On May 22, 2020, Office of the U.S. Trade Representative (USTR) released the specific negotiating objectives of the proposed U.S.-Kenya Free Trade Agreement. Overall, the proposed free trade agreement (FTA) intends to “builds on the objectives of the African Growth and Opportunity Act (AGOA) and serve as an enduring foundation to expand U.S.-Africa trade and investment across the continent.” USTR also visions to conclude an agreement with Kenya that “can serve as a model for additional agreements in Africa, leading to a network of agreements that contribute to Africa’s regional integration objectives.”
Regarding the textiles and apparel (T&A) sector, USTR says it will “Secure duty-free access for U.S. textile and apparel products and seek to improve competitive opportunities for exports of U.S. textile and apparel products while taking into account U.S. import sensitivities.” The proposed agreement also will “Establish origin procedures that streamline the certification and verification of rules of origin and that promote strong enforcement, including with respect to textiles.” The same/very similar language is used in the proposed U.S.-Japan Free Trade Agreement and U.S.-EU trade negotiation.
Of the total $667million U.S. merchandise imports from Kenya in 2019, nearly 70% were apparel items, making the sector the single largest stakeholder of the proposed FTA. While still being a relatively minor supplier, Kenya’s apparel exports to the U.S. reached a record high of $453million in 2019, which was an increase of 132% from ten years ago. For many U.S. fashion companies, Kenya is also its single largest apparel-sourcing base in Sub-saharan Africa (SSA), accounting for one-third of the region’s total apparel exports to the U.S. in 2019.
However, how to design the textile and apparel chapter in the proposed U.S.-Kenya FTA is anything but easy. A preliminary content analysis of the 133 public comments submitted to the U.S. International Trade Commission (USITC) as of May 2020 shows that various stakeholders have proposed competing views on several complicated issues, ranging from the rules of origin to the tariff elimination schedule. Specifically:
First, the fashion apparel industry has expressed strong unanimous support for the proposed U.S.-Kenya FTA. Notably, Kenya is widely regarded as a growing sourcing destination for U.S. fashion brands and retailers. As noted by the U.S. Fashion Industry Association (USFIA) in its comment “there is a tremendous opportunity to expand trade between the United States and Kenya” through the elimination of both tariff and non-tariff barriers under the FTA.
Second, the fashion apparel industry calls for the proposed U.S.-Kenya FTA to “do no harm” to the existing supply chain established based on AGOA and ensure a seamless transition between the two trade programs. For example, PVH, one of the largest U.S. fashion corporations, says in its comment, “no change should be made with respect to market access and duty‐free treatment for apparel made in Kenya effective from the date of entry into force of the agreement.” Likewise, USFIA calls for the new FTA to “Preserve the commercial opportunities developed through AGOA benefits.” The American Apparel and Footwear Association (AAFA) further proposes to extend AGOA for another ten years after 2025, regardless of the status of the U.S.-Kenya FTA.
Third, despite the overall support for the agreement, industry stakeholders hold different views on how liberal the apparel-specific rules of origin should be in the U.S.-Kenya FTA and how long to keep it. Data shows, between 2015 and 2019, 99.7% of U.S. apparel imports from Kenya claimed the AGOA benefits. Of these imports, almost 100% took advantage of the so-called “third-country” fabric provision, which allows lesser-developed SSA countries like Kenya to enjoy duty-free access to the U.S. market for apparel made from yarns and fabrics originating from anywhere in the world (also known as the “cut and sew” or “single transformation” rules of origin).
On the one hand, some argue that without AGOA-like liberal rules of origin, Kenya won’t survive as an apparel sourcing destination for U.S. fashion companies because of the lack of local textile manufacturing capacity. For example, according to the African Coalition for Trade representing businesses in several SSA countries, “Africa does not currently have the capacity to produce the volume and variety of yarn and fabric necessary to support its apparel industry. Any tightening of the third-country fabric rule of origin in the post-AOGA model FTA would decimate the African apparel industry and lead to the loss of hundreds of thousands of jobs.”
However, some other industry stakeholders suggest that U.S.-Kenya FTA should gradually adopt the more restrictive “yarn-forward” rules of origin to encourage the development of the local textile industry in Kenya and the broader SSA region. Should U.S.-Kenya FTA adopt the “yarn-forward” rules of origin, garment factories in Kenya would have to either import yarns and fabrics from the United States, an option that is commercially infeasible given the long-distance, or use textile inputs locally-made. PVH, in its comment, explains the rationale behind the proposal, “we should move to a yarn forward rule of origin in phases…to allow the orderly verticalization of the apparel industry (in Kenya).” AAFA further adds, “A strong, vertical supply chain for the apparel and footwear industry in Kenya will reduce costs, minimize disruption and improve efficiency.”
