RESTRICTEDWORLD TRADE
ORGANIZATIONWT/TPR/G/64
3 January 2000
(00-0016)
Trade Policy Review Body Original: English
TRADE POLICY REVIEW
KENYA
Report by the Government
Pursuant to the Agreement Establishing the Trade Policy Review Mechanism
(Annex 3 of the Marrakesh Agreement Establishing the World Trade
Organization), the policy statement by the Government of Kenya is attached.
Note: This report is subject to restricted circulation and press embargo until the end of the meeting
of the Trade Policy Review Body on Kenya.Kenya WT/TPR/G/64
Page 3
TABLE OF CONTENTS
Page
I. INTRODUCTION 5
II. ECONOMIC OUTLOOK 5
(1) G ROSS DOMESTIC PRODUCT 5
(2) I NVESTMENT AND SAVING 6
(3) E MPLOYMENT 6
III. PUBLIC FINANCE 6
(1) P UBLIC EXPENDITURE 6
(2) P UBLIC REVENUE 7
(3) P UBLIC DEBT 7
IV. SECTORAL PERFORMANCE 7
(1) A GRICULTURE 7
(2) M ANUFACTURING 8
(3) S ERVICES 8
V. KENYA'S TRADE POLICY 8
(1) A GRICULTURE 9
(2) M ANUFACTURING INDUSTRY 9
(3) T RADE POLICY IMPLEMENTATION 9
(4) M ULTILATERAL , REGIONAL OR PREFERENTIAL TRADING AGREEMENTS 10
(5) B ILATERAL TRADE AGREEMENTS 10
VI. KENYA'S EXTERNAL TRADE RELATIONS 10
(1) E XPORTS 10
(2) I MPORTS 10
(3) B ALANCE OF TRADE 11
(4) D IRECTION OF TRADE 11
VII. INVESTMENT POLICY 11
(1) I NVESTMENT PROMOTION CENTRE (IPC) 11
(2) M AJOR INVESTMENT INCENTIVES 12
(3) M ANUFACTURING UNDER BOND (MUB) 12
(4) E XPORT PROCESSING ZONES AUTHORITY (EPZA) 12
VIII. KENYA AND THE MULTILATERAL TRADING SYSTEM 13
(1) I MPLEMENTATION OF THE WTO A GREEMENTS AND CHALLENGES FACED 13
(i) Schedule of commitments 13WT/TPR/G/64 Trade Policy Review
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(ii) Notifications 13(iii) Change in legislation 13
(a) Anti-dumping and countervailing duties 14(b) Customs valuation 14(c) Trade-related aspects of intellectual property rights 14
(iv) Kenya's concerns in WTO Agreements 14
(a) Agreement on Agriculture 14
(b) Agreement on Sanitary and Phytosanitary Measures 15(c) Agreement on Textiles and Clothing 15(d) Agreement on Trade-Related Investment Measures (TRIMs) 15(e) Agreement on Rules of Origin 15
(f) Agreement on Preshipment Inspection 16
(g) Agreement on Customs Valuation 16(h) Agreement on Trade-Related Aspects of Intellectual Property
Rights (TRIPS) 16
(v) Kenya's position regarding future negotiations 16
IX. CONCLUSION 17Kenya WT/TPR/G/64
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I. INTRODUCTION
1. Since the last Trade Policy Review in 1993 the Government has intensified and continued to
implement far reaching structural reforms within  the economy including price decontrols, removal of
all import licensing and foreign exchange controls, reforms of investment incentives, rationalization
and privatization of public enterprises and reforming the financial sector and other key sectors of the
economy.
2. The focus of the structural adjustment programmes initiated by the Government and funded
by World Bank and other key donors is to remove the bottlenecks to economic growth by,
maintaining macroeconomic stability, improving effici ency of the public service, enhancing external
and domestic competitiveness of the economy and addressing the social dimensions of development.
The government encourages the active participation of the private sector in economic developmentand market forces in determination of prices, interest rates, exchange rate etc as witnessed by
liberalization measures including divestiture even in key and strategic sectors of the economy where
the Government had absolute control previously.
3. The Government recognizes the need to accelerate economic growth and structural
transformation through various sessional papers and development plans.  The theme adopted for thecurrent 8th national development plan (1997-2000) is "Rapid Industrialization for Sustained
Development" with emphasis on putting in place measures that would enable Kenya to attain the
status of Newly Industrialized country (NIC) by the year 2020.  These include deliberate efforts to
promote linkages among industries and sectors to enhance the spread effects of industrial growth and
to facilitate the transfer of technology, skills and growth to small-scale enterprises.
