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The AfCFTA and the U.S.-Kenya Free Trade Agreement Challenge: Getting Beyond Divide-and-Rule

AfCFTAHardly had South African President Cyril Ramaphosa settled into his chairmanship of the African Union (AU) and his compatriot, Wamkele Mene, assumed leadership as Secretary-General (SG) of the fledgling and still largely aspirational African Continental Free Trade Area (AfCFTA) agreement before both began to face a baptism by fire in the form of the United States’ and Kenya’s intent to pursue their own bilateral free trade agreement—a formidable challenge to the AfCFTA. How Ramaphosa as 2020 AU Chair and Mene as AfCFTA’s first SG confront this bilateralist challenge to continental trade integration will determine much about the AfCFTA’s future as Africa’s flagship for achieving global economic power status within the world’s fast-shifting geo-economic/strategic landscape.

A U.S.-Kenya agreement would pose a major challenge to the AfCFTA in setting the terms of post-African Growth and Opportunity Act (AGOA) U.S.-Africa trade relations. That said, this clash between U.S. (and other external power) bilateralism and aspirational pan-African integrationist multilateralism should not have come as a surprise considering how early it surfaced. With the expiration date of AGOA fast approaching in 2025, the prospective U.S.-Kenya bilateral deal has been touted by Washington as a template for U.S. trade agreements with other African countries. The U.S. seeks to model its trade agreement with Kenya on its 2004 FTA with Morocco, the only one of its kind in Africa. The U.S.-Morocco FTA covers agricultural and industrial goods, telecommunications, intellectual property, textiles, services, and aviation. The Joint Committee that monitors the FTA has hailed the agreement as a major success in increasing bilateral investment and deepening trade relations since 2006, quadrupling U.S.-Morocco trade to USD$5.44 billion in 2018 from USD$1.24 billion in 2006.

Current U.S.-Kenya trade negotiations should be viewed in light of the options initially set out by the Obama Administration. Modeling future FTA agreements off a workable template with one African country (Morocco) was one option; a second option was to negotiate a continental FTA with the AU. The latter option was backed by AU Trade and Industry Commissioner Albert Muchanga during the 2019 AGOA Forum in Abidjan. Specifically, the joint U.S.-AU statement at the Forum indicated that: “The U.S. and the AU share a mutual desire to pursue deeper trade and investment ties beyond the AGOA…eventually leading to a continental trade partnership between the United States and Africa that supports regional integration.” A third option, an FTA agreement with Africa’s various Regional Economic Communities (RECs), failed to take off given the collapse of negotiations between the U.S. and the Southern African Customs Unions in 2006 for a host of reasons. These included disagreement on the scope of negotiations and differences over the inclusion of certain industrial sectors, labor rights, and environmental regulations.

The establishment of the AfCFTA presents massive potential for increased intra-African trade, growth, and investment, and can catalyze structural transformation and regional integration. Yet in spite of the monumental prospects that a U.S.-AU FTA agreement could offer within the framework of the AU, the Trump Administration’s bilateral overture to Kenya indicates its policy preference for a bilateral approach with individual African countries rather than a multilateral or regional approach. This policy position is consistent with the Trump Administration’s dismissive approach to the rule-based multilateral trading system and its penchant for a transactional and narrow focus on the commercial aspects of FTAs and Regional Trade Agreements (RTAs). To many observers, Washington’s recent launch of the Prosper Africa initiative, together with the creation of the U.S. International Development Finance Corporation, is purely a countermove to Chinese dominance in trade and investment in Africa.

While great power competition and realpolitik are at the core of the U.S.’ strategic calculus to remedy its lackluster engagement with Africa, the implications for the global trading system and the regional integration agenda are detrimental and far-reaching. This aligns with two other key elements in the multilateral vs. bilateral U.S.-Africa relations equation. The first is the extent to which South Africa and the AU are able to muster proactive political will to overcome the prevailing divide-and-rule dynamic dictating how Africa is engaged by major external powers pursuing their national agendas on a hyper-fragmented continent. The second is whether constituencies will emerge in the U.S. and Africa to push back against the threat bilateralism poses to fulfilling a major goal of the AU’s Agenda 2063. For Ramaphosa, the stakes are especially high given how the AfCFTA fits into his vision of giving greater priority to economic rather than political or geopolitical goals. Yet Ramaphosa’s economic priorities during his AU chairmanship are fraught with high geopolitical stakes concerning whether South Africa can regain its influence on the continent and in the world after a decade of decline.

For its part, Kenya has argued that its intention is not to break ranks with the other 53 signatories of the AfCFTA (of which 29 have deposited their instruments of ratification), but rather to position itself as a pacesetter for Africa regarding trade deals in the uncertain post-AGOA landscape. Aside from this official narrative, there are indications that Kenya’s objective is to benefit from a Millennium Challenge Corporation (MCC) grant focused on sectoral reforms and rigorous standards for good governance. In December 2019, the MCC Board selected Kenya for a threshold program premised on regulatory and institutional reforms, with the promise of Kenya eventually becoming eligible for an MCC compact and grants. Furthermore, Kenya has also expressed interest in an infrastructure financing agreement under the U.S. Blue Dot Network, which would be a welcome reprieve for its debt-laden infrastructure projects, such as the stalled standard gauge railway financed by the Chinese.

For all of Nairobi’s rhetoric about pragmatism and strategic engagement, it remains a mystery what Kenya stands to gain from a bilateral FTA agreement with the U.S. that contradicts the common position of the AU. For one thing, critics have pointed out that provisions to allow U.S. wheat imports into the Kenyan market would undercut Kenya’s plans to transform and diversify its economy. Moreover, Kenya’s unilateral action would weaken the continent’s bargaining position, undermine collective negotiations strategy, and expose AfCFTA’s intra-regional trade liberalization commitments to major trading powers such as the U.S. Such bilateral FTAs would also feed into an outcome-based system rather than a multilateral rules-based system, fuelling fragmentation, a race for competitive trade targets, and multiplication of opportunity costs and administrative barriers.

How Mene and Ramaphosa, in their respective new positions, will navigate such potential disruption is unclear. One suggestion emanating out of Washington is for the AU, African Development Bank, and Africa Trade Policy Centre (within the UN Economic Commission for Africa) to develop a draft continental trade deal with the U.S. to replace AGOA in 2025 (if not sooner). Another possible approach is for African stakeholders to pro-actively engage the U.S. Congress, particularly the House Africa Subcommittee and the Congressional Black Caucus, to leverage broader congressional support for Africa.

Ahead of the 2020 U.S.-Africa trade ministerial to be held in Washington, discussions on the future of the post-AGOA U.S-Africa partnership should be centered on the promotion of Africa’s regional integration processes and the implementation of the AfCFTA. The U.S. should abide by “the mutual desire and common goal” to promote a continental trade partnership with Africa, as expressed in the 2019 joint statement, rather than bilateral FTAs. In moving beyond a business-as-usual strategy with an evolving continent that has seen vast changes since the last AGOA negotiations, the U.S. should update its approach to bring it in line with policy and institutional shifts on the ground in Africa. In this regard, bipartisan consensus is pivotal to Washington’s declared commitment to deeper, targeted, reciprocal partnerships with Africa.

For its part, Kenya needs to weigh the potential benefits, albeit short-term, of its bilateral negotiations with the U.S. and the risk of getting an unfavorable deal against the potential long-term benefits of a continental approach that would enhance Africa’s bargaining position, maximize regional economies of scale, and promote regional integration and broader structural transformation across the continent.

 

Biographical note

Mr. Francis Kornegay is a Senior Research Fellow at the Institute for Global Dialogue. He is also a member of the JIOR international editorial board and a past fellow of the Woodrow Wilson International Center of Scholars where he worked on his edited work, Laying The BRICS of a New Global Order (2013). Kornegay holds Masters Degrees in African Studies from Howard University and in International Public Policy from the School of Advanced International Studies at Johns Hopkins. Kornegay served two stints in the US Congress as a professional staffer, among other things, developing financial sanctions legislation on South Africa. His latest co-edited publication is Africa and the World: Navigating Shifting Geopolitics (Mapungubwe Institute for Strategic Reflection, 2020).

 

Ms Faith Mabera is a Senior Researcher at the Institute for Global Dialogue, where she oversees the Foreign Policy Analysis programme. She holds an MA in International Relations (cum laude) from the University of Pretoria.  Her research interests include the Responsibility to Protect (R2P), African diplomacy, foreign policy analysis, African peace and security issues, norms dynamics in international relations, and global governance. She is also a regular commentator on South African media covering foreign policy issues, geopolitical trends, and international politics pertinent to South Africa and Africa. Ms. Mabera recently contributed a chapter to Africa and the World: Navigating Shifting Geopolitics on “Northeast Africa and interregional power dynamics: The Nile-Red Sea-Persian Gulf Nexus.”

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