Implication of Economic Partnership Agreements (EPAs) on Kenya

Augustus Muluvi; Christopher Onyango; Manaseh Otieno; Simon Githuku

doi:doi:10.11648/j.jwer.20160503.11

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Implication of Economic Partnership Agreements (EPAs) on Kenya

Augustus Muluvi, Christopher Onyango, Manaseh Otieno, Simon Githuku

Received: 18 July 2016 Accepted: 5 August 2016 Published: 31 August 2016

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Abstract

This study sought to examine the economic implication of EPAs on Kenya. In particular to analyze trade relations between Kenya and EU, the implications of EPAs on regional trade and other trade arrangements and welfare effects on Kenya. Using trade statistics analysis and partial equilibrium approach, the study found out that Kenya’s exports to the EU market are dominated by a narrow range of primary commodity exports that include cut flowers, tea, coffee, vegetables and fish. The perceived preference margins that Kenya is to enjoy with the conclusion of EPAs are declining and will continue to decline in the future because EU is also negotiating FTA with other countries/regions and that multilateral trade liberalization under the WTO implies continued decline of tariffs and other trade barriers in the future. On trade arrangements, the study found out that the conclusion of the WTO Doha Round will increase competition in the EU market and reduce policy space and flexibility that Kenya has negotiated under the Doha Round of negotiations. Although the simulation results show loss of tariff revenue as a result of trade liberalization, these are compensated for through net welfare gains as a result of reduced consumer prices and also increased trade creation. On the policy front, the study recommends that for Kenya to benefit from EPAs there is need to urgently address supply side constraints such as inadequate infrastructure, low productive capacity of producers which limits exportable surplus among others. Kenya should also enhance export growth and diversification away from limited primary and natural resource based commodities. In addition Kenya should work on its competitiveness to retain and benefit from trade agreements such as the EPAs. This is because tariff and other trade barriers are decreasing over time in the international markets.

DOI	10.11648/j.jwer.20160503.11
Published in	Journal of World Economic Research (Volume 5, Issue 3, June 2016)
Page(s)	15-25
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Preference Margins, Trade Arrangements, Doha Round, Welfare Effects

References

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[2]	Berisha-Krasniqi, et al. (2008). Economic Partnership Agreements between the European Union and African, Caribbean, and Pacific Countries: What is at Stake for Senegal? IFPRI Discussion Paper No. 765.
[3]	Bhagwati, J. (1971). Trade-Diverting Customs Unions and Welfare-Improvement: A Clarification. The Economic Journal, 81: 580-587.
[4]	Bhagwati, J. and Panagariya, A. (1996). The Theory of Preferential Trade Agreements: Historical Evolution and Current Trend. The American Economic Review, 86: 82-87.
[5]	Fontagne, et al. (2008). An Implication Study of the EU-ACP Economic Partnership Agreements (EPAs) in the Six ACP Regions. The Commission of the European Commission.
[6]	Karingi, S. Lang R, Oulmane N, Perez R, Mustapha S and HammoudaH. (2005).
[7]	Economic and Welfare Impacts of the EU-Africa Economic Partnership Agreements. ATCP Work paper No. 10.
[8]	Keck, A. and Piermartini. (2005). The Economic Impact of EPAs in SADC Countries. WTO Staff Working Paper No. 4.
[9]	KIPPRA. (2005). Assessment of the Potential Impact of Economic Partnership Agreements (EPAs) on the Kenyan Economy. A Study by KIPPRA on behalf of Ministry of Trade and Industry.
[10]	Lipsey, R. G. (1957). The theory of Custom Unions: Trade Diversion and Welfare. Economica, Vol. 24, No. 93: 40-87.
[11]	Milner, C. (2002). Some Simple Analytics of the Trade and Welfare Effects of Economic Partnership Agreements: The Case of the EU-EAC. Mimeo, CREDIT, University of Nottingham.
[12]	Milner, C. Oliver Morrissey, O. and McKay A. (2005). Some Simple Analytics of the Trade and Welfare Effects of Economic Partnership Agreements. Journal of African Economies, 14 (3), 327-358.
[13]	Mkenda, B. and Hangi, M. (2009). Revenue Implications of EPA on Tanzania. CUTS GRC Publications Series.
[14]	Morrissey, O. and Zgovu, E. (2009). The Impact of Economic Partnership Agreements on ACP Agriculture Imports and Welfare. Centre for Research in Economic Development and International Trade (CREDIT), University of Nottingham, CREDIT Research Paper, No. 7.
[15]	Panagariya, A. (1998). Rethinking the New Regionalism. In: Nash, J. and Takas, W. (eds). Trade Policy Reform: Lessons and Implications. Washington DC, World Bank.
[16]	Panagariya, A. (2000). Preferential Trade Liberalization: The Traditional Theory and New Developments. Journal of Economic Literature, 38: 287-331.
[17]	Perez, R and Karingi, S. (2006). Will the Economic Partnership Agreements foster Sub-Saharan African Development? Paper presented at the GTAP conference, June, Addis Ababa, Ethiopia.
[18]	Rotich, J. (2014). Status of EPA negotiations: A presentation during the National Committee on WTO Bali Package and EPA Negitiations, Merica Hotel 4-8^th 2014, Nakuru, Kenya.
[19]	Viner, J. (1950). The Customs Union Issue. New York: Carnegie Endowment for International Peace.
[20]	World Trade Organization. (2011). The WTO and preferential trade agreements: From co-xistence to coherence.
[21]	Zouhon-Bi, S. G. and Nielson, L. (2007). ECOWAS-Fiscal Revenue Implications of the Prospective EPA with the EU. World Bank Regional Working Paper Series No. 103.