4. While the Government has continued to embrace the policy of liberalization there has been a
slowdown in economic performance affecting all majo r sectors and this can be attributed mainly due
to structural constraints that discourage investment.  These include dilapidated infrastructure,
inadequate provision of public services, insecurity and increased costs of manufacturing and reduced
donor funding.  However, the Government has implemented various reforms aimed at reversing the
current downturn in economic growth.
5. The slowdown in economic activity is expected  to continue up to early 2000 and thereafter
recovery is expected and will be underpinned by the ongoing reform measures particularly
rehabilitation of infrastructure, improved fiscal discipline and the speedy implementation of the
remaining economic reforms in the public sector.
II. ECONOMIC OUTLOOK
(1) G
ROSS DOMESTIC PRODUCT
6. Over the period 1995 to 1998 the trend in real Gross Domestic Product indicates that the
Kenyan economy has been slowing down in recent years.  The growth of GDP of 4.3% and 4.6%
achieved in 1995 and 1996 respectively dropped to 2% in 1997 and was only 1% in 1998, which was
slower than growth in population.
7. The lead sectors in terms of GDP contribution in 1997 were Agriculture (24.7%),
manufacturing (13.3%) and real estate and Business Services (10.2%).  Agriculture and
manufacturing sectors have been growing at rates below that of GDP.WT/TPR/G/64 Trade Policy Review
Page 6
(2) INVESTMENT AND SAVING1
8. There has been steady decline in investment, which fell to 17.1% of GDP in 1998 from 20.4%
in 1996 and 18.5% in 1997.  Both public and private investment declined due to tight fiscal policy and
reduced local and foreign investor confidence.  A larger proportion of investment continues to be
financed using private domestic savings, which also declined to 17.5% of GDP in 1998 from 25.6% in
1995.  Foreign financing of investment has remained almost static at around 3.5% in both 1997 and1998.  A large share of this support is from bilateral donors and international agencies such as World
Bank and IMF.  Grants from abroad only grew by 5.1% in 1998 compared to 20.5% in 1997.  Lack of
sufficient domestic credit, poor international publicity worsened by withholding of Enhanced
Structural Adjustment Facility (ESAF) support since 1997 have played a significant role in
deterioration of the investment climate in the country.  Other factors include poor infrastructuralservices and insufficient access to export finance.
(3) E
MPLOYMENT
9. The growth in employment creation has continued to be slow due to economic recession and
the ongoing reforms in the public sector through retrenchment and recruitment embargoes.  In 1998
the economy generated 384,000 jobs2 outside small-scale farming and pastoral activities as
employment rose from 4.7 million persons in 1997 to 5.1 million people in 1998.  The slight increase
of 1.1% in 1998 in wage employment in the modern sector was confined to the private sector, while
most of the jobs were created by the expanding informal sector.
10. Wage employment in the manufacturing activity rose by only 2.1% due to reduced
performance of the sector.  The employment in the financial sector decelerated from 4.5% in 1997 to
2.1% in 1998 occasioned by structural changes and continued automation.  Decline in employment
has also been recorded n transport, communications activities and the public sector.
III. PUBLIC FINANCE
11. The major goals of the Government's fiscal policy which continue to be outlined in the
national budget are to reduce interest rates and government borrowing in order to spur economic
growth, boost fight against poverty, unemployment and help restore investors confidence.  The
objective of balanced budget is to be achieved through a more disciplined expenditure policy andstepped up revenue collection.
(1) P
UBLIC EXPENDITURE
12. The expenditure and net lending in absolute terms increased from Kshs 195 billion in 1997/98
to 197.3 billion in 1998/99, falling from 30.6% to 26.7% of GDP.  Recurrent expenditure increased
from Kshs 160.3 billion in 1997/98 to 165.3 billion in 1998/99 mainly due to the following:
(i) Domestic and foreign interest repayments rose from 30.4 billion and 7.6 billion to
Kshs 31.7 billion and Kshs 8.3 billion respectively.
(ii) The Civil Service wage bill rose by 1.2 billion to Kshs 63.3 billion in 1998/99.
                                                     
1 Central Bank Annual Report, 1999
2 Government of Kenya (Economic Survey, 1999)Kenya WT/TPR/G/64
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(iii) Government expenditure on operations and maintenance rose by 3% from
Kshs 60.2 billion in 1997/98 to 62.0 billion in 1998/99.
