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Updated August 8, 2023
U.S.-Kenya Trade Negotiations
The United States and Kenya began free trade agreement
firms employed 4,400 people in Kenya in 2020 (latest data
(FTA) negotiations in 2020 under then-President Donald
available), with total sales of $2.1 billion.
Trump and then-President Uhuru Kenyatta of Kenya. The
Kenya is a relatively small trading partner for the United
Joseph R. Biden Administration did not continue the FTA
talks; it instead launched the U.S.-Kenya Strategic Trade
States (94th largest in 2022), but the United States is a major
trading partner for Kenya (4th largest) and the second-
and Investment Partnership (STIP) in July 2022. STIP aims
to establish “high-standard commitments” between the
largest single export market after Uganda, accounting for
9% of Kenya’s exports. In contrast, Kenya’s largest trading
United States and Kenya on various nontariff trade issues—
including on agriculture, anti-corruption efforts, digital
partner, China, accounted for 3% of Kenya’s exports in
2022 ($232 million of Kenya’s reported $7.6 billion total)
trade, environmental issues, workers’ rights, and trade
facilitation—but not to address tariff barriers, as would a
and 18% of Kenya’s reported imports ($3.8 billion of $21
billion). In 2022, the United States had a goods trade deficit
comprehensive FTA.
with Kenya; U.S. exports totaled $604 million and imports
The Biden Administration has not indicated whether or not
$875 million. U.S. exports were concentrated in petroleum
it will seek congressional approval for STIP. Congress
products ($198 million), aerospace and related parts ($69
nevertheless may assess the talks with regard to: 1)
million), and chemicals ($41 million). Imports consisted
Congress’s constitutional authority to regulate foreign
mostly of apparel ($544 million), fruits and nuts ($128
commerce; 2) congressional oversight of the negotiations;
million), and metal ores ($60 million). U.S. imports from
3) the agreement’s potential effects on the U.S. economy,
Kenya have grown by 10% annually, on average, since
and trade and foreign policy implications; and 4) statutory
2001, when AGOA’s tariff benefits took effect (Figure 1).
mandates in the African Growth and Opportunity Act
Figure 1. U.S. Goods Imports from Kenya
(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. Increased trade is a key U.S. bilateral
priority; U.S. Trade Representative Katherine Tai led the
official U.S. delegation to President William Ruto’s
inauguration. The U.S. government also views Kenya as a
strategic partner in the region more broadly; Kenya is a
major beneficiary of U.S. security and foreign assistance,
acts as a hub for U.S. security initiatives in the region, and
hosts the largest U.S. diplomatic mission in sub-Saharan
Africa (SSA).

U.S.-Kenya Economic Ties
Source: CRS; data from U.S. International Trade Commission.
In the decade prior to the COVID-19 pandemic, Kenya
Tariff Rates and Other Trade Restrictions
achieved an average annual GDP growth rate above 5%. At
As the United States and Kenya are both members of the
the same time, it remains a lower middle-income country,
World Trade Organization (WTO), trade between them is
with GDP per capita under $2,300, and more than 80% of
governed by their WTO commitments, which include
employment in the informal sector. The economy
reciprocal most-favored nation (MFN) tariff rate access to
contracted by 0.25% in 2020, Kenya’s first GDP decline
all other WTO members. The United States also provides
since the 1990s, but rebounded in 2021 with 7.5% growth
unilateral duty-free treatment to most Kenyan exports
and may grow more than 5% in 2023, the International
through the Generalized System of Preferences (GSP) and
Monetary Fund estimates. Despite a return to pre-pandemic
AGOA. AGOA builds on GSP by providing duty-free
levels of growth, potential long-term effects of pandemic-
treatment to a broader range of U.S. imports. Both
related setbacks in childhood education and its impact on
programs require congressional reauthorization every few
human capital development remain a major concern. As of
years. GSP lapsed at the end of 2020 and AGOA is set to
2022, roughly 38% of Kenya’s population of 57 million
expire at the end of September 2025. AGOA countries
was age 14 or younger, suggesting a coming surge in the
maintain access to both programs, even though GSP
labor force that presents both challenges and opportunities.
authorization expired.
Kenya’s economic relationship with the United States
Kenya is a member of the East African Community (EAC)
centers on trade in goods. There also is trade in services,
customs union and shares a common external tariff
but official data on its value and sectoral breakouts is not
schedule with the other EAC members, though it applies its
available. Nearly all bilateral investment activity is from
own tariff rates on some products. Other EAC members are
U.S. foreign direct investment in Kenya, valued at $277
Burundi, the Democratic Republic of the Congo (DRC),
million in 2022. Foreign affiliates of U.S. multinational
https://crsreports.congress.gov

