Trade Liberalization And Export Survival In Kenya

Abstract

This paper explores the effect of trade liberalization on export survival using product level SITC-5 digit panel data from 1980 to 2018. This study focuses on agricultural sectors, manufacturing sectors and Economic Integration Agreements (EIAs) as a proxy for trade liberalization. Employing discrete-time random effects logit regression model, this study showed that Kenya has short export durations with a failure rate of 64% in the first year and close to 90% in the fifth year. Economic Integration Agreements like EAC and COMESA confer more additional benefits for Kenya’s exports growth through survival advantages. For instance, exporting manufactured goods to COMESA along with agricultural exports to EAC serves Kenya with higher survival probabilities. However, trade agreements between Kenya and EU do not result to any increase in survival for any sector. Based on the findings, therefore Kenya’s export survival is better inspired by exporting to regional blocks that are geographically close. Therefore, policy makers should focus on deepening intra-African trade. Keywords: Agricultural sector, export survival, manufacturing sector, trade liberalization, trade agreements.