Trump’s ‘America First’ seen in trade deals with EAC

Workers at a textile factory that produces clothing for export to the US under Agoa. For the US, an open mitumba market will guarantee the estimated $120 million sales into the East African Community. PHOTO | FILE | AFP  

In Summary

• Smart, a US lobby, argued the ban would amount to a trade barrier, violating the Africa Growth Opportunity Act (Agoa).
• Then Trade CS Adan Mohammed told journalists that Nairobi was letting market forces determine what Kenyans want to buy.
• In trade, the observers say Kenya will draw little if it fails to push for things that matter.

By AGGREY MUTAMBO
More by this Author

The East African Community had given itself a deadline of 2019 to start phasing out importation of second-hand clothes from the US.

Commonly known as mitumba, the presidents of Kenya, Uganda, Tanzania, Rwanda and Burundi had agreed in 2016 to stop further importation from 2019, saying it would protect their nascent textile and leather industries.

Then things started to fall apart.

First, the Secondary Materials and Recycled Textiles Association (Smart), a US lobby, argued the ban would amount to a trade barrier, violating the Africa Growth Opportunity Act (Agoa).

The Act, created during the George W Bush years, allows African countries like the EAC members to export goods to the US through tariffs.

WARNINGS

Then the US government itself started giving warnings to each of the EAC countries: If any ban was imposed, they would lose the privilege of selling goods to the US and the attendant jobs that come with it.

Last year, Kenya acted first, pulling out of the EAC deal to ban mitumba.

Then Trade Cabinet Secretary Adan Mohammed told journalists that Nairobi was letting market forces determine what Kenyans want to buy between mitumba and new clothes produced locally.

“Our policy is, of course, that it is our desire to develop and promote our textile industry in our country to create more jobs for people in our country,” he argued.

“And through the transition of market forces we would like mitumba clothes to compete with clothes that are produced within East Africa, within Kenya, and if those products are more competitive and more consumer-friendly, then of course you will see a reduction in the mitumba business in our country,” he added.

RWANDA

Kenya survived the suspension, but Rwanda which went ahead with the plan, was recently removed from the Agoa beneficiaries list.

Tanzania and Uganda survived too.

For the US, an open mitumba market will guarantee the estimated $120 million sales into the East African Community.

Kenya, through Agoa, has sold goods worth $256 million (Sh25.6 billion) to the US this year— mainly apparel under this arrangement, according to the US Census Bureau.

In 2017, the trade with the US was worth Sh126 billion, more than half of it benefiting the US.

Under Agoa, Kenya sold about Sh40 billion worth of textiles and clothing into the US market with Uganda, Rwanda and Tanzania selling a cumulative Sh4.3 billion.

JOBS AT RISK

In rescinding decision to ban, Kenyan officials had argued more than 60,000 jobs that draw from the textile industry were under threat.

Yet President Trump had always spoken of ‘America first’ in engaging with other parties.

When Trump first made contact with President Uhuru Kenyatta last year, a White House read-out of the call said the two had “discussed our economic partnership and mutual dedication to overcoming terrorism and other regional security challenges through close cooperation.”

Politically, the meeting between Mr Kenyatta and Mr Trump could benefit Kenya’s image, argued Benard Ayieko, an economist and commentator on trade and investment.

“It’s also a perfect opportunity for the president to engage his US counterpart on interventions that will reduce this trade imbalance. The US remains a key source of foreign tourist arrivals to Kenya thus need to discuss potential challenges that hinder American tourists from arriving in droves for holidays.”

THINGS THAT MATTER

In trade, the observers say Kenya will draw little if it fails to push for things that matter.

“It needs to change gears from the traditional trade of selling primary commodities. Most of the things we are selling are apparels, which are not even manufactured by companies owned by Kenyans,” argues Clement Onyango, the Director of Nairobi’s trade think-tank CUTS International.

“We need lots of value addition because we are an agriculture-based economy. There are many US firms that have done this bit so well, in food processing, in ICT and e-commerce. These are areas that the president can facilitate cross-feritilisation of ideas on,” he told the Nation.

Ahead of the meeting, Foreign Affairs Cabinet Secretary Monica Juma spoke of Africa’s engagement with the US, after Agoa expires in 2025.

ACCESS TO US MARKETS

Started by the Republican administration of Mr Bush, it was extended, to help African countries access US markets.

But it also requires beneficiaries to eliminate barriers or at least show progress in doing so.

“The policy advantages of Agoa have enabled entire industries to emerge in many countries in Africa such as the textile exports in Kenya,” she told a gathering of African diplomats in Washington last on Wednesday.

“Regrettably, these Agoa policy advantages have not translated to firm-level advantages that define world beaters with the inevitable lifting the preferences.”

According to Dr Juma, Africa can improve on that by adopting the recent Africa Continental Free Trade Area agreement, signed earlier this year to open up the continent’s markets as a way of dealing with any vacuum left after Agoa expires.