13. Development expenditure, which was 4.3%  of GDP compared with 5.5% in 1997/98,
amounted to Kshs 32.0 billion, which was 2.7 b illion below the level in the previous year.
(2) PUBLIC REVENUE
(i) The Kenya Revenue Authority (KRA) stepped up revenue collection in 1998/99
amounting to Kshs 196.3 billion which was 9.3% higher than that collected in 1997/98
financial year.  Higher tax revenue of Kshs 151.6 billion in 1998/99 was collected as a
result of the following:
(ii) Due to intensified crackdown on diversion of transit goods into the local market, import
duty rose from Kshs 25.0 billion to 28.4 billion.
(iii) Revenue from Value Added Tax (VAT) increased by 12% from Kshs 34.8 billion to
Kshs 39.2 billion mainly due to broadening of VAT base and enhanced compliance
which counteracted the effect of lowering the VAT by 1% during the year.
(iv) Income from tax receipts declined from Kshs 56.0 billion to Kshs 55.2 billion as most
companies declared less profit.
(v) Excise duty collections remained almo st unchanged at Ksh 28.7 billion in 1998/99.
(3) PUBLIC DEBT
14. The stock of domestic debt stood at Kshs 150.3 billion as at 1998/99, an increase of
Kshs 4.8 billion.  This arose from increased budgetary financing requirements as well as net
repayments of external debt.  Most of the domestic debt is held in form of Government securities
comprising Treasury bills, Treasury bonds and long  term stocks.  Treasury bills accounted for 76.3%
of the outstanding government securities while Treasury bonds and stocks accounted for 21.2% and2.5% respectively.
IV. SECTORAL PERFORMANCE
(1) A
GRICULTURE
15. Agriculture which contributes about 24.7% of Gr oss Domestic products (GDP) is estimated to
have expanded by 1.4% in the twelve months to August 1999 compared to 1.5% in 1998 and 1.0% in
1997.3  Overall output growth at current prices in agriculture increased by 7.6% from Kenya pound
7,580.7 million in 1997 to Kenya pound 8,154.3 million in 1998.  In 1998 total output, inputs and
value added at current prices rose by 7.6% 10.7% and 7.3% respectively.  The depressed output in
agriculture is mainly due to dilapidated infrastr ucture that continue to increase marketing and
production costs, unfavourable weather conditions and weak management in key agriculturemarketing organizations.
16. However, marketed production rose by 19.2% from Kenya pound 3,556.7 million in 1997 to
Kenya pound 4,240.1 million in 1998 mainly due to better prices for coffee, tea, pyrethrum, sisal,
sugarcane and milk.  Fresh horticultural export volume decreased from 84,190 tones in 1997 to
                                                     
3 Central Bank Monthly Economic Review, November, 1999WT/TPR/G/64 Trade Policy Review
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78,373 tones in 1998 but the overall value increased by 11% from Kenya pound 450 million to Kenya
pound 499.5 million.
(2) MANUFACTURING
17. Manufacturing whose contribution to GDP declined to 13.3% in 1998 from 13.8% in 1993
expanded by 1.2% in 1998/999 fiscal year compared with 1.3% in 1997/98 and 1.9% in 1997.  The
sector remained subdued as a result of the sector’s inability to compete with low priced imports in the
local market, poor infrastructure especially roads, electric power supply, operational inefficiency in
the main sea ports and railway transport which reduced competitiveness by pushing production costs
upwards.  Sales of manufactured goods amounted to Kenya pound 13,357.7 million in 1998, an
increase of 120.1% compared with 1997 while stocks held by the manufacturing firms by end of
19998 was Kenya pound 2,783.6 million compared to stocks worth Kenya pound 2,314 million in1997.
18. Exports of manufactured goods are mainly to COMESA countries and especially Uganda and
Tanzania.  Continued demand for Kenya's manufactured goods within COMESA and opening up of
trade in the East African community will contribute to substantial recovery to this sector though this
will depend on decline in the general costs of manufacturing and doing business in Kenya.
(3) S
ERVICES
19. Activity in most services sector remained depressed in the fiscal year 1998/99.  Growth in
output from trade, restaurants and hotel is estimated to have stagnated at 2.6% in the twelve months to
June 1999 compared with 2.5% in 1998 and 3.8% in 1997.  The poor performance can be attributed to
reduced tourism caused by competition from alternative tourist destinations in the sub region,
incidences of insecurity and negative publicity.
20. Government services equally stagnated at 0.7% in 1998/99 compared with 0.8% in 1998 and
1.1% in 1997 mainly due to privatization and retrenchment in the public sector aimed at improving
efficiency in the sector.
