I have a lot of faith in bilateral trade agreements, especially when these are fairly and smartly negotiated to maximise wider value for Kenya without limiting Kenya’s participation in wider global and regional trade. While following global oil and gas markets , I have closely watched US and China negotiate their yet to be finalised bilateral trade deals, and what I have observed is that a negotiating team needs a clearly mandated strategy that maximises value for its country.
And without doubt any negotiated deal for Kenya should directionally empower agriculture, the anchor productive sector for this country, and which carries the highest potential for employment and household incomes. For this reason, Kenya’s negotiating team should include a strong contingent of agricultural economists to support trade experts.
Our negotiating team needs to understand US motivations and what they are trying to achieve. No doubt US is belatedly seeking to re-enter Africa, a trade and infrastructure playground dominated by the Chinese over the last two decades. And Kenya happens to be picked by President Trump as an ideal entry point.
Secondly, it is the US Midwest agricultural production that President Trump may be trying to empower with export opportunities for grains, dairy and livestock products. The Midwest also happens to be a critical Republican political base. US is aware that in Africa it cannot compete with China in exports of general manufactured goods, considering US higher productions costs.
Nor in infrastructure where the Chinese have perfected the art of negotiating construction deals with African nations. In the high-tech ICT, the US is already well represented in Africa and Kenya, and the only US focus may be to keep the Chinese Huawei out of Africa.
The Kenyan negotiating team should by now have noted that US Midwest agricultural outputs are the US team focus. And this may be in conflict with Kenya’s ongoing efforts to revive and reform a struggling agricultural sector that seeks to enhance national food security. However, we should seek to increase exports of tea, coffee, and horticulture exports as these are not in conflict with US Midwest food crops.
The USA team will dangle the African Growth and Opportunity Act (AGOA) “carrot”, seeking reciprocal matching from Kenya. How to maintain and even improve on AGOA without jeopardising sensitive agricultural crop sub-sectors is the key challenge and opportunity for our team. Agricultural economists will advise on “no-go” areas.
Further, our team needs to understand that US is a free market economy with minimum regulatory interventions, while Kenya may need protective policies and regulations to nurture agricultural reforms and revival. The Americans will likely view such policies as unfair market entry barriers for their agricultural exports into Kenya, and this will make negotiations tricky. But reforms to strengthen Kenyan food security are not negotiable.
There is no way Kenya’s agricultural production costs will match US economies of scale enabled by highly mechanised production. Kenyan agricultural production is mainly driven by small scale holders. As such, allowing free entry of USA agricultural products will be suicidal to the wider endeavour by Kenya to feed itself while providing livelihoods for rural Kenyans. One day we shall graduate to high tech farming, but we are not there yet.
Let us look at our struggling dairy sub-sector. The CS for agriculture recently intervened to protect the dairy farmer by limiting cheap imports from neighbouring countries, while guaranteeing a producer minimum price of Sh30 per litre (which still does not cover production costs). Allowing the large-scale US Midwest farmer an unrestricted export entry for his surplus milk powder to Kenya will be a disastrous mistake.
Further, Kenya should by now be developing its capacity for oil crops which also support animal feeds industry. Allowing free access for US soya crop into Kenya will mean that Kenya will never develop a sustainable local value chain for cooking oil and animal feeds.
I am confident that the ongoing agricultural revival of moribund crops will succeed. However, until this happens, it is untimely to introduce unfettered competition from agricultural imports. When reforms have succeeded and our production costs are down and quality up, we can relax tariffs. And this is the key message for our negotiating team.
