Market structure in regional integration: analysis Of the Kenyan sugar industry in COMESA

Abstract

The study analysed intra - industry trade in sugar within COMESA and also evaluated the market with regard to distribution of production share. Theoretical foundations contend that intra - industry trade normally takes place when countries are similar in their relative factor supplies and therefore comparative advantage cannot be used to explain its occurrence. We infer the homogeneity of white sugar from the value of the Grubel - Lloyd index calculated to be 0.71 for the period 1995-2000 thus argue that there is no further basis for trade in this industry and since it does exist, we evaluated the structure of the market for sugar. This we did noting that there has been an increase in sugar imports to Kenya since the trade related provisions of COMESA came into effect. The bulk of this increase has been from COMESA-member countries. This increase has been perceived as unfair yet it has not been explained properly. This study estimated intra sugar-industry trade and further, the structure of the market proxied by production levels of selected COMESA countries against their number of sugar-producing firms for the single year 2000. It emerged that there is unequal production share distribution thus imperfect competition, the level of which, as evident from the Gini coefficient of 0.23, is low. Working out an equitable production share distribution of member countries in line with their respective number of sugar firms will reduce the disparity existing currently.