21. Services by finance, insurance and real estate expanded by 2.9% in 1998/99 compared with
3.2% in 1998 and 5.3% in 1997.  The banking crisis and high interest rates affected output of the
sector and profitability of most commercial banks.  The monetary authorities pursued tight monetarypolicy in 1998 with the aim of stabilizing prices and banking system and this led to slower expansion
in money supply (M3) by 3.3% while total domestic credit increased by 8.1% and credit to the public
sector increased by 10.2%.
22. Transport storage and communication services expanded by 1.2% in the twelve months to
June 1999 from 1.3% in 1998 and 2.0% in 1997.  Building and construction grew by 1.3% in 1998/99,the same rate as in 1998.  The reduced activity was mainly due to reduced public construction
activities following the tight fiscal policy pursued in 1998/99.  This is also reflected in decline in
cement production of 1,044,423 tones in 1998/99 from 1,124,727 tones in 1997/1998 and fewer
residential and non-residential building plans approved by several urban centres.
V. KENYA'S TRADE POLICY
23. Kenya's general trade policy objectives are articulated in the sessional paper No 1 of 1986 on
economic management for renewed growth.Kenya WT/TPR/G/64
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24. Trade policies in Kenya have evolved over time, changing from an inward looking import
substitution policy regime to the existing one whose primary objective is the promotion of exports of
consumer and intermediate goods, while at the same time laying the base for eventual production of
capital goods for both domestic and export markets.  This is expected to lead to higher earnings of
foreign exchange, which in turn will help to reduce the balance of payments deficit and the
unemployment problems.
25. The Government has put into place various incentives such as:
- the duty and VAT remission;
- manufacturing under bond scheme;
- export processing zones;
- the pursuance of a flexible and realistic exchange rate that promotes exports.  Currently,
the export compensation scheme has been abolished since 1993.
(1) AGRICULTURE
26. Self-sufficiency and expansion of exports are main objectives of the Government in the
agricultural sector.  With these objectives, the Government has evolved a comprehensive policy
framework to meet its stated priorities covering production, pricing and marketing (i.e. domestic andexport trade).  For staple foodstuffs, the Government has embarked on creating an enabling
environment through gradual liberalization of the marketing system.
(2) M
ANUFACTURING INDUSTRY
27. After independence, Kenya relied on the import substitution of consumer goods, but due to
lack of incentives to foster the production of capital and intermediate goods, a greater demand for
foreign exchange for import substitution was needed compared to other sectors.  The import
substitution policy was biased towards protection of domestic industries at the expense of theircompetitiveness, which in turn enabled manufacturers  to make profits even in cases of under utilized
capacities.  Kenyan manufacturers thus became inward oriented and failed to venture into
international markets.  The Government then had to  change from this policy of import substitution to
export promotion in order to acquire more foreign exchange resources, and increase employment and
productivity.
28. To encourage investment, the Government of Kenya has resorted to price liberalization.  The
Government published the Restrictive Trade Policies, Monopolies and Price Control Act (1988) to
guard against exploitation of smaller firms by larger enterprises.  Import licensing has now been
scrapped except for few items that form the negative list.  This list was enacted under the Import,
Export and Essential Supplies Act, for reasons of public health, wildlife and environment protection,state and public security, or to meet required sanitary, phytosanitary and environmental standards.
(3) T
RADE POLICY IMPLEMENTATION
29. Trade policy implementation in Kenya is carried out mainly by the Ministry of Tourism,
Trade and Industry, the Customs and Excise Department of Kenya Revenue Authority, as well as
Central Bank of Kenya.  There are also a number of government departments or agencies, which playa role in the implementation of trade laws in Kenya.  The Government, in its revitalization
programme, is committed to a policy of broad-based liberalization, as well as price liberalization to
encourage investmentWT/TPR/G/64 Trade Policy Review
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(4) MULTILATERAL , REGIONAL OR PREFERENTIAL TRADING AGREEMENTS
30. Kenya's external trade policies are designed to create an environment conducive to promoting
its products in international markets, especially those of the developed countries of Europe, America
and Japan without prejudice to the promotion of intra-African trade.  Trade policies are formulated
with the view to speeding up Kenya's industrialization process, and in such away to make access to
foreign markets easier for Kenyan products.  In pursuing these objectives, Kenya has entered intoMultilateral, regional, bilateral and preferential trade arrangements as detailed below.  Kenya is a
signatory to the Lomé convention, and a member of the African Economic Community, Common
Market for Eastern and Southern Africa (COMES A), East African Community (EAC) and Inter-
governmental authority on Development (IGAD).