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APA Style

Augustus Muluvi, Christopher Onyango, Manaseh Otieno, Simon Githuku. (2016). Implication of Economic Partnership Agreements (EPAs) on Kenya. Journal of World Economic Research, 5(3), 15-25. https://doi.org/10.11648/j.jwer.20160503.11

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Augustus Muluvi; Christopher Onyango; Manaseh Otieno; Simon Githuku. Implication of Economic Partnership Agreements (EPAs) on Kenya. J. World Econ. Res. 2016, 5(3), 15-25. doi: 10.11648/j.jwer.20160503.11

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AMA Style

Augustus Muluvi, Christopher Onyango, Manaseh Otieno, Simon Githuku. Implication of Economic Partnership Agreements (EPAs) on Kenya. J World Econ Res. 2016;5(3):15-25. doi: 10.11648/j.jwer.20160503.11

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@article{10.11648/j.jwer.20160503.11,
  author = {Augustus Muluvi and Christopher Onyango and Manaseh Otieno and Simon Githuku},
  title = {Implication of Economic Partnership Agreements (EPAs) on Kenya},
  journal = {Journal of World Economic Research},
  volume = {5},
  number = {3},
  pages = {15-25},
  doi = {10.11648/j.jwer.20160503.11},
  url = {https://doi.org/10.11648/j.jwer.20160503.11},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jwer.20160503.11},
  abstract = {This study sought to examine the economic implication of EPAs on Kenya. In particular to analyze trade relations between Kenya and EU, the implications of EPAs on regional trade and other trade arrangements and welfare effects on Kenya. Using trade statistics analysis and partial equilibrium approach, the study found out that Kenya’s exports to the EU market are dominated by a narrow range of primary commodity exports that include cut flowers, tea, coffee, vegetables and fish. The perceived preference margins that Kenya is to enjoy with the conclusion of EPAs are declining and will continue to decline in the future because EU is also negotiating FTA with other countries/regions and that multilateral trade liberalization under the WTO implies continued decline of tariffs and other trade barriers in the future. On trade arrangements, the study found out that the conclusion of the WTO Doha Round will increase competition in the EU market and reduce policy space and flexibility that Kenya has negotiated under the Doha Round of negotiations. Although the simulation results show loss of tariff revenue as a result of trade liberalization, these are compensated for through net welfare gains as a result of reduced consumer prices and also increased trade creation. On the policy front, the study recommends that for Kenya to benefit from EPAs there is need to urgently address supply side constraints such as inadequate infrastructure, low productive capacity of producers which limits exportable surplus among others. Kenya should also enhance export growth and diversification away from limited primary and natural resource based commodities. In addition Kenya should work on its competitiveness to retain and benefit from trade agreements such as the EPAs. This is because tariff and other trade barriers are decreasing over time in the international markets.},
 year = {2016}
}

