Discussion Paper No. 80 of 2007 on Implications of the Proposed WTO Tariff Reduction Modalities: Case of Kenya’s Agricultural Tariff Structure

Abstract

Various proposals in the World Trade Organization agricultural market access negotiations are explained and their implication to tariff reduction in terms of meeting stated objects evaluated in reference to Kenya’s agricultural tariff structure. A partial equilibrium model is used to assess the impact of the tariff reductions to trade and revenue to Kenya. The results show that proposals involving deeper cuts will reduce Kenya’s flexibility in using tariffs as a trade policy tool instrument when it comes to protecting domestic production as a result of unfair trade practices. The “water in tariff” will be significant eroded in some of the proposals. Deeper tariff cuts will also lead to revenue loss, although not significant as most formulae will affect only a few applied tariff lines. Although the current revised draft modalities for negotiation provides some reasonable flexibility in terms of difference between the bound and applied tariff, the ACP proposal gives more flexibility for Kenya. Given that the country has made significant progress in agriculture trade liberalization through structural adjustment programmes and its own voluntary trade reforms, there is need to negotiate for credit or any other form of consideration for this voluntary effort. For products to be affected by the formula, Kenya should consider designating them as special products to receive less cuts as envisaged in the July framework.