(5) B
ILATERAL TRADE AGREEMENTS
31. Kenya has bilateral trade agreements with th e following countries: Argentine, Bangladesh,
Bulgaria, China, the former Czech and Slovak Republic, Djibouti, Egypt, Ethiopia, India, Iran,
Lesotho, Nigeria, Pakistan, Poland, Romania, Rwanda, Republic of Korea, Sudan, Tanzania,
Thailand, the former USSR, the former Yugoslavia, Zambia and Zimbabwe.
32. Under these agreements, Kenya and its contracting partners accord each other the MFN
treatment in all matters with respect to their mutual  trade relations.  These agreements have been used
as instruments for promoting trade and improv ing economic relations between Kenya and these
countries.
VI. KENYA'S EXTERNAL TRADE RELATIONS
33. External trade plays a vital role in the Kenya's economic development.  Key indicators of
international trade and balance of payments show a poor performance in 1998 compared to the
previous year.  The balance of trade worsened owing to a marginal growth in imports while exportsalmost stagnated.
34. The volume of trade grew by only 2.5 per cent in 1998 to stand at Kenya pound 15,948.5
million compared to 13.5 per cent and 8.5 per cent growth registered in 1996 and 1997 respectively.
The slackened growth of exports and imports vo lume reflects the slow growth of the economy.
(1) E
XPORTS
35. Kenya's export earnings, continues to be generated mainly from exports of primary
agricultural products including coffee, tea and horticulture.  Food and beverages contributed 57.4 per
cent of the total export earnings, while non-food industrial supplies made up 18.3 per cent in 1998
compared to 22.4 per cent in 1997.  Exports of fuel and lubricants contributed 9.1 per cent of total
export earnings.  Export earnings from food and beverages slightly increased by 6.8% from Kenyapound 3,072.9 million in 1997 to Kenya pound 3,283.3 million in 1998, mainly due to substantial
increase in exports of primary food and beverages for household consumption, especially tea, beans
and mussels frozen.
(2) I
MPORTS
36. In 1998, there was a general increase in the values of most import categories, although
imports of non-food industrial supplies fell by 11.7% in 1998, compared to a 22.9% increase in 1997.Kenya WT/TPR/G/64
Page 11
This was mainly due to the liberalization of trade, through the removal of import licensing,
quantitative import restrictions and foreign exchange controls.
(3) BALANCE OF TRADE
37. One effect of the aforementioned measures has been that the increase in the value of imports
has not been matched by a corresponding increase in export earnings, and the balance of trade has
deteriorated.
38. In should, however, be noted that even though liberalization has increased the volume of
imports, exports have also grown but at a lower rate than imports.
(4) DIRECTION OF TRADE
39. African Countries continued to be the major de stination of Kenya's exports followed by the
European Union (EU).  In 1998, the market share of total exports to African countries and EuropeanUnion (EU) stood at 47.3% and 30.0%, respectively.
40. The share of total exports to the European Union (EU) reduced by 2.6% points while of that
African countries increased by 1.3% points.  Exports to the Far East and Middle East accounted for
12.8% and 4.0% of total exports, respectively.
41. Exports to all European Union countries except United Kingdom decreased by 7.5% in 1998,
while exports to Middle East, and Far East and Australia increased by 24.3% and 26.9% respectively.
Exports to Uganda and Tanzania jointly stood at Kenya pound 1,779.1 million, equivalent to 29.4% of
total exports.
VII. INVESTMENT POLICY
42. The government investment policy is outlined in various sessional papers and national
development plans, the most notable ones being sessional paper 1 of 1986 on economic management
for renewed growth and sessional paper no. 1 of 1994 on recovery and sustainable development whichemphasizes on the increased role of the private sector in economic growth.  The Government has
undertaken key economic reforms with a view to promote both domestic and foreign investment.
These include abolishing export and import licensing, rationalizing and reducing import tariffs,
liberalization of foreign exchange and price controls and partial liberalization of the capital markets
among other measures.
(1) I
NVESTMENT PROMOTION CENTRE (IPC)
43. Investment Promotion Centre is a public funded institution, which was established in 1992 as
a one-stop shop geared to promote investment in th e country.  IPC processes all applications for new
investments and forwards recommendations to the Mi nistry of Finance and Planning for approval by
the Minister.  A General Authority license is issued within one month with prior approval from therelevant authority in charge of issuing the license.