Notably, the National Council of Textile Organizations (NCTO), which represents the voice of the U.S. textile industry, has not commented on U.S.-Kenya FTA yet but may potentially join the rules of origin debate. For years, NCTO insists that all U.S. free trade agreements should adopt the strict “yarn-forward” rules of origin. NCTO is most likely to hold the same position for the proposed U.S.-Kenya FTA because of two reasons: 1) avoid setting a “bad precedent” that may have implications for future U.S. FTA negotiations; 2) prevent the case when U.S. apparel imports from Kenya substantially increase and negatively affect apparel suppliers in the Western Hemisphere (such as Mexico and countries in Central America).
Furthermore, the debate on rules of origin is connected with the discussion on how to promote a regional textile and apparel supply chain in SSA and enhance regional economic integration. Several stakeholders, including AAFA, urge that U.S.-Kenya FTA should support regional supply chain collaboration rather than intensify the competition between Kenya and other AGOA members in the U.S. apparel market. The Atlantic Council, a well-known think tank also argues, “the bilateral (FTA) approach should not undercut the US’ longstanding support for regional integration in African markets and the progress that has been made in the East African Community (EAC) and the African continental free trade agreement area (AfCFTA).” Mauritius embassy echoes and suggests that the U.S.-Kenya FTA “could be made conductive to regional integration in Africa by allowing cumulation provisions in the agreement that would allow the use of materials sourced from other African partners to achieve the rules of origin requirements.”
Fourth, industry stakeholders also suggest that U.S.-Kenya FTA could include modern trade agendas to make the agreement more relevant to the needs of the fashion apparel industry in the 21st-century world economy. The most commonly mentioned issues include: 1) Sustainability, labor, and environmental standard; 2) E-commerce, digital trade, and data protection; 3) Strengthened intellectual property rights (IP) protection; 4) Transparency and trade facilitation. The released USTR negotiation objectives have covered most of these topics.
Additionally, how to deal with Kenya’s secondhand clothing import restriction could be another thorny issue relevant to fashion apparel in the U.S.-Kenya FTA negotiation. In its submitted comment, the Secondary Materials and Recycled Textiles Association (SMART), whose members export 8-10 million kilograms of used clothing each year, urged the proposed U.S.-Kenya FTA to “prohibit the imposition of any import ban on secondhand clothing” and “phase-in duty eliminations on secondhand clothing.” However, SMART’s position could be at odds with apparel manufacturers in Kenya, along with U.S. fashion brands and retailers interested in expanding apparel sourcing from the country.
Further readings:
- Lu, S. (2019). Challenges for sub-Saharan Africa as an apparel sourcing hub. Just-Style.
- Kendall Keough and Sheng Lu. (2020). U.S.-Kenya Free Trade Agreement: Comments from the Fashion Apparel Industry. Just-Style.
FASH455 Global Apparel & Textile Trade and Sourcing 
This was very interesting because I was not aware that Kenya was so involved in the fashion industry. Since Kenya’s apparel exports to the U.S have increased 132% in the last ten years, this shows us how important the U.S trade relationship with Kenya really is. However, recently Kenya has put a ban on second-hand clothing imports in order to prevent the spread of COVID-19. I believe this is a very smart idea, especially since Kenya is a developing country, therefore they can not respond to a pandemic as quickly as developed countries. I found this article while researching that gave me more information about this.
https://www.isonomia.co.uk/from-rags-to-riches-second-hand-clothing-restrictions-in-east-africa/
I too found it surprising of Kenya involvement in the fashion industry. Like you said the growth of US exports from Kenya has greatly increase and may suffer from tariffs, and the benefits of tariff free may help them in the pandemic help them fight it off! I read into the article you attached and liked hearing about secondhand products in Kenya. I understand why they do not want to import any more due to covid, but I wonder does that outweight the economic success of the imports? Is the disease able to live through the travel?
I found this article to be very intriguing because we haven’t learned much about Kenya and their apparel manufacturing. Kenya exported $667 million to the US in 2019 and 70% of it were apparel garments. I didn’t know that Kenya played that big of a role exporting goods to the US. It was interesting to learn about AGOA and how if there was any slight change in this rule of origin, Kenya would lose its capacity of yarn and fabrics along with thousands of jobs. Kenya is a developing country, so just like Bangladesh, many workers are surviving on the jobs in apparel manufacturing. I am curious to see how the NCTO responds to the proposal of a strong, vertical supply chain that will reduce costs, disruption and improve efficiency in Kenya.
