In these challenging times of ensuing trade war between US and China, social unrest in Hong Kong, the never-ending coronavirus scare and extended lockdowns, every trade deal and negotiations are been seen with lot of interest by every big and small fashion retailers.
Therefore when both US and Kenya recently launched trade talks towards a much probable free trade agreement, the fashion retail sector of both the nations started keeping a close eye on every single development.
While many argue America’s decision to sign free trade agreement with Kenya is a measure to counter China’s influence in Africa, one cannot deny that Kenya remains a fast-growing sourcing hub for US apparel retailers and fashion brands.
And there are reasons!
Of the overall US $ 667 million US imports from Kenya in 2019, US $ 453 million is apparels alone – That’s a big 70 per cent. So once FTA officially comes into being, the apparel sector will be the largest stakeholder.
Also, it’s important to note here that this number of US $ 453 million achieved in 2019 is a jump of 132 per cent from what it was 10 years back.
So it’s not just political reasons! America knows Kenya is growing – and growing at a good pace.
The trade deal intends to build on the objectives of the African Growth and Opportunity Act (AGOA). Every fashion retailer hopes to enjoy the same gains and benefits once the FTA materialises.
It is imperative to state here that according to a data, 99.7 per cent of US apparel imports from Kenya got all AGOA benefits between 2015 and 2019. The brands hope these benefits will continue with FTA.
Talking of AGOA benefits, almost 100 per cent of aforementioned imports gained from ‘third country’ fabric facility wherein Kenya enjoyed duty-free access to US market for clothes made of yarn and fabric originating from anywhere else in the world.
These are surely going to be the core areas of discussion before the FTA comes into effect. Africa still does not have the capacity to produce yarns and fabrics to support its apparel sector and if FTA does not take care of this, it could hit the industry badly.
On same lines, renowned fashion brand PVH says “No change should be made with respect to market access and duty-free treatment for apparels made in Kenya effective from the date of entry into force of the agreement.”
However, at the same time, there are many who feel the FTA may help move to the yarn-forward rule of origin in phases to help the local textile industry develop in Kenya. The textile industry has to grow in Kenya. The US has already made it clear that its objective is to strengthen ties with Kenya and help the country and the industry grow. So that will be one major point of discussion.
Kenya Cabinet Secretary for Industrialization, Trade, and Enterprise Development Betty Maina, substantiated by saying at the official launch of the trade talks that “Kenya is also keen to attract foreign direct investment from the US that will help enhance vertical and horizontal linkages in the Kenyan economy.”
There’s lot to look forward to in the coming days for the retail sector of both the countries with a primary focus on apparel-specific rules of origin that would decide where the trade deal is heading to.