44. The Foreign Investments Protection Act  (FIPA) (Cap518) guarantees repatriation of capital,
after tax profits and remittance of dividends and interests accruing from investing in the country.  The
constitution also provides guarantee against expropriation of private property unless for security or
public interest and when this happens fair and prompt compensation is paid.WT/TPR/G/64 Trade Policy Review
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(2) MAJOR INVESTMENT INCENTIVES
45. While the Government policy is to formulate and implement measures in favour of private
sector investment, the following repr esent a summary of current incentive4 :
- investment allowance - is provided as an incentive for investment in the manufacturing
and hotel sectors the rate of 60% countrywide;
- depreciation - liberal rates are allowed for depreciation of assets based on value as
follows:
- buildings and hotels
- machinery e.g. tractors and aircrafts;
- loss carried forward - business enterprises that suffer losses can carry forward such losses
to be offset against future taxable profits;
- duty remission facility - material imported for use in manufacture for export or for the
production of raw materials for use in export oriented manufacture or for the production
of duty free items for sale domestically are eligible for duty remissions.  Applications for
this facility may be made to the Export Promotion Programme Office in the Ministry of
Finance and Planning.
(3) MANUFACTURING UNDER BOND (MUB)
46. To encourage manufacturing in Kenya for world markets, the Government has established an
in-bond programme open to both local and foreign investors.  IPC and Ministry of Finance and
Planning (Department of Customs and Excise) administer the program.  Enterprises operating under
the programme are offered the following incentives:
- exemption from duty and VAT on imported plant, machinery and equipment, raw
material and other imported inputs;  and
- 100% investment allowance on plant machinery equipment and buildings.
(4) EXPORT PROCESSING ZONES AUTHORITY (EPZA)
47. Export Processing Zones are coordinated by th e Export Processing Zones Authority (EPZA).
A number of EPZs have already been established.  Enterprises operating in export processing zones in
Kenya enjoy the following benefits:
- 10 years tax holiday and a float 25% tax for the next 10 years;
- exemption from all withholding taxes on dividends and other payments to non-residents
during the first 10 years;
- exemption from import duties on machinery raw materials and intermediate inputs;
- no restriction on management or technical arrangement;
- exemption from stamp duty;  and
- exemption from VAT and operate on one license only.
                                                     
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VIII.  KENYA AND THE MULTILATERAL TRADING SYSTEM
48. Since its accession to GATT in 1964, Kenya has participated in the Multilateral Trading
System, with the objective of achieving concrete results in terms of effective access to markets, and
broader and more highly developed Multilateral rules than those applied under GATT.  Kenya
supports the role of WTO in strengthening the Multilateral Trading System by its commitment to
implement the obligations and responsibilities arising from the Uruguay Round.  Towards this, Kenyais in the process of changing her trade-related laws to be in conformity with the WTO rules and
regulations.
49. In order to effectively implement Kenya's obligations under the WTO, a National Committee
on World Trade Organization was formed in 1995 to assist the government in adopting its economic
and trade policy to the requirements of all the agreements administered by the WTO.  In addition, theNCWTO is expected to assist the country to take maximum advantage of the trading opportunities
created by the Uruguay Round.
50. Members of the NCWTO are drawn from govern ment ministries, and concerned parastatals,
private sector organizations, including Manufacturers Association, Chambers of Commerce and
Industry, Bankers Association, Universities and Association of Insurers etc.
(1) I
MPLEMENTATION OF THE WTO A GREEMENTS AND CHALLENGES FACED
51. Since 1995, Kenya has made substantial progress in implementing several of the requirements
of the WTO.
(i) Schedule of commitments
52. During the Uruguay Round negotiations Kenya submitted her offers in Trade in Goods and
Services, which include tariff concessions on a number of products including a wide range of
agricultural products.  Kenya also offered bound tariffs on a few selected items, which included freshchilled/frozen fish, medicaments, minerals/chemical fertilizers, tropical products etc.  The tariff
bindings range from 18% to 100%.  Kenya's specific commitments on trade in services, included
offers in communication services, financial services, travel related services and transport services.
53. Kenya also participated in the recently concluded financial services negotiations.  Her
participation in these negotiations involved reviewing of the offers made in the 1995 schedule ofcommitments and bringing more areas into the schedule .
(ii) Notifications
54. Despite the  stringent notification procedures some of which include providing justification,
making reference to the relevant articles, Kenya has been able to submit most of the required
notifications in line with conforming  to various agreements.