This was a really interesting read and I am interested to see how this agreement turns out. I agree with a lot of the points made about crafting the US-Kenya FTA such as not impacting of the AGOA when putting it in to force, as well as phasing in yard forward rules of origin in order to allow Kenya to vertically integrate their own textile sector in the future. I also agree that modern trade agendas should be put in place so that Kenya is already on track from the start and won’t have to make any amendments for these agendas later. The AGOA has already significantly helped the SSA region by reaching their record of $453 million in exports to the US in 2019, and I think that the US-Kenya FTA would really help continue their economic development as well as advance their T&A industry.
During the spring semester, I took a fashion sustainability course where we learned about the second hand market in African countries. We learned how second hand garment imports to countries like Kenya can actually be very harmful to their economic growth as a developing nation. Typically, less developed countries are taken advantage of for their cheap labor costs, and they manufacture immense amounts of apparel for wealthier countries like the United States. However, instead of becoming self reliant and domestically producing their own apparel, they are given second hand clothing from the same wealthy countries that they are exporting to. While this seems like a good deed, it is actually restricting these countries from growing on their own and establishing a strong national economy for themselves.
I really enjoyed reading this article to learn more about Kenya and its involvement in the industry. I was super happy to hear that they are trying to include modern trade agendas to make the agreement more relevant to the needs of the fashion apparel industry in the 21st-century world economy. The most commonly mentioned issues include: 1) Sustainability, labor, and environmental standard; 2) E-commerce, digital trade, and data protection; 3) Strengthened intellectual property rights (IP) protection; 4) Transparency and trade facilitation. This is something that brands and consumers need to hear more about in more under developed countries. For these jobs to be sustainable, the region will need to break away from the model the fashion industry has pursued elsewhere in the world and which has already done damage in Kenya, for example all of the second hadn’t clothing being imported here. In Kenya, like many other African countries, the domestic textile industry has seemed to suffer because of other countries seeking out cost labour and in turn making Kenya make things more unethically because of the demand they are trying to keep up with. It would be interesting to see if Kenya could flourish on their own with their own brands and designs rather than other countries.
I think the relationship between Kenya and US is going to set an important precedent over Africa as a whole. I believe that the free trade agreement with Kenya will help the country grow and help them be able to produce more and move more production to them. The debate between RoO may be solved if Kenya can bring in more profit from exports to the US and can use that capital to build a better production source for yarns and apparel.
In addition, I feel this relationship is important for the US to maintain with COVID. The popularity of the idea of “moving out of china” seems to be spreading. The US can benefit from having a new production source elsewhere.
I don’t think that adopting the strict yarn-forward rule will necessarily or automatically create a textile industry in Kenya. While vertical integration would be beneficial in the long run, it takes tremendous investment and capital to be able to fully implement. Kenya needs wealthy investors to help tackle the challenge of developing a textile industry within the country and simply adopting the yarn-forward rule without consideration for the challenge it would impose on Kenya might be counterproductive and potentially devastating to their local economy. I agree with the African Coalition for Trade representing businesses in several SSA countries when they stated that “Africa does not currently have the capacity to produce the volume and variety of yarn and fabric necessary to support its apparel industry [and] any tightening of the third-country fabric rule of origin in the post-AOGA model FTA would decimate the African apparel industry and lead to the loss of hundreds of thousands of jobs.” We need to make responsible and appropriate trade agreements that are not based on forcing countries to adopt industrial actions that they may not yet be able to afford.
Additionally, I strongly oppose the organization SMART. They appear to only interested in generating billions of dollars in the used-clothing trade to enrich themselves – they do not seem to care about the welfare of the people in the countries they export to. If we are trying to negotiate an FTA with Kenya then forcing them to accept our imports of used clothing is a conflict of interest because it will stunt the development of their local economy. They have a right to refuse used clothing because the right to stimulate their local economy is protected under the AGOA legislation. SMART has no right to impose its will on Kenya or other EAC members. Just because Western nations, mainly the US and UK, have massive overconsumption and waste issues does not mean that we can strong-arm less developed sovereign countries into dealing with our trash. We need to consume less and keep clothes for longer periods of time. We also need to heavily invest in recycling methods so that we can reuse or upcycle our clothing waste. Exporting used-clothing does not actually help the planet as SMART claims.
This post intrigued me because I was not aware of how much trade was done between the apparel industries of Africa & America in terms of manufacturing and production. Considering the fact that America imported over $660 million worth of goods from Kenya in 2019 alone, I believe that expanding the trade through a FTA would be beneficial for both the US and Kenya. However, I do feel strongly that countries with strong economic power like America should focus on investing in the infrastructure of countries such an Kenya and not just their products, in order to improve quality of life for those employed within their supply chains.