U.S.-Kenya Trade Negotiations
Rwanda, South Sudan, Tanzania, and Uganda. The United
Kenya. In 2006, U.S. FTA talks with the South African
States signed a Trade and Investment Framework
Customs Union—the only other U.S. FTA negotiations
Agreement with the EAC in 2008.
attempted to date in SSA—were suspended, due in part to
divergent views over scope.
U.S. Tariffs. In 2022, almost 70% of U.S. imports from
Kenya entered duty-free under AGOA, and remaining
Moving Beyond Nontariff Barriers
imports were largely duty-free under GSP or on an MFN
While the STIP is not slated to address tariff barriers, some
basis. The U.S. average effective applied tariff (total duties
U.S. and Kenyan businesses support the inclusion of tariffs
divided by imports) on Kenyan imports was 0.4% in 2021.
in the talks. For example, the U.S. agriculture industry
Kenya’s Tariffs
asserts that Kenyan tariffs on agricultural products will
. According to the WTO, Kenya’s average
continue to hinder U.S. market access even if NTBs
applied MFN tariff rate for all partners was 14.3% in 2022.
concerns are addressed. Meanwhile, Kenyan exporters
Several top U.S. exports, such as machinery and aircraft
expressed interest in gaining permanent market access to
face low or zero tariffs. Kenya’s agriculture sector presents
the United States under a comprehensive FTA, rather than
the highest barriers to U.S. exports, with an average tariff of
using preferential benefits provided under AGOA and GSP.
24.5%, and relatively high tariffs on dairy (53.1%), animal
Some analysts note that Kenya’s benefits of entering into an
products (30%), and cereals (28.1%).
FTA with the United States may not be greater than those it
Other Barriers. The U.S. government identified certain
currently enjoys under AGOA, especially for textile and
nontariff barriers (NTBs) as ongoing concerns for U.S.
apparel products. Kenya qualifies for AGOA’s third-
businesses, including Kenya’s complex import
country fabric rule, which allows Kenya the flexibility to
requirements for agricultural products and weak intellectual
export apparel made with imported fabrics to the United
property protections. Opaque rules under Kenya’s 2019
States duty-free. In 2022, 98% of U.S. apparel imports from
Data Protection Act also potentially create uncertainties for
Kenya were assembled from third-country fabrics. By
cross-border data flows. Additionally, Kenya is not a
contrast, U.S. FTAs typically use a more stringent “yarn
member of the WTO Government Procurement Agreement,
forward” rule of origin, requiring local or U.S. sourcing of
and its government grants exclusive preference to Kenyan
yarn and fabrics to qualify for duty-free treatment.
companies for procurements under roughly $450,000.
Relation to African Regional Trade Initiatives
Motivations for Trade Talks
Kenya’s membership in the EAC and the African
For the United States, a final STIP agreement could
Continental Free Trade Area (AfCFTA), and U.S. efforts to
enhance U.S.-Kenya bilateral trade relations by addressing
support these regional initiatives, are also likely to factor in
nontariff barriers, and it could become a model for future
trade talks. Kenya’s EAC commitments affect its external
U.S. efforts to expand ties with trading partners in Africa.
trade policy, and EAC interests may influence Kenya’s
Reducing NTBs could lower costs for U.S. businesses and
negotiating positions. A U.S.-Kenya agreement could affect
help U.S. firms maintain their competitiveness in the
regional trade patterns and set precedents for regional trade
Kenyan market, especially given Kenya’s new trade
and investment rules. Similar issues apply regarding the
agreements with the United Kingdom (UK, effective since
AfCFTA, an Africa-wide trade agreement that took effect
2021) and the European Union (EU, negotiations completed
in January 2021.
in June 2023), both of which lower tariffs. A U.S.-Kenya
Timeline and Next Steps
trade agreement could help foster economic growth in both
The United States and Kenya held pre-negotiating
countries and encourage Kenya’s efforts to continue to
discussions in February 2023 and the first negotiating
improve its business environment and domestic economic
rounds in April 2023. For its part, the Ruto government
reforms. Kenya’s World Bank Doing Business score rose
hopes to finalize an agreement by April 2024. USTR has
from 58 to 73 between 2016 and 2020. U.S. officials may
not confirmed a timeline for completing negotiations.
also see the trade talks as a strategic tool to counter growing
Chinese influence on the continent.
Issues for Congress
Reportedly, the Kenyan government sees the STIP as a
The STIP negotiations are the only known prospectively
binding trade negotiations the United States is pursuing in
complement to AGOA and a stepping stone for a potential
comprehensive FTA in the future. Kenyan officials may
Africa. As it has with some of the trade initiatives the Biden
Administration is pursuing in other regions, Congress may
also seek to bolster its strategic relationship with the United
States, potentially boosting Kenya’s position vis-à-vis
seek to engage in the process, given its historical role of
authorizing and implementing trade agreements through
regional rivals.
legislation. As negotiations continue, Congress may
Key Issues for STIP Talks
consider whether or not to urge the Administration to
The significant economic development disparities between
consult, collaborate, and maintain transparency with
the United States and Kenya may affect their respective
Congress on STIP negotiating goals and process. Congress
negotiating priorities. The U.S. government may seek to
may also consider how STIP may support regional
negotiate commitments close to those in comprehensive
integration efforts and U.S. economic interests; and the
FTAs it has with countries that are more developed than
potential types of support (e.g., trade capacity building
Kenya. Such a framework could present challenges in
funds) and flexibilities (e.g., phasing in of commitments) to
Kenya, where the government faces domestic pressure to
potentially include given Kenya’s level of development.
maintain protections for import-sensitive or nascent
Also see CRS In Focus IF10168, Kenya and CRS In Focus
industries. Potentially contentious topics include rules on
intellectual property rights, investment, and data flows, as
IF10149, African Growth and Opportunity Act (AGOA).
well as labor and environmental protections. STIP talks
Liana Wong, Analyst in International Trade and Finance
may need to establish clear negotiating parameters at an
early stage to set expectations for the United States and
Lauren Ploch Blanchard, Specialist in African Affairs
https://crsreports.congress.gov

U.S.-Kenya Trade Negotiations

IF11526

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https://crsreports.congress.gov | IF11526 · VERSION 7 · UPDATED