November 23, 2020

EastAfrica Herald

East African Views on Global News.

Obama proposes new US-EAC trade pact

President
Barack Obama has proposed a new United States-East African Community Trade and
Investment Partnership that calls for a regional investment treaty that will
ensure the fair and equitable treatment of investors.

Obama’s
Deputy National Security Advisor for International Economics Michael Froman,
who spoke at the American Chamber of Commerce luncheon in Nairobi, announced
that the partnership calls for a focus on trade facilitation to reduce
bottlenecks at the border.
This
will limit delays and unnecessary costs while giving investors confidence that
their investments will remain secure.

“This
initiative calls for greater engagement with the private sector through a new,
first of its kind regional commercial dialogue, which will help facilitate
private sector input into the trade and invest policy agenda in the
region,” he said.

“I’m
pleased to tell you that our initiative has been well received by both the EAC
and each of the member states, and we are now looking at how to ensure that it
achieves concrete results,” he added.
He also
announced the launch of the new “Doing Business in Africa” campaign
to help support US trade and investment in the region, which grew by 34 percent
between 2010 and 2011.

“Our
Export-Import Bank has financed record amounts for American companies doing
business in Africa, with loans rising to a record high of $1.4 billion in
2011,” he revealed.

“The
Overseas Private Investment Corporation (OPIC) has invested over $3 billion in
Sub-Saharan Africa, and just last year almost $1 billion was invested, which is
a 300 percent increase from 2010,” he stated.
He noted
that the increased activity in the region includes a significant investment in
the expansion of the Olkaria geothermal plant in Kenya.

Currently,
Olkaria – Africa’s first geothermal power field – produces 210 Megawatts (MW)
of electricity, but Kenya aims to boost that output to 5,530 MW by 2030 by
tapping the vast steam energy is the country’s Rift Valley region.

Trade
Minister Moses Wetangula, who met with Froman earlier on Thursday morning to
discuss strengthening trade and investment between the two countries, said
there is still much to be done in improving Kenya’s trade volumes to the US.

“If
you look at the American investments in this country from 20 years ago to
today, they haven’t grown but rather they have shrunk,” he said.

“There
have been divestitures from some American companies and one of the difficulties
that have impacted on our trade is communication.

If we
had direct flights from Kenya to the US – since Kenya is always trying to find
its way into the American market and we already have an open skies agreement –
I think it would help,” he added.

Wetangula
said there is still much to be done in improving trade volumes to the US
especially under the African Growth and Opportunity Act (AGOA) Agreement, and
added that Kenya is looking to double its trade profile with the US in the next
five years.

EPZ
companies notably in textiles accounted for 70 percent of the exports under AGOA,
with 61 percent of companies operating in Kenya’s EPZ being from China, UK, US,
Taiwan, Qatar and the Netherlands among other countries.

The
country’s exports to the US remain very narrow, only having exported less than
a hundred of the 6,500 eligible products in the AGOA framework; however, the
government is in the process of implementing Special Economic Zones (SEZ) to
expand the range.

Last
month, President Obama launched a new US strategy toward Sub-Saharan Africa
with the objectives of strengthening democratic institutions in the region,
advancing peace and security, promoting opportunity and development and
spurring economic growth, trade and investment.

“The
President’s new strategy will strengthen our economic ties by seeking to
improve the enabling environment for trade and investment, enhancing economic
governance, promoting regional integration and encouraging US companies to
trade and invest in Africa,” Froman stated.

Despite
the halt of US investments in Kenya, Froman pointed out that from 2006-2009, US
investment in Sub-Saharan Africa was up 64 percent and private investment flows
to Africa have now substantially exceeded foreign aid.

“Trade
among the five East African Community member States has doubled over the last
five years and US trade with the EAC grew an impressive 34 percent between 2010
and 2011 alone,” he said.

“The
trends are all headed in the right direction and US and international investors
are making Sub-Saharan Africa a priority and making Kenya a hub for doing
business across the region and across the continent,” he added.

Last
week, the US International Trade Commission released a report on trade
facilitation in the EAC which reported that EAC countries require a different
collection of documents for import or export, and on average they require twice
as many documents as the global best practice.

“Lengthy
transit times at the border make the export costs of a container of textiles
from the EAC nearly $2,500, compared to $580 for a competitor in Vietnam,”
he said.

“For
a coffee exporter in the EAC, it takes an average of 29 days to obtain export
documentation, transport the product to port, clear customs and get the cargo
loaded on a ship, but that is twice as long as it takes for competitors in
Brazil and Colombia,” he acknowledged.

From an
emphasised that reform in EAC trade doesn’t require a lot of money, but rather
a great deal of political will.

“Agreement
by leaders is important, but equally important will be leaders driving that
message down through their respective bureaucracies so that the customs agent
at the border doesn’t continue to impose tariffs on his customs union partner
because he refuses to recognise the certification of a neighbouring
authority,” he explained.

Numerous
police roadblocks and weigh bridges on the central and Northern transport
corridors have been blamed for rampant corruption and causing unnecessary
delays for goods in transit.

During
the Sixth Regional Forum on the Elimination of Non Tariff Barriers (NTB) in
March, Kenya agreed that it would reduce the number of roadblocks from 36 to
five, while Tanzania would reduce from 30 to 15 and Burundi and Rwanda would
not have road blocks.

In
addition, vehicles will only be weighed at weighbridges at the point of entry
and exit.
Member
states also resolved to adopt a harmonised electronic cargo tracking system to
replace roadblocks by December 2012, with Tanzania agreeing to remove the $200
fee charge for merchandise trucks entering the country.

Froman
is leading a nine-member delegation of senior administration officials on a
two-day visit to Kenya during which they will visit sites crucial to the
growing US-Kenyan economic relationship, consult with Kenyan officials and
American investors along with other key figures in Kenya’s political and
economic establishment.
Source: AllAfrica.com