Any Kenya Trade Deal Must Preserve AGOA Benefits, Commenters Say

African Growth and Opportunity Act benefits for Kenya need to continue as any trade partnership is formed, commenters said, especially the third-country fabric rule of origin.

The Office of the U.S. Trade Representative posted more than 1,400 comments on what the U.S. should negotiate for in a U.S.-Kenya Strategic Trade and Investment Partnership. The Biden administration has moved away from considering a traditional free trade agreement that lowers tariffs, as was proposed by the Trump administration. The comments were posted Sept. 20.

Some trade groups said that was a mistake. The American Chamber of Commerce Kenya said that while the administration's approach has the potential to increase exports and improve market access in both directions, "We recommend that the Agreement eliminate all tariffs on industrial goods traded between the United States and Kenya and include high-standard provisions on Technical Barriers to Trade to address non-tariff barriers."

Corporate Council on Africa said that a Kenya agreement should go beyond AGOA unilateral preferences. The group said the U.S. should get U.S. companies market access comparable to what Kenya negotiated with the EU and the U.K.

The African Coalition for Trade -- which represents apparel-producing countries in AGOA -- the Kenya Association of Manufacturers and the American Apparel and Footwear Association commented in detail about what AGOA has meant for bilateral trade and how any future trade deal should maintain its provisions.

The AAFA said that Kenya should stay in AGOA during a phase-in period, and that AGOA countries should still be able to partner with Kenya in manufacturing apparel or footwear eligible for the preference.

"In the end, regionalization will encourage more AGOA countries to pursue trade agreements with the U.S.," the AAFA wrote. The group also said the agreement should allow claims to be made at the 6-digit level under the Harmonized Tariff Schedule where possible. "The agreement should not require direct export, and instead permit interim storage locations, which is consistent with global supply chains. The agreement should include simple drawback rules that permit substitution drawback claims and facilitate returns," the AAFA wrote.

The group said Kenya could eventually move to yarn-forward after there has been more vertical integration in East Africa, but even if that were to happen, sewing thread, pocketing fabrics, elastomeric and other inputs should not have to originate in the U.S. or Africa.

The Kenya Association of Manufacturers expressed anxiety that U.S. communication on trade negotiations so far has been silent on goods. It noted that 50,000 workers are in the apparel industry, with about $500 million in exports to the U.S. in 2021, accounting for 98% of textile and apparel exports.

The group said it could double or triple AGOA exports if AGOA is renewed.

The ACT noted that Kenya is responsible for one-third of AGOA apparel exports, and that 90% of AGOA apparel trade uses yarn and fabric from outside Africa.

"It is obvious that just the threat of the termination of the AGOA duty-free benefit has had a significant negative effect on the AGOA apparel industry," they wrote. "U.S. apparel imports under AGOA have declined significantly every time there was uncertainty regarding whether AGOA or the third-country fabric rule of origin would be extended."

Rethink Trade suggested that the entire endeavor be abandoned, and that the U.S. should make clear that AGOA will be renewed in 2025. The group said one of the main reasons Kenya sought an FTA with the U.S. was because it feared AGOA would end.

"It is unclear what the upside would be for the people in Kenya -- and U.S. consumers and workers -- from negotiating a deal that appears to be mainly focused on imposing new rights for Big Tech interests and deregulations of various consumer and food security protections," the group said.

Many groups addressed customs facilitation, one of the areas the administration says it will tackle.

The National Foreign Trade Council, AmCham Kenya, the U.S. Council for International Business and the National Association of Manufacturers all talked about electronic customs forms, online payments and other modernization. Several talked about the need for a commercially significant de minimis level and informal entry procedures.

The NFTC said that "[w]hile Kenya does provide the functionality for a single window, the continued use of and reliance on a manual review process for shipments (VO process) makes a single window impossible. In addition, not all Government Departments are fully on board yet." It said de minimis is the most important trade facilitation measure. It also said its members are troubled by Kenya's Digital Services Tax of 1.5% on non-resident businesses.

"As part of the STIP, Kenya should commit to removing its DST and endorse the OECD/G20 ongoing framework negotiations as a pre-condition to the initiation of STIP negotiations," the group said.

The NAM said Kenya has an "inconsistent application of customs rules [and] product bans or restrictions on manufactured products."

USCIB said "Kenya should re-affirm its commitment to the WTO Customs Valuation Agreement (CVA), which prohibits the use of reference price databases. We encourage Kenya to abandon the use of foreign government or commercially available pricing databases as sources for determining the import value of goods."