(iii) Change in legislation
55. Kenya has made some progress towards adopting legislation and administration arrangements
to meet the requirements of the WTO.  These include:WT/TPR/G/64 Trade Policy Review
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(a) Anti-dumping and countervailing duties
56. Kenya's anti-dumping law which is contained in section 125 and 126 of the Custom and
Excise act was enacted in 1984 long before the WTO Agreement came into force.  It was not however
possible for Kenya to continue using this legislation in its present form since some of its provisions
did not conform to the WTO provisions.  Therefore, an amended anti-dumping and countervailing
duty law has now been passed in Parliament during the budget of 1998/99 financial year.  Regulations
have now been prepared.
(b) Customs valuation
57. Currently, the Kenyan Customs and Excise Department applies the Brussels Definition of
Value system.  Under WTO system of Customs valuation, this method of valuation is disallowed.
The Kenya customs department has undertaken to change the valuation system to the new prescribedsystem.  Kenya submitted a notification for delayed application of the WTO customs valuation
system, until the year 2000.  Assistance has been sought and received from the World Customs
Organization to provide training and to work out logistics of changing the valuation system. The new
valuation method is expected to be in force by January 2000.
(c) Trade-related aspects of intellectual property rights
58. Kenya is a member of the World Intellectua l Property Organization (WIPO), The African
Regional Industrial Property Organization (ARIPO),  the Paris Convention, the Berne Convention and
the Universal Copyright Convention.  Kenya as a developing country benefits from a transition period
up to 1st January 2000 to bring its legislation into co nformity with the TRIPS Agreement.  Kenya is in
the process of amending its Intellectual property legislation with a view to conforming to the  TRIPS
Agreement and to other international agreements or conventions to which it is a signatory.  The
industrial property amendment bill has been presented to parliament for debate and approva
5.
59. The Copyright Act has also been amended.  The copyright rights and neighbouring rights bill
which is compliant with the TRIPS Agreement has also been drafted and will soon be presented in
Parliament6.  Kenya's intellectual property legislation does not provide protection for geographical
indications, layout designs and integrated circuits and undisclosed information.
(iv) Kenya's concerns in WTO Agreements
(a) Agreement on Agriculture
60. As regards implementation of the provisions of the Agreement on Agriculture, Kenya
concerns are as follow7:
- Market access for our agricultural products continues to be adversely affected mainly
because of trade distorting measures of which export subsidies is perhaps the mostprominent example that continue to prevent our products from competing on a level
                                                     
5 The Industrial Property Bill 1999
6 The Copyright Bill 1999
7 Kenya's Position paper to the 3rd Ministerial Conference in SeattleKenya WT/TPR/G/64
Page 15
playing ground.  This problem has been aggravated by the circumvention of existing rules
by some developed countries leading to further distortion in the market.
- The tariffication in the Agricultural sector at the end of the negotiations during the
Uruguay Round resulted in very high tariff levels particularly for products of interest to
developing countries like Kenya.  The recommended percentage reduction levels have not
substantially lowered the tariff levels as expected by the developing countries.
- While non-trade concerns such as food security have been mentioned in the preamble to
the Agreement very little has been done to address this issue.  The Agricultural
liberalization advocated for by the Agreement cannot by itself be able to overcome the
problems of food security for Kenya, which has a sizeable rural population.
- Initial assessment shows that Kenya would have benefited more if the reduction of tariffs
on goods or export interest to her were either the same or higher than those of the goods
of export interest to developed countries.  For example, goods of export interest to Kenya
such as leather coffee, tea and tropical fruits had their tariffs reduced by an average of
30% against 56% reduction in average tariffs at every stage of production, the degree of
escalation remains high for products of export interest to Kenya.  For example, somemajor countries still retain relatively high degree of tariff escalation on hides and skins,
leather products and tobacco.
(b) Agreement on Sanitary and Phytosanitary Measures
61. Market access for agricultural products from Kenya has been hindered by the use of sanitary
and phytosanitary measures as non-tariff barriers by the developed countries.  For example, our fish
exports have faced a ban to the EU market on the ground that they are infected with cholera without
any scientific evidence.  As the EU is one of our largest markets for this product, the ban hasadversely affected our fish industry.
(c) Agreement on Textiles and Clothing
62. Kenya has noted with concern that the integration of textiles and clothing products into
GATT 94 has not been in favour of products originating from developing countries.  In the textile
sector, the major importing developing countries have not implemented the phase-out of theMulti-Fibre Arrangement (MFA) restrictions as was expected under the Textile and Clothing
Agreement.  As a result products of interest to Kenya are still excluded from the liberalization
schedules.
