Preface by the Cabinet Secretary

The National Trade Policy is being launched* at a time when the global trade landscape is facing emerging challenges. Over 70 percent of global trade is made up of manufactured goods. Intra-Africa trade averages about 12 percent whilst Kenya’s share of both the global pie as well as in Africa has been facing serious bottlenecks leading to a huge balance of trade deficit with most of our trading partners.

The Trade Policy adds impetus to the robust trade policy reforms that the country has pursued under regional and multilateral trade arrangements. It translates to Kenya’s commitments at regional and multilateral level to solidify policy measures and create opportunity for their domestication through the various instruments that are proposed. This will contribute to strengthening of regional integration and will in turn anchor our country as a dependable and predictable trading partner.

This Policy spells out complementarity with other sectors and provides a framework for these sectors to adopt policies that complement rather than compete with each other. This trade policy in particular introduces a trade agenda in several sectors such as agriculture, industry, infrastructure and ICT.

It creates opportunities for trade-led sector policy formulation to achieve sector specific trade targets. For instance, agricultural and industry policies must be geared towards responding to the national trade agenda of product and destination market diversification. Similarly, energy and infrastructure policies must contribute towards promoting competitiveness of Kenya’s trade sector. ICT, on the other hand must drive trade, in keeping with the global experience, where e-commerce is overtaking traditional commerce because of the savings associated with low cost of trading under e-commerce.

Effective implementation of the National Trade Policy is expected to transform Kenya to a most competitive and prosperous trading nation. Prospects for this transformative impact lie in opportunities in the domestic market as well as in the regional and global markets, where Kenya has immense unexploited trade potential.

The structure and content of the policy portends itself to immediate implementation. I therefore call upon the full commitment and cooperation of all stakeholders to ensure successful implementation of this policy and thus enable it to contribute in a substantial way to Kenya’s national development.

Cabinet Secretary, Ministry of Industry, Trade and Cooperatives

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Executive Summary

The Policy Framework

This National Trade Policy has been formulated within the framework of the national long term policy blueprint; the Kenya Vision 2030 which is the basis of the country’s entire policy formulation and implementation for all sectors in the country. The policy formulation has been further guided by the provisions of the Kenya Constitution (2010) which recognizes the concurrent jurisdiction of the national and county governments in relation to trade matters. The policy is also underpinned within the Constitution’s provisions on the Bill of Rights, particularly the freedom of expression, freedom of the media, freedom of association, freedom of movement and residence, protection of right of property, labour relations as well as consumer rights and the Fourth Schedule. In addition, the critical International development aspirations and commitments such as the Sustainable Development Goals (SDGs) as well as regional and international trade agreements to which Kenya is a signatory have guided the formulation; notably: The World Trade Organization (WTO) agreements, the East African Community (EAC) and Common Market for Eastern and Southern Africa (COMESA) Treaties, EAC-EU Economic Partnership Agreement and the African Caribbean Pacific Cotonou Agreement.

The Focus on Trade Policy

The policy aspires to articulate the government’s aspiration towards poverty eradication and sustainable economic development through providing opportunity for expanded markets, income generation and distribution, increased employment and competitiveness. The policy advances the course for poverty reduction by mainstreaming Micro, Small and Medium Enterprises (MSMEs) in the global trade, in view of their critical role in job creation, poverty reduction and the furtherance of export diversification and economic development. Moreover, the Policy builds on the momentum of trade policy reforms that have been ongoing since the mid-1980s, when the country shifted its trade policy from import substitution to export oriented policies. The key features of this reform include the significant reduction in tariff levels as well as the reduced licensing requirements and the elimination of price controls.

Balance of Trade Deficit

The Policy is cognizant of the prevailing situation in the trade sector, where overall trade performance, as measured by the Balance of Trade, has been poor and recording a deteriorating trend that is characterized by huge balance of trade deficits. In addition, the policy is developed in the context of the already documented fact about Kenya’s share in the regional and global market, which remains low, with huge potential already having been identified in sectors that Kenya has both comparative and competitive advantage. The fundamentals behind this situation are traced to a narrow export base, which is characterized by the predominance of primary products and dependence on limited traditional destination markets. Limited value addition in the manufacturing sector and the relatively underdeveloped intermediate and capital goods industries also explain the dismal trade performance.

Trade in Services

The Policy recognizes the important role that trade in services is poised to play in overall development of the economy. The service sector which comprises tourism; transport and communications; trade and related services; and financial and business services, accounts for 60 percent of GDP. Within the service sector, there are emerging trends of growth in domestic trade brought about by the liberalization of the capital markets and the privatization program. In addition, there are new developments of the domestic oriented Business Processing Outsourcing (BPO) and Information Technology Enabled Services (ITES) which has created trade opportunities for MSMEs to provide Business Development Services (BDS). The Trade Policy will therefore facilitate improvements in the enabling of the environment for increased trade in stock and shares and outsourced services.

Unleashing Kenya’s Potential in International Trade

The National Trade Policy seeks to unleash Kenya’s potential targeting domestic, regional and global market. The multilateral, regional integration and bilateral trade arrangements that currently define the space that Kenya’s international trade enjoys present an immense opportunity for pursuit of this policy objective. The task ahead is to address the main constraints and challenges to international trade, which include;

1. Limited capacity for diversification and low value addition in production;

2. Increased use of non-tariff barriers in export markets;

3. Lack of competitiveness due to inefficient trade facilitation infrastructure;

4. Lack of medium and long term finance for SMEs;

5. Limited availability of affordable trade finance;

6. Limited negotiation capacity and uncoordinated negotiation processes; and,

7. Preference erosion, among others.

Finding Sustainable Solutions

The drive in pursuit of solutions to these constraints and challenges is the central role that trade plays in the country’s growth and development as well as poverty eradication. This is through its linkages with all the sectors of the economy where trade creates markets through which goods and services get to the consumers. Trade also plays a critical role in poverty reduction through employment creation in informal, retail, and wholesale trade and provides MSMEs with opportunities of accessing more favourable prices in regional as well as international markets thereby ensuring equitable income distribution.

Complementarity

The National Trade Policy complements other existing sectoral policies and strategies that touch on trade issues including the agriculture and rural development policy, industrial policy, livestock policy, fisheries policy, among others. The National Trade Policy aims at providing a broad and overarching policy framework for other key policies, strategies and official documents affecting trade which include the following:

1. The Kenya Constitution (2010);

2. Agricultural Sector Development Strategy;

3. National Livestock Policies;

4. National Industrial Policy;

5. Competition Policy;

6. Investment Policy;

7. Intellectual Property Policy and Strategy; and,

8. Other Sectoral Policies and Strategies.

In sum, the National Trade Policy establishes coherence with all these other documents and where possible, the policy and its implementation plan incorporates elements of these other strategies, policies and plans in order to ensure as much coherence as possible. The trade policy also becomes a point of reference for sectoral policies and strategies that will be developed in the future, to ensure that such policies and strategies are in harmony with the overall trade policy.

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* The National Trade Policy was launched during the National Trade Week, hosted by the State Department on Trade from 10-12 July 2017 at the Kenyatta International Conference Centre. The National Trade Week was held to bring together stakeholders from the public and private sector in Kenya to discuss the current state of play of Trade in Kenya, review progress on key initiatives currently under implementation and to develop a consensus on the path forward towards developing Kenya as an export led economy supported by robust domestic trade.

During the course of the week, other key documents and programs that are important to the private sector were launched, including the following (download below):