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TY  - JOUR
T1  - Implication of Economic Partnership Agreements (EPAs) on Kenya
AU  - Augustus Muluvi
AU  - Christopher Onyango
AU  - Manaseh Otieno
AU  - Simon Githuku
Y1  - 2016/08/31
PY  - 2016
N1  - https://doi.org/10.11648/j.jwer.20160503.11
DO  - 10.11648/j.jwer.20160503.11
T2  - Journal of World Economic Research
JF  - Journal of World Economic Research
JO  - Journal of World Economic Research
SP  - 15
EP  - 25
PB  - Science Publishing Group
SN  - 2328-7748
UR  - https://doi.org/10.11648/j.jwer.20160503.11
AB  - This study sought to examine the economic implication of EPAs on Kenya. In particular to analyze trade relations between Kenya and EU, the implications of EPAs on regional trade and other trade arrangements and welfare effects on Kenya. Using trade statistics analysis and partial equilibrium approach, the study found out that Kenya’s exports to the EU market are dominated by a narrow range of primary commodity exports that include cut flowers, tea, coffee, vegetables and fish. The perceived preference margins that Kenya is to enjoy with the conclusion of EPAs are declining and will continue to decline in the future because EU is also negotiating FTA with other countries/regions and that multilateral trade liberalization under the WTO implies continued decline of tariffs and other trade barriers in the future. On trade arrangements, the study found out that the conclusion of the WTO Doha Round will increase competition in the EU market and reduce policy space and flexibility that Kenya has negotiated under the Doha Round of negotiations. Although the simulation results show loss of tariff revenue as a result of trade liberalization, these are compensated for through net welfare gains as a result of reduced consumer prices and also increased trade creation. On the policy front, the study recommends that for Kenya to benefit from EPAs there is need to urgently address supply side constraints such as inadequate infrastructure, low productive capacity of producers which limits exportable surplus among others. Kenya should also enhance export growth and diversification away from limited primary and natural resource based commodities. In addition Kenya should work on its competitiveness to retain and benefit from trade agreements such as the EPAs. This is because tariff and other trade barriers are decreasing over time in the international markets.
VL  - 5
IS  - 3
ER  -

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Author Information

Augustus Muluvi

Kenya Institute for Public Policy Research and Analysis (KIPPRA), Nairobi, Kenya
Christopher Onyango

Kenya Institute for Public Policy Research and Analysis (KIPPRA), Nairobi, Kenya
Manaseh Otieno

Kenya Institute for Public Policy Research and Analysis (KIPPRA), Nairobi, Kenya
Simon Githuku

Kenya Institute for Public Policy Research and Analysis (KIPPRA), Nairobi, Kenya

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APA Style

Augustus Muluvi, Christopher Onyango, Manaseh Otieno, Simon Githuku. (2016). Implication of Economic Partnership Agreements (EPAs) on Kenya. Journal of World Economic Research, 5(3), 15-25. https://doi.org/10.11648/j.jwer.20160503.11

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ACS Style

Augustus Muluvi; Christopher Onyango; Manaseh Otieno; Simon Githuku. Implication of Economic Partnership Agreements (EPAs) on Kenya. J. World Econ. Res. 2016, 5(3), 15-25. doi: 10.11648/j.jwer.20160503.11

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AMA Style

Augustus Muluvi, Christopher Onyango, Manaseh Otieno, Simon Githuku. Implication of Economic Partnership Agreements (EPAs) on Kenya. J World Econ Res. 2016;5(3):15-25. doi: 10.11648/j.jwer.20160503.11