(d) Agreement on Trade-Related Investment Measures (TRIMs)
63. Kenya does not maintain any of the prohibited TRIMs as defined in the illustrative list
annexed to the TRIMs Agreement.  These measures have been faced out in the course of the
economic reforms that the country has so far u ndertaken outside the WTO framework in order to
liberalize trade and create an enabling environment for domestic as well as foreign investment.  The
removal of these measures however has not attracted investment into the country as expected.
(e) Agreement on Rules of Origin
64. Kenya is concerned about the completion of the work programme to harmonize non-
preferential rules of origin which was not achieved within the 3 years set forth in the agreement
because of the complexity and amount of technical work involved.  In addition, there is lack ofWT/TPR/G/64 Trade Policy Review
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common understanding among WTO member as to the implications of the future discipline to
"equally apply" the harmonized rules of origin for "all purposes".  The Council for Trade in goods
should therefore look into the above mentioned issues to enhance prospects for progress on the
technical work.
(f) Agreement on Preshipment Inspection
65. Under this agreement, Kenya does not support the creation of a preshipment inspection
committee for monitoring of the implementation of  the preshipment inspection agreement.  Kenya
believes that the committee on customs valuation can  adequately address the preshipment inspection
issues as and when they arise.  In fact, Kenya does not support the proliferation of WTO bodies as
they tend to over burden developing countries whose missions are in most cases suffering from
inadequate staffing, technical and financial resources.
(g) Agreement on Customs Valuation
66. As far as the implementation of the Agreement on Customs Valuation is concerned, Kenya
has noted with concern the following:
- compliance with the provisions of the Agreement is difficult to administer in countries
with high tariff rates;
- the provisions of the Agreement are inadequate to deal with cases of collusion between
the importer and supplier with intends to defraud;
- agreement tends to allow for exclusion from the customs value of abnormal discounts
which do not demonstrate evidence linking them to the quantities purchased.
67. Where reference prices can be demonstrated to be representative of the value the agreement
should allow for it to be a basis for rejecting the transaction value and result to the alternativemethods.
(h) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)
68. Kenya has noted that there are instances where the ambiguity of the text of the TRIPS
Agreement allows for different and controversial interpretations, as exemplified in Article 27.3(b) of
the Agreement.
(v) Kenya's position regarding future negotiations
69. Kenya hopes that the future WTO Ministerial Conference's results will take into consideration
proposals from developing countries like Kenya to enable them integrate into the Multilateral trading
System.  More importantly, it should guarantee a multilateral trading system that is beneficial to both
developed and developing countries.  It is only after this that these countries will reap maximumbenefits from the system.  The work programme of the General Council should include the
negotiations already covered in the Marrakesh mandate to ensure that they will begin at the stated
time.
70. The forthcoming negotiations on Agriculture, established under Article 20 of the Agreement,
are a priority for Kenya for entrenching the process of  reform in international Agricultural trade.  The
main objective of this reform process should consist of subjecting Agricultural trade to the same rulesKenya WT/TPR/G/64
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and disciplines as are applied to trade in other goods , in view of the fact that agriculture has not been
prioritized in the multilateral trade negotiations.
71. New issues which have no direct relation to trade should not be introduced in the WTO
agenda.  Already trade and environment has been adopted for "study" in WTO work programme.
Discussions on labour standards has also gained prominence in WTO debate since Singapore
Ministerial Meeting.  More new issues may be proposed for discussion in the future.  The fear ofKenya is that these new issues may overburden her given that she is still grappling with implementing
the already existing WTO agreements.
IX. CONCLUSION
72. Kenya attaches strong importance to liberalization and globalization and continues to
participate effectively in formulating and implementing policies geared towards this objective.  Kenyaappreciates the role played by the WTO in advocating for a rule based, freer and predictable
international trading environment through the removal of unnecessary obstacles to trade.
Consequently, Kenya will continue to participate effectively in negotiations under the WTO with the
aim to ensuring that her interests are taken into acco unt.  Kenya believes that her integration into the
multilateral trading system will go a long way in assisting her realize her objective of becoming anewly industrialized country by the year 2020.
73. The Kenyan government will continue reviewing unnecessary barriers to trade with the
intention of further liberalization for better allocation of productive resources and therefore for
improved economic wellbeing.  On the other hand, Kenya expects that its partners in WTO will
rapidly and significantly dismantle distortions and limitations on trade in order to realize the
objectives of the World Trade Organization.
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