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Kenya: Exports Can Beat Tariff Cuts
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The Nation (Nairobi)
30 April 2008
Posted to the web 30 April 2008
Mwaniki Wahome
Nairobi
Kenya is unlikely to lose many trade opportunities if tariff cuts proposed by the World Trade Organisation are implemented.
The cuts will increase competition for the country's exports that will lose some preferential treatment in the European Union and America, among other markets. The Institute of Economic Affairs (IEA), a body that helps formulate economic policies, says Kenya will equally gain access to other markets that will open up for its goods.
Speaking during a media briefing at the Norfolk hotel, Dr Mary Mbithi from the IEA, said the country would lose $17 million worth of trade, which represents a paltry1.2 per cent of all non-agricultural exports. This also translates to 0.3 per cent of total exports.
"If developed countries reduce Most Favoured Nations (MFN) tariffs, Kenya will experience preferential erosion, and therefore, a possibility of trade loss." However, she added that in developing countries, reduction in MFNs tariffs will expand their market opportunities for Kenya, hence presenting an opportunity for Kenya to increase trade in those markets.
"The loss would depend on whether manufacturers adapt and change, to be able to compete effectively," she said.
Among exports that would be affected most are fish and related products, minerals, cement and textile and related products. Most developing countries, like Kenya, get Generalised System of Preferences (GSP) which apply lower tariff rates, the removal of which will not have much impact.
Kenya's exports have preferential treatment in the EU, where they do not attract tariffs. They also benefit from Africa Growth and Opportunity Act (Agoa), a US initiative aimed at enabling products from the continent access its market.
However, Dr Mbithi said Agoa was not compliant with World Trade Organisation (WTO) rules and could be challenged. The country also has regional trade agreements like Comesa, where most of its industrial goods are sold.
Most developing countries are unable to take advantage of the trade opportunities, because of other conditions, including rules of origin.
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Dr Mbithi said it was important to build capacity and develop products that are less likely to be adversely affected by the proposed tariff cuts.
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