Will U.S.-China Competition Shape Kenya’s Trade Trajectory?
President William Ruto has just been declared the winner of Kenya's hotly contested presidential election by the Supreme Court. For once, economic and policy issues dominated Kenya's political discourse in the lead-up to this tight election. Trade will play a role in the policy responses to enduring problems like rising unemployment rates, Kenya's high public sector debt, worries about equitable taxation, and the lingering effects of global shocks like the coronavirus pandemic and the Russia-Ukraine war as the new government takes over the reins of administration. Trade will be crucial in determining the course of the nation's post-election economic strategy in a number of areas, including its volume, closing Kenya's trade deficit, and the state of the nation's connections with other nations. A casual examination of Kenya's foreign trade reveals some startling trends (see figure 1). In 2020, the country's overall merchandise trade was worth $21 billion, or 21% of GDP. China, the nation's main trading partner, accounts for more than 16% of this total, with the EU ($2.9 billion), India ($1.8 billion), and the United Arab Emirates (UAE) ($1.2 billion) following closely behind. The fifth-largest trading partner of Kenya is the United States, worth around $1.0 billion. Tanzania and Uganda, two nations in East Africa, are additional significant economic partners. The new Kenyan government's policy goals, particularly those relating to raising the productivity of manufacturing, agriculture, and small companies, will be shaped by these trading ties with significant foreign partners.
A potential arena for great power competition is Kenya's international trade. In 2019, the nation's top exports to the United States were woven clothing ($286 million), knit clothing ($168 million), edible fruit and nuts ($55 million), ores, slag, and ash ($52 million), and coffee, tea, and spices ($41 million). The Africa Growth and Opportunity Act, the preferential market access pact for nations south of the Sahara, played a significant role in facilitating this commerce. In the meantime, Kenya imported from the United States foodstuffs ($30 million), plastics ($58 million), machinery ($41 million), and aircraft ($59 million). The United States and Kenya are currently negotiating a free trade agreement as Kenya aims to become a manufacturing base for American businesses looking to diversify or leave China. In the interim, the two nations agreed to the U.S.-Kenya Strategic Trade and Investment Partnership (STIP), which they signed in July 2022. According to this agreement, specific areas needed to be developed in order to "negotiate high-standard commitments in order to achieve economically meaningful outcomes." Agriculture, digital trade, micro, small, and medium-sized firms, promoting the involvement of women, young people, and others in trade, standard-setting cooperation, trade facilitation, and customs procedures are among the initial areas of partnership. The United States and Kenya are currently negotiating a free trade agreement as Kenya aims to become a manufacturing base for American businesses looking to diversify or leave China. In the interim, the two nations agreed to the U.S.-Kenya Strategic Trade and Investment Partnership (STIP), which they signed in July 2022. According to this agreement, specific areas needed to be developed in order to "negotiate high-standard commitments in order to achieve economically meaningful outcomes." agriculture, digital trade, micro, small, and medium-sized firms, promoting the involvement of women, young people, and others in trade, standard-setting cooperation, trade facilitation, Plastics (60%) and iron and steel (7% each). This trade disparity is a pressing issue that comes up frequently in diplomatic discussions between the two nations. In fact, it was announcing during the Forum on China-Africa Cooperation in 2021. Six bilateral trade agreements aimed at reducing tariffs and other trade and nontrade barriers were also signed in January 2022 between China and Kenya. These agreements included procedures to ease bilateral trade, particularly shipments of avocados and aquatic items, and provided Kenyan producers access to China's sizable market. Kenya was the first African nation to export fresh avocados to China in August 2022. Kenya has solid and expanding trade ties with many other nations in addition to the US and China. From Kenya, the UAE imports refined petroleum, tea, and meat. The UAE and Kenya announced the beginning of trade talks to launch a comprehensive economic cooperation agreement that seeks to lower trade barriers between the two nations in July 2022. Through this deal, the UAE will increase non-oil trade and investment while contributing to Kenya's critical economic sectors including tourism and agriculture. In December 2020, Kenya and the UK also signed an economic partnership deal that gave all Kenyan goods, including manufactured and processed ones, duty-free and quota-free market access. The deal also ensured that UK providers of, among other things, machinery, electronics, and technical equipment, would have tariff-free access to Kenya's market. Kenya is a key player in fostering several aspects of regional integration within Africa. It is the largest economy and a main force behind the East African Community's growing integration, with a projected 2021 GDP of $110.3 billion (EAC). Therefore, it is not surprising that Kenya came in second place in Africa for regional integration. The unrestricted movement of people is the EAC's strongest component, giving it the top ranking on the Africa Regional Integration Index. According to an Afro barometer study on East African integration, 52% of Kenyans support the free flow of people, products, and services. The public's understanding of and support for this integration is still lacking. Kenya has made significant strides in gaining regional and global trade agreements, establishing it as a significant trading economy. Trade with Kenya will need to strike a balance between its multiple, intricate connections with the major countries, its trading relations with the EAC its neighbours, and its desire to advance the African Continental Free Trade Area. Kenya trades policy will be central to Kenya's goals to reduce its trade deficit, create jobs, raise public funds, and promote productivity when its new president assumes office.
