalization
economic interests; and the potential types of support (e.g.,
including on agricultural goods; rules on intellectual
trade capacity building funds) and flexibilities (e.g., phasing
property rights, investment, and data flows; and the level of
in of commitments) to include as appropriate to Kenya’s
labor and environmental protections. U.S. FTA talks with
level of development.
the South African Customs Union—the only other U.S.
FTA negotiations attempted to date in SSA—were
See Also: CRS In Focus IF10168, Kenya, by Lauren Ploch
suspended in 2006 in part due to divergent views over
Blanchard; and CRS In Focus IF10149, African Growth
scope, which may highlight the need to establish clear
and Opportunity Act (AGOA), by Brock R. Williams.
negotiating parameters for the Kenya talks at an early stage.
https://crsreports.congress.gov
U.S.-Kenya FTA Negotiations
Lauren Ploch Blanchard, Specialist in African Affairs
Brock R. Williams, Specialist in International Trade and
IF11526
Finance
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https://crsreports.congress.gov | IF11526 · VERSION 4 · UPDATED