A CGE model analysis of reducing obstacles to trade in Kenya: a focus on the agro-food sector

Abstract

This paper evaluates compliance cost with regulations as obstacles to trade and its effects in exports to the EU in the avocado market. An exporter interview conducted in several African countries provides the structure of compliance costs as obstacles to trade. The questionnaires collected in Kenya contain information on the main products exported by Kenya: tea, flowers, coffee and fresh beans. These products give the structure of compliance costs of firms which have already successfully modify their export facilities to comply with international regulations. Their costs incurred are adopted for the avocado market and the implications for the Kenyan avocado exporters and international trade are evaluated. Trade between the EU and African countries has increased through different agreements such as the program "Everything But Arms" (EBA). Within EBA, the main exports of the least developed countries (LDCs) have been able to enter the EU market without any duties since 2001. The ACP countries’ trade agreements, favouring ACP access to the EU market. Being Kenya one ACP Member State, trade to the EU has been intensified since then. In a first step higher compliance with private standards for avocados is modelled in a multi-country CGE model as a change in technology enhancing EU imports from Kenya. The changes in export and import quantities obtained from GTAP are transmitted to the single country model to analyse changes in the Kenya economy. The main scenario takes into consideration an increase in the Kenyan export due to the higher compliance with international standards by increasing technological change in EU imports from Kenya. Results evaluate the main implications of this in international trade (GTAP model) and in Kenyan households (single country model).