While these negotiations are expected to result in the first bilateral trade agreement with a sub-Saharan African country, negotiators will face a number of challenges, including: the United States and Kenya are trying to conclude a free trade agreement that will complement regional integration efforts within the East African Community (EAC) and the African Continental Free Trade Area. Data taxes. Few countries have made as rapid progress as Kenya in the use of mobile financial services and digital transformation. In order to generate more revenue from digital transactions, the government recently introduced two taxes: a 1.5 per cent tax on digital services, which will come into effect on 1 January 2021, and a former withholding tax levied on ”non-resident marketing, sales promotion and advertising services”. U.S. technology companies find these taxes discriminatory. Indeed, last month, the United States announced tariffs on certain French products in retaliation for France`s unilateral tax on digital services, which targets American companies. While this issue has not been directly related to trade negotiations, it remains to be seen how the United States could address this issue in the negotiations. How will efforts to resolve this problem in the OECD conflict fuel discussions between the parties? In addition to the relatively small volume of trade between the United States and Kenya, the main U.S. imports from Kenya are relatively lower products, such as clothing, fruit, nuts and coffee. On the other hand, the main U.S.
exports to Kenya are relatively high quality products such as airplanes and machinery. This dynamic confirms President Trump`s strategy outlined in the 2018 U.S. and Africa POLITICS. However, since the Kenyan agreement is an initiative of President Trump, the significant pressure to reach an agreement could harm Kenya`s interests. Pressure is further hampering Kenya because of the asymmetry of capacity between the two states. From a political point of view, a trade agreement makes sense. It protects Kenya from uncertainty over the extension of the African agreement and the vicissitudes of political parties in Washington.