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@article{10.11648/j.jwer.20160503.11,
  author = {Augustus Muluvi and Christopher Onyango and Manaseh Otieno and Simon Githuku},
  title = {Implication of Economic Partnership Agreements (EPAs) on Kenya},
  journal = {Journal of World Economic Research},
  volume = {5},
  number = {3},
  pages = {15-25},
  doi = {10.11648/j.jwer.20160503.11},
  url = {https://doi.org/10.11648/j.jwer.20160503.11},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jwer.20160503.11},
  abstract = {This study sought to examine the economic implication of EPAs on Kenya. In particular to analyze trade relations between Kenya and EU, the implications of EPAs on regional trade and other trade arrangements and welfare effects on Kenya. Using trade statistics analysis and partial equilibrium approach, the study found out that Kenya’s exports to the EU market are dominated by a narrow range of primary commodity exports that include cut flowers, tea, coffee, vegetables and fish. The perceived preference margins that Kenya is to enjoy with the conclusion of EPAs are declining and will continue to decline in the future because EU is also negotiating FTA with other countries/regions and that multilateral trade liberalization under the WTO implies continued decline of tariffs and other trade barriers in the future. On trade arrangements, the study found out that the conclusion of the WTO Doha Round will increase competition in the EU market and reduce policy space and flexibility that Kenya has negotiated under the Doha Round of negotiations. Although the simulation results show loss of tariff revenue as a result of trade liberalization, these are compensated for through net welfare gains as a result of reduced consumer prices and also increased trade creation. On the policy front, the study recommends that for Kenya to benefit from EPAs there is need to urgently address supply side constraints such as inadequate infrastructure, low productive capacity of producers which limits exportable surplus among others. Kenya should also enhance export growth and diversification away from limited primary and natural resource based commodities. In addition Kenya should work on its competitiveness to retain and benefit from trade agreements such as the EPAs. This is because tariff and other trade barriers are decreasing over time in the international markets.},
 year = {2016}
}

Copy | Download

TY  - JOUR
T1  - Implication of Economic Partnership Agreements (EPAs) on Kenya
AU  - Augustus Muluvi
AU  - Christopher Onyango
AU  - Manaseh Otieno
AU  - Simon Githuku
Y1  - 2016/08/31
PY  - 2016
N1  - https://doi.org/10.11648/j.jwer.20160503.11
DO  - 10.11648/j.jwer.20160503.11
T2  - Journal of World Economic Research
JF  - Journal of World Economic Research
JO  - Journal of World Economic Research
SP  - 15
EP  - 25
PB  - Science Publishing Group
SN  - 2328-7748
UR  - https://doi.org/10.11648/j.jwer.20160503.11
AB  - This study sought to examine the economic implication of EPAs on Kenya. In particular to analyze trade relations between Kenya and EU, the implications of EPAs on regional trade and other trade arrangements and welfare effects on Kenya. Using trade statistics analysis and partial equilibrium approach, the study found out that Kenya’s exports to the EU market are dominated by a narrow range of primary commodity exports that include cut flowers, tea, coffee, vegetables and fish. The perceived preference margins that Kenya is to enjoy with the conclusion of EPAs are declining and will continue to decline in the future because EU is also negotiating FTA with other countries/regions and that multilateral trade liberalization under the WTO implies continued decline of tariffs and other trade barriers in the future. On trade arrangements, the study found out that the conclusion of the WTO Doha Round will increase competition in the EU market and reduce policy space and flexibility that Kenya has negotiated under the Doha Round of negotiations. Although the simulation results show loss of tariff revenue as a result of trade liberalization, these are compensated for through net welfare gains as a result of reduced consumer prices and also increased trade creation. On the policy front, the study recommends that for Kenya to benefit from EPAs there is need to urgently address supply side constraints such as inadequate infrastructure, low productive capacity of producers which limits exportable surplus among others. Kenya should also enhance export growth and diversification away from limited primary and natural resource based commodities. In addition Kenya should work on its competitiveness to retain and benefit from trade agreements such as the EPAs. This is because tariff and other trade barriers are decreasing over time in the international markets.
VL  - 5
IS  - 3
ER  -

Copy | Download