Free Trade and Economic Growth & Development in Kenya
The Kenyan economy is among the strongest in the East African Region but has shown less growth than its neighbors in recent years. The country is currently part of a regional trade bloc, which would benefit its economy if it utilized the available trade advantages to its fullest extent. In reality, however, there are a number of non-tariff trade restrictions that reduce the country’s ability to trade freely with its neighbors. By removing these restrictions, Kenya can place itself in an advantageous trading position and prepare itself for the reduced importation rates that the free trade zone offers. Free trade policies have the ability to improve a country’s economic status if the country in question implements them properly. These potential benefits raise the issue of the impact that the implementation of free trade policies would have on Kenya’s current economic situation as well as its future development.
Kenya exports a large number of goods such as agricultural products and textiles to European and US markets. In turn, these markets supply the country with a large portion of its imports, which are in the form of manufactured goods and oil. The country’s imports exceed its imports. The result is an increase in the country’s reliance on the foreign exchange earned by its more lucrative industries, such as its active service sector. In such a scenario, the economy can easily be destabilized if it has to deal with an increase in the prices of its imported products. According to external analysts, the country’s economy currently suffers from deficits in sectors such as food and energy due to its strict import regulations. These deficiencies lead to citizens paying more than the standard global rate for such products and illuminate the defects in the country’s strictly regulated trading system.
The East African Community free trade zone could benefit Kenya’s economic situation by allowing the state to pay lower tariffs for its imports. Tanzania produces a surplus amount of food products, and free trade would enable Kenya to import these food products at subsidized rates and reduce food prices in the country. Kenya could also reduce its dependence on oil imports by reducing trade barriers with Ethiopia and importing power directly from this country. In return, Kenya could export its expertise by allowing its service sector to expand its reach in the region. The income generated by this expansion would improve service provision in the EAC while also providing the Kenyan economy with an additional revenue source. Manufacturing industries would also benefit from the implementation of free trade policies due to easier movement of capital and labor across the region, eventually reducing the region’s dependence on imported manufactured goods.
Free trade policies allow countries to benefit from each other’s strengths and reduce their dependence on externally-sourced goods and services. Strict trading policies reduce a country’s ability to equalize the revenue spent on imports with that gained from exports. Participating in free trade practices would allow Kenya to spend less on oil and food imports while also allowing it to export its expertise to the East African region. This additional revenue source would also enable the country to boost its manufacturing sector, which would, in turn, reduce its reliance on imported manufactured goods as this industry improves. Implementing free trade policies would, therefore, benefit Kenya and its neighbors, boost their economies and allow them to reduce their dependence on externally-sourced imports while also increasing their development potential across the board.