Kenya watches US companies dumping China in Biden deal

Kenya is vying to become the manufacturing hub for American companies looking to shift out of China or diversify in new trade talks Washington opened with Nairobi in July.

Cabinet Secretary for Industrialization and Trade Betty Maina said Nairobi will negotiate an agreement that will lay the groundwork for a manufacturing base for US firms with an emphasis on technology factories.

“In view of all the changes worldwide, US companies are looking for new production facilities for their products. They are diversifying their traditional manufacturing bases in the Far East, particularly in China,” Ms. Maina said Business Daily.

“This gives us the opportunity as a country to attract these new investments. That’s why it is [proposed deal] is called a trade and investment partnership, shaped by the need for US companies to diversify their manufacturing base and for us to find new products [for export].”

US manufacturers operating in China are escalating decades-old plans to relocate production after being rocked by strict Covid-19 lockdowns in April and May that further disrupted supply chains and hurt their profits.

Rising labor costs and trade disputes between Washington and Beijing have led US manufacturers in labor-intensive sectors like textiles and furniture to shift production lines to other countries like Indonesia and Bangladesh over the past decade.

Recent reports suggest that US firms that make electronic products like smartphones and tablets are holding back recent investments in China and are considering moving production lines to other countries.

“When it comes to IoT and IoT products or digital products, this is an opportunity for Kenya to showcase that by attracting investment from the US and manufacturing digital products that go to the US market are aligned, but trade agreements use this to enable better access and better framework conditions,” said Ms. Maina.

“I gave the example of digital commerce and opportunities because Kenya has excelled in this area of ​​e-commerce and digital. It is a regulated partnership with a major party [the US]. It has potential for big growth.”

The two parties are keen on an agreement like the US-Dominican Republic-Central America Free Trade Agreement (CAFTA-DR) that “facilitates trade and investment and drives regional integration by eliminating tariffs, opening markets, lowering barriers to services and transparency should be promoted”.

Kenya has long sought a full free trade agreement with the US, and serious talks began in August 2018 when President Uhuru Kenyatta paid a visit to the White House.

Mr Kenyatta and then US President Donald Trump identified economic development and trade as the pillar of the “strategic relationship” between Kenya and the US.

The visit comes on the back of Mr Trump’s insults about Africa, in which he described certain immigrants as from “shithole” nations of the continent.

Only two years later, in July 2020, did the two countries start formal negotiations for a free trade agreement. But Trump-era talks were slowed by Covid restrictions before being temporarily put on hold when the current Joseph Biden administration took power in January 2021.

The Biden administration has now given the green light to resume bilateral talks – which will set the benchmark for the rest of Africa – following a review of the Trump-era document.

Washington consequently launched the “realigned” strategic trade and investment partnership with Kenya on July 14, after several interactions with trade officials in Nairobi.

The negotiating teams are due to regroup in mid-October under a new government that will succeed Mr Kenyatta after the August 9 elections.

According to a previous communiqué, the October meeting is expected to present a roadmap for engagement across 10 pillars, including agriculture, digital trade, action on climate change, and trade facilitation and customs procedures.

“What we are negotiating is a creature by a different name, but the goals of the US and Kenya in pursuing this deal have not changed,” Ms. Maina said.

“Trade is quite a complex issue, it is also a very sensitive issue in any country, not just Kenya. We will negotiate many of the pillars that we started with the Trump administration.”

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