Domestic and Foreign Market Access

Overview: Trade Policy and Business Environment

 The Republic of Kenya is classified as a low-income country with an aim to transform into an industrializing middle income country by promoting domestic and international trade and regional integration. Since independence in 1963, Kenya has enjoyed rapid economic growth; however, its economic growth has been slow and behind some other neighbouring countries in recent years. The country was ranked 103rd out of 132 in the World Economic Forum (WEF) Enabling Trade Index (2012), which measures institutions, policies and services to facilitate trade in countries. Kenya’s unfavourable performance, as reflected in the survey, is due to its infrastructure deficit, lacking business environment as well as corruption and a lack of governance, which serves to suppress the country’s competitiveness in production of export goods and services.

WEF, 2012, Global Enabling Trade Report

Domestic Market Access The pillar assesses the level and complexity of a country’s tariff protection as a result of its trade policy. This component includes the effective trade-weighted average tariff applied by a country, the share of goods imported duty free and the complexity of the tariff regime, measured through tariff variance, the prevalence of tariff peaks and specific tariffs, and the number of distinct tariffs. 84 4.64
Foreign Market Access The pillar assesses tariff barriers faced by a country’s exporters in destination markets. It includes the average tariffs faced by the country as well as the margin of preference in destination markets negotiated through bilateral or regional trade agreements or granted in the form of trade preferences. 38 3.35
Tariff rate (%) This indicator is calculated as a trade-weighted average of all the applied tariff rates, including preferential rates that a country applies to the rest of the world. The weights are the trade patterns of the importing country’s reference group (2012 data). An applied tariff is a customs duty that is levied on imports of merchandise goods. 96 8.84
Complexity of tariffs , index 1-7 (best) This indicator is calculated as the average of the following indicators: Tariff dispersion, Specific tariffs and Number of distinct tariffs. See description of each individual indicator for more details. Prior to averaging, values for each indicator were transformed to a 1–7 score, using the min-max method. 46 6.39
Tariffs dispersion (standard deviation) This indicator reflects differences in tariffs across product categories in a country’s tariff structure. The variance is calculated across all the tariffs on imported merchandise goods, at the 6-digit level of the Harmonized Schedule. 104 11.66
Tariffs peaks (%) This indicator is the ratio of the number of tariff lines exceeding three times the average domestic tariff (across all products) to the MFN (most-favoured nation) tariff schedule. The tariff schedule is equal to the total number of tariff lines for each country. These tariffs are revised on a yearly basis. 44 0.79
Specific tariffs (%) This indicator is the ratio of the number of Harmonized System (HS) tariff lines, with at least one specific tariff, to the total number of HS tariff lines. A specific tariff is a tariff rate charged on fixed amount per quantity (as opposed to ad valorem) 61 0.22
Number of distinct tariffs This indicator reflects the number of distinct tariff rates applied by a country to its imports across all sectors. 52 19.00
Share of duty-free imports (%) Share of trade, excluding petroleum, that is imported free of tariff duties, taking into account MFN tariffs and preferential agreements. Tariff data is from 2013 or most recent year available and imports data is from 2012 87 51.15
Tariffs faced (%) This indicator is calculated as the trade-weighted average of the applied tariff rates, including preferential rates that the rest of the world applies to each country. The weights are the trade patterns of the importing country’s reference group (2012 data). A tariff is a customs duty that is levied by the destination country on imports of merchandise goods 107 5.56
Index of margin of preference in destination markets, 0-100 (best) This indicator measures the percentage by which particular imports from one country are subject to lower tariffs than the MFN rate. It is calculated as the average of two components: 1) the trade-weighted average difference between the MFN tariff and the most advantageous preferential duty (advantage score), and 2) the ratio of the advantage score to the trade-weighted average MFN tariff level. This allows capturing both the absolute and the relative margin of preference. 14 60.76
Source : World Economic Forum, Global Enabling Trade Report 2014

Trade Policy and Market Access

 Kenya has a relatively open trade policy. Under the national trade strategy, Kenya has reduced tariff levels and eliminated price controls and licensing requirements for export growth. The country has been a member of the WTO since 1995, and its simple average MFN applied tariff in 2012 was 12.9 per cent. Agricultural exports into the country face higher barriers (19.9 per cent) compared to non-agricultural exports (11.7 per cent). Kenya is an original member of the East African Community (EAC) and is implementing the common external tariff (CET), launched in 2005 (WTO 2012). The country has enjoyed preferential access to the EU market through the Economic Partnership Agreement, and to the US market through the African Growth and Opportunity Act.

WTO, 2012, Trade Policy Review (EAC: Kenya)

WTO, 2012, Tariff profile (Kenya)

Standard Compliance and Other Relevant Import/Export Restrictions

 Under the Ministry in charge of Industry, the Kenya Bureau of Standards (KEBS) continues to coordinate: the preparation of standards relating to products, measurements, and processes; the certification of industrial products; assistance in quality controls; and the dissemination of information relating to standards. With respect to technical barrier to trade (TBT), Kenya is a member of the International Organization for Standardization (ISO), the International Electrotechnical Commission (IEC), and the African Regional Organization for Standardization (ARSO). Moreover, the agriculture sector is recognized as a fundamental driver of export growth, and the government is fully aware the importance of meeting sanitary and phytosanitary (SPS) requirements. However, like most developing countries, it is challenging for the government to implement the SPS agreement due to the lack of implementation and technical capacity (CUTS Africa Resource Centre 2012). Accordingly, several TBT as well as SPS related capacity building activities are provided (Swedish National Board of Trade 2013).

CUTS Africa Resource Centre, 2012, Importance and Effects of SPS and TBT Measures on Trade Policy and Trade Relations

Swedish National Board of Trade, 2013, Experiences gained from TBT- related projects in Sweden

WTO, 2012, Trade Policy Review (EAC: Kenya)