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Updated May 27, 2022
U.S.-Kenya FTA Negotiations
The United States and Kenya began free trade agreement
Kenya is a relatively small U.S. trading partner (92nd largest
(FTA) negotiations in 2020 under then-President Trump
in 2021), but the United States is a major trading partner
and President Uhuru Kenyatta of Kenya. The Biden
(4th largest) and third-largest export market for Kenya
Administration has not resumed the FTA talks, but has
(absorbing 8% of Kenya’s exports). In contrast, Kenya’s
stated its interest in deepening bilateral trade relations and
largest trading partner, China, accounted for 3% of Kenya’s
sent a high-level U.S. delegation to Kenya in May 2022 to
exports in 2021 ($198 million of Kenya’s reported $6.7
discuss trade issues. Some Members of Congress, including
billion total) while supplying 21% of its reported imports
the chair of the Ways and Means committee, and U.S.
($4.0 billion of $19.4 billion). In 2021, the United States
business groups have pressed the Administration to resume
reported a goods trade deficit with Kenya, with U.S. exports
and conclude the FTA. The 2015 grant of Trade Promotion
of $551 million and imports of $685 million. U.S. exports
Authority (TPA), under which President Trump initiated the
were concentrated in petroleum products ($125 million),
FTA talks, expired in July 2021, potentially complicating
pharmaceutical products ($68 million), and aircraft ($59
congressional consideration of the proposed FTA.
million). Imports consisted mostly of apparel ($449
million), macadamia nuts ($51 million), and coffee ($41
A U.S.-Kenya FTA would be the first U.S. FTA with a
million). U.S. imports from Kenya have grown by more
country in sub-Saharan Africa (SSA). Congressional
than 10% annually (avg.) since 2001, when AGOA’s tariff
interest may include (1) Congress’s constitutional authority
benefits took effect (Figure 1).
to regulate foreign commerce; (2) the FTA’s potential
effects on the U.S. economy, and trade and foreign policy
Figure 1. U.S. Goods Imports from Kenya
implications; and (3) statutory mandates in the African
Growth and Opportunity Act (AGOA, P.L. 106-200, as
amended) directing the President to seek FTAs in Africa.
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.
U.S.-Kenya Economic Ties
In the decade leading to the Coronavirus Disease 2019
Source: Data from U.S. International Trade Commission.
(COVID-19) pandemic, Kenya achieved an average GDP
Tariff Rates and Other Trade Restrictions
growth rate above 5%. 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
The economy contracted by 0.3% in 2020, Kenya’s first
nation (MFN) tariff rates—uniform rates applied to all other
GDP decline since the 1990s, but rebounded in 2021 with
WTO members. The United States, however, provides
growth of 7.2% and the IMF estimates growth in 2022 of
unilateral preferential tariff treatment (below MFN rates) to
more than 5%. Despite this return to pre-pandemic levels of
most Kenyan exports through AGOA. AGOA is similar to
growth, potential long-term effects of pandemic-related
the Generalized System of Preferences (GSP), but builds on
setbacks in childhood education and its impact on human
GSP by providing duty-free treatment to a broader range of
capital development remains a major concern. As of 2020,
U.S. imports. Kenya is a member of the East African
nearly 40% of Kenya’s population of over 50 million was
Community (EAC) customs union and shares a common
age 14 or younger, implying a coming surge in the labor
external tariff schedule with the other EAC members,
force that presents both challenges and opportunities.
although it applies its own tariff rates on some products.
Currently, Kenya’s economic relationship with the United
Other EAC members are Burundi, Rwanda, South Sudan,
States is concentrated in trade in goods. The U.S. Bureau of
Tanzania, Uganda, and since 2022, the Democratic
Economic Analysis does not provide official statistics on
Republic of the Congo (DRC).
U.S.-Kenya services trade due to its low value. Nearly all
U.S. Tariffs. In 2021, more than 75% of U.S. imports from
bilateral investment activity is comprised of U.S. foreign
Kenya entered duty-free under AGOA, and remaining
direct investment (FDI) in Kenya, valued at $339 million in
imports were largely duty-free on an MFN basis. The U.S.
2020. Majority-owned foreign affiliates of U.S.
average effective applied tariff (total duties divided by
multinational firms employed 4,600 people in Kenya in
imports) on Kenyan imports was 0.4% in 2021.
2019 (latest data available), with total sales of $1.1 billion.
Kenya’s Tariffs. According to the WTO, Kenya’s average
applied MFN tariff rate for all partners was 13.5% in 2020.
https://crsreports.congress.gov
U.S.-Kenya FTA Negotiations
Several top U.S. exports, such as machinery and aircraft,
by AGOA and GSP. Establishing new apparel trade rules
however, face low or zero tariffs. Kenya’s agriculture sector
may be particularly complicated. As a lesser-developed
presents the highest barriers to U.S. exports, with an
beneficiary country (LDBC) under AGOA, Kenya qualifies
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 2021, 99% of U.S. apparel imports from
Other Barriers. Ongoing U.S. concerns include Kenya’s
Kenya were assembled from third-country fabrics. By
broad ban on genetically engineered food and feed
contrast, U.S. FTAs typically use a more stringent “yarn
products. Kenya’s 2019 Data Protection Act also potentially
forward” rule of origin, requiring local or U.S. sourcing of
creates uncertainties for cross-border data flows. Kenya
yarn and fabrics to qualify for duty-free treatment.
also is not a member of the WTO Government Procurement
Negotiators could also need to set rules for allowable levels
Agreement, and grants exclusive preference to Kenyan
of sourcing from other AGOA countries.
companies for procurements under roughly $450,000.
Motivations for Trade Talks
Relation to African Regional Trade Initiatives
Kenya’s membership in the EAC and the African
For the United States, an FTA could fulfill the shared goal
Continental Free Trade Area (AfCFTA)—and U.S. goals to
of Congress (as stipulated in AGOA) and successive U.S.
support these regional initiatives—are also likely to factor
Administrations to expand ties with trading partners in
in potential trade talks. Kenya’s EAC commitments affect
Africa and transition to a more reciprocal trading
its external trade policy, and EAC interests may influence
framework. Reducing Kenyan trade barriers through an
Kenya’s negotiating positions. A U.S.-Kenya agreement
FTA could help U.S. firms maintain their competitiveness
could affect regional trade patterns (e.g., through rules of
in the Kenyan market, especially with a new trade
origin requirements) and set precedents for regional trade
agreement between Kenya and the United Kingdom (UK)
and investment rules. Similar issues apply regarding the
now in effect, giving tariff and other advantages to UK
AfCFTA, an Africa-wide trade agreement that took effect
exporters. An interim EU-Kenya trade agreement (due to
in January 2021. The AfCFTA’s MFN clause requires
delays in the ratification of an EU-EAC pact) is also under
Kenya to extend tariff concessions granted to the United
negotiation. A U.S.-Kenya FTA may help foster economic
States to AfCFTA members on a reciprocal basis.
growth in both countries and encourage Kenya’s efforts to
continue to improve its business environment and domestic
Timeline and Next Steps
economic reforms. Kenya’s World Bank Doing Business
The Assistant USTR for Africa led a trade delegation,
score has risen from 58 to 73 from 2016 to 2020. U.S.
including officials from the Departments of State, Labor,
officials may also see the trade talks as a strategic tool to
Commerce, and Agriculture, to Kenya in early May, but
counter growing Chinese influence on the continent.
made no announcements regarding resuming FTA
negotiations. For its part, the Kenyatta government seeks a
With AGOA set to expire in 2025 Kenya may see benefit in
quick conclusion of the talks with the hope of achieving an
securing permanent preferential access to its third-largest
agreement before planned August 2022 elections. From a
export market. The Kenyatta administration may also see an
congressional perspective, the July 2021 expiration of U.S.
FTA as supporting its economic agenda and signaling
TPA may create challenges regarding the path forward for
commitment to liberal economic policies to attract FDI.
an FTA. In past TPA legislation, Congress allowed for
Kenya likely also seeks to bolster its strategic relationship
expedited consideration of trade agreement implementing
with the United States, potentially boosting its position vis-
legislation, if the Administration made progress toward
à-vis regional rivals.
achieving statutory negotiating objectives and satisfied TPA
Key Issues for Bilateral FTA Talks
notification and consultation requirements during the
negotiations. Some Members have urged the President to
The significant economic development disparities between
the two countries suggest possible differences in
seek prompt renewal of TPA, but the Administration has
negotiating priorities. A key challenge could be to establish
not stated a position on its possible renewal.
a framework for the talks that can achieve the ambitious
Issues for Congress
level of commitments Congress traditionally directs the
A U.S.-Kenya FTA would represent a milestone in U.S.-
President to seek in FTAs, for which U.S. business
Africa trade and economic relations, but its current
stakeholders have advocated in a potential U.S.-Kenya
prospects are unclear. Congress may consider and advise
FTA. At the same time, such a framework must remain
the Administration on how to prioritize FTA talks with
politically and economically viable in Kenya amidst
Kenya among other U.S. trade policy objectives; whether
domestic pressure to maintain protections for import-
and in what form to seek renewal of TPA; the scope and
sensitive or nascent industries. Potentially contentious
extent of potential U.S.-Kenya FTA commitments to
topics include the timing and extent of tariff liberalization
pursue; how to ensure an FTA with Kenya and its rules of
including on agricultural goods; rules on intellectual
origin support regional integration efforts and U.S.
property rights, investment, and data flows; and the level of
economic interests; and the potential types of support (e.g.,
labor and environmental protections. U.S. FTA talks with
trade capacity building funds) and flexibilities (e.g., phasing
the South African Customs Union—the only other U.S.
in of commitments) to include as appropriate to Kenya’s
FTA negotiations attempted to date in SSA—were
level of development.
suspended in 2006 in part due to divergent views over
scope, which may highlight the need to establish clear
See Also: CRS In Focus IF10168, Kenya, by Lauren Ploch
negotiating parameters for the Kenya talks at an early stage.
Blanchard; and CRS In Focus IF10149, African Growth
and Opportunity Act (AGOA), by Brock R. Williams.
Moving Beyond AGOA
Another potential challenge is how to transition from the
Brock R. Williams, Specialist in International Trade and
current non-reciprocal bilateral trade relationship governed
Finance
https://crsreports.congress.gov
U.S.-Kenya FTA Negotiations
IF11526
Lauren Ploch Blanchard, Specialist in African Affairs
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https://crsreports.congress.gov | IF11526 · VERSION 5 · UPDATED