Picture by Billy Mutai/SOPA Pictures/LightRocket through Getty Pictures
Kenya is likely one of the prime 5 beneficiaries of the US-Africa commerce initiative, the African Progress and Alternative Act (AGOA). It additionally had the second-highest utilisation price in 2018 with over 70% of its US exports coated by the programme.
Launched in 2000, the commerce pact provides sub-Saharan Africa essentially the most liberal entry to the large US market obtainable to any nation or area with which Washington doesn’t have a free commerce settlement. The initiative has had a big influence on stimulating Africa-US commerce. Exports to the US from eligible African international locations grew by over 272%, from US$22 billion in 2000 to US$82 billion in 2008.
In all probability attributable to COVID-19 disruptions, exports declined to US$18.4 billion in 2020. Regardless of these fluctuations, Africa maintained a constructive stability of commerce with the US within the 2000-2020 interval, because of AGOA eligible merchandise. As of 2017, the commerce initiative had created over 300,000 jobs in sub-Saharan Africa, lots of which had been within the attire sector.
We lately carried out a Kenya nation case research on the implementation of AGOA within the 2000 to 2016 interval. We discovered that on this interval, Kenya’s complete exports to the US grew by $443.2 million (or 405%) from $109.4 million to $552.6 million. By 2020, the determine had risen to $569 million, with many of the nation’s exports coming from eligible merchandise.
Checked out in a different way, within the 9 years earlier than the commerce programme (1992 to 2000), Kenya’s common annual exports to the US had been $101 million. Within the 9 years after (2002 to 2010), common annual exports to the US rose to $305 million. They rose additional on common to $557 million within the 2012 to 2020 interval.
Furthermore, in distinction with the Nineteen Nineties, Kenya had a constructive stability of commerce with the US, averaging $158 million per yr since 2016.
Kenya’s exports to the US below this programme have enabled the nation to construct a sizeable textile and attire export sector. As of 2016, Kenya had 111 companies in its export processing zones that produced most of its $634 million value of exports. Calvin Klein and Tommy Hilfiger are a few of the US manufacturers that purchase Kenyan attire and clothes merchandise.
The sector employed 52,000 staff, used over $250 million in native assets and attracted in extra of $710 million in complete investments. However Kenya’s attire export sector is overwhelmingly depending on the US market. This over-reliance on the US market ought to fear Kenya as a result of it makes its attire sector inclined to unpredictable swings within the US market.
Whereas Kenya’s non-textile exports to the US – primarily espresso, tea, nuts and lower flowers – additionally grew through the 2000-2016 interval, their progress price was much less spectacular.
Socially, AGOA has additionally helped to create jobs for marginalised teams similar to ladies and youth. Nonetheless, we discovered that working in these attire companies entailed poor working circumstances, low pay, short-term work, and the sexual harassment of feminine staff.
We additionally discovered that Kenya, like many different eligible international locations, is under-utilising AGOA with the close to neglect of the non-texitle sectors. Whether or not or not the US-Africa commerce programme is renewed when it expires in 2025, Kenya’s expertise factors to many coverage implications for the nation and different member international locations.
Commerce pact aims
The African Progress and Alternative Act was signed into regulation by former US president Invoice Clinton. Its principal aims had been to diversify the area’s export manufacturing, increase commerce and funding between the 2 locations, and speed up financial progress in sub-Saharan Africa.
These can be achieved in a lot of methods. First, the discount of tariff and non-tariff limitations. Second, the negotiation of commerce agreements. Third, the combination of the area into the worldwide economic system. Lastly, the enlargement of US help to Africa’s regional integration.
In some ways, its principal intention was to help African economies’ means to make use of the textile and attire sectors as potential engines of industrialisation and financial progress. On this sense this mirrored the same success in South and Southeast Asia.
A lot of the expansion in exports to the US from Kenya and different non-oil exporting international locations has come from the textile and attire sector. There’s a comparatively tepid response from different sectors of the economic system. These international locations could make higher use of the US commerce initiative by not so closely basing their exports on just a few of the 1000’s of eligible merchandise.
Classes for Africa
In our research, we discovered a lot of coverage gaps in Kenya which can be related for different African international locations. For instance, the commerce alternatives are largely pushed by US commerce coverage somewhat than by the area’s aggressive benefit. Additionally, the US dominates the phrases and circumstances of the pact’s renewal. In our view, eligible international locations like Kenya ought to look past US-Africa programme and diversify their markets accordingly.
Second, to benefit from their attire exports to the US and to seize new world markets, the African international locations ought to be certain that their attire industries are globally aggressive. They need to have a great provide of the inputs and infrastructure they should thrive. Enhancements in transport infrastructure, as an illustration, would pace up and scale back prices of shifting inputs in and completed items out.
Third, the overwhelming majority of Kenya’s export processing zone investments are foreign-owned. There may be additionally an enormous pay hole between Kenyan and international staff as a result of cadre of jobs and abilities possessed by these two sorts of staff. Thus, there’s a want for capability constructing to provide a vital mass of execs who can lead the nation’s textile and agro-processing industries to maximise their positive factors from present and future commerce alternatives.
Nations within the sub-Saharan Africa area must also strengthen their regulatory frameworks. These embrace mechanisms for enforcement of legal guidelines concerning labour and different types of human rights protections envisaged below the US-Africa commerce pact. This might be certain that ladies and youth staff in Kenya’s export-led enterprises are protected and enabled to learn from this commerce programme.
These international locations must also create a beneficial export coverage atmosphere which is globally aggressive to draw substantial manufacturing investments to the area. In Kenya, that is at the moment undermined by excessive ranges of corruption and mismanagement. There may be additionally a good quantity of political instability largely pushed by the nation’s ethnic-driven and hyper-competitive elections particularly on the presidential stage.
The nation now has a brand new devolved authorities construction that guarantees to contribute to a extra tranquil nationwide political atmosphere. However Kenya must do extra to carry credible elections, and, maybe, dilute its presidential powers which drive its overly aggressive, acrimonious, and perennially destabilising elections.
Lastly, Kenya and different African international locations ought to strengthen their commerce negotiation means to benefit from new worldwide commerce offers. In right this moment’s world, the distinction between successful and dropping in commerce considerably comes down to 1’s means to barter good commerce offers. Due to this fact, African international locations should not solely put money into top quality capability constructing coaching for his or her commerce negotiators, however they have to additionally rent, maintain, and empower the fitting individuals for these roles.
Kenya is in the midst of negotiating a free commerce settlement with the US, the primary such settlement between the US and a sub-Saharan African economic system. If it succeeds, it could be a very powerful commerce improvement within the area because the enactment of the AGOA in 2000.
The unique analysis for this work was funded by the African Capability Constructing Basis (contract ACBF/EOI/054/c/17/NRF),
The unique analysis for this work was funded by the African Capability Constructing Basis (contract ACBF/EOI/054/c/17/NRF).