International trade refers to the exchange of goods and services between nations, allowing businesses to engage in commercial transactions across borders. It offers countries expanded market opportunities and access to products that may be unavailable or insufficiently produced domestically. The international marketplace facilitates trade across all categories—from raw materials and food products to consumer goods and industrial machinery. Increased competition among global suppliers leads to more competitive pricing, ultimately benefiting consumers through improved affordability and greater choice.

International trade is done through import and export and can be classified into import trade, export trade and Entrepot trade. Import trade refers to the purchase of either raw, intermediate or finished products from another country. Consumers and companies import products which are either not produced within their country or the products that are not produced in sufficient amounts to meet their needs. Export trade on the other hand simply means the sale of products and services to another country. Finally, Entrepot trade is the case where goods are imported into a country, not for consumption within the country, but for re-export to a third country.

The major factors to consider that may affect a company’s exports into another country are