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Kenya Wins Reprieve From U.S. Despite Slow Reforms

Published on Tuesday 29th December 2009 Kenya Wins Reprieve From U.S. Despite Slow Reforms

US President Barack Obama has handed local exporters a New Year gift by extending trade benefits under the African Growth and Opportunity Act (Agoa), allowing them a chance to continue tapping into opportunities in the vast American market in 2010.

A raging diplomatic row between the US and Kenya over the pace of reforms had caused jitters among local exporters that President Obama could opt to deny the country eligibility under the Agoa initiative for 2010 to pressurise political leaders to implement key reforms meant to avoid the recurrence of the kind of political violence that rocked the country two years ago this week.

The Agoa Act authorises the US president to designate on an annual basis countries eligible for benefits in the pact.

Countries qualify if they are identified as having established or making progress towards setting up market-based economies; the rule of law and political pluralism and eliminating barriers to US trade and investment.

The eligibility is determined on the basis of protection of intellectual property, efforts to combat corruption, policies to reduce poverty, increasing availability of health care and educational opportunities, protection of human rights and worker rights and elimination of certain child labour practices.

For Kenya, the review of countries eligible for Agoa in 2010 came against a backdrop of a deepening diplomatic row with the US over the pace of political and institutional reforms, raising fear among local traders.

"The confrontation places trade and investment opportunities at risk because America may choose not to deal with Kenyan traders or investors under the initiative until the reforms are in place," Rudolf Isinga, an official of Protex Limited that operates within the Export Processing Zone (EPZ) in Athi River, lamented in November as the review of countries eligible for Agoa in 2010 entered a critical stage.

But in what could turn out as a New Year gift for local exporters, President Obama last week said Kenya and other countries that had been in the roll of countries eligible for Agoa in 2009 would be retained with an exception of Guinea, Madagascar and Niger.

"It gives us an opportunity to work towards growing our market share in the US market and diversify from traditional outlets such as Europe," Kenya Flower Council CEO, Mrs Jane Ngige, told Business Daily.

The US President said he had terminated trade benefits for the three countries because of political threats to democratic governance.

In a statement, Obama said the three countries had failed to make "continual progress" in meeting US requirements for the Agoa.

"Each of these countries has experienced an undemocratic transfer of power, which is incompatible with making progress toward establishing the rule of law or political pluralism," Reuters quoted a White House official saying.

"These circumstances also make it extremely difficult to achieve the progress necessary to satisfy the other Agoa eligibility criteria," the official added.

At the same time, President Obama said he was adding Mauritania to the list of sub-Saharan African countries eligible for preferential US tariff treatment under the programme.

"The retained eligibility gives prospects for good tidings in 2010 because we have made huge investments to promote horticulture sales in the US market and prospects for direct flights that would bolster trade ties between the two trade blocs are also on going" Mrs Ngige said.

Records of Agoa decisions that US Presidents have made since 2000 show an emphasis on the rule of law and political pluralism, protection of human rights and workers' rights and the fight against corruption.

Similar benchmarks were applicable last year when the decision was made to lock out eight countries including Zimbabwe, Somalia, Sudan, Cote d'Ivoire, Equitorial Guinea, Eriteria, Mauritania and the Central African Republic, from the Agoa initiative in 2009.

"If the President determines that a beneficiary sub-Saharan country is not making continual progress in meeting the eligibility requirements, he must terminate the designation of that country as a beneficiary," the Agoa Act states.

This provision seems to have sealed the fate of Guinea, Madagascar and Niger.

Statistics show that returns from the Agoa initiative accounted for the bulk of Kenya's total trade with the US worth $300 million in 2008.

Kenyan products, notably clothes and agricultural produce are big beneficiaries of the Agoa arrangement that removes import duty on all eligible African products and grants them preferential market access upon compliance with set Rules of Origin (ROO).

Kenya exported textile and apparel worth $250 million to the US in 2007, including agricultural produce worth $52 million.

This year's Economic Survey indicates that direct employment in the garment and apparel sector, which is heavily supported by the Agoa initiative, stood at 25,776.

Statistics show that duty-free access to the US market under the combined Agoa/GSP programme covers about 7,000 product lines, in addition to about 1,800 product tariff lines that were added to the GSP system when the Agoa legislation was enacted.

The product lines include agricultural produce, wine, footwear, selected motor vehicle components, chemicals, steel and clothes among others.

In August, Kenya played host to the 8th Agoa forum where most African leaders including President Kibaki called for a permanent arrangement in place of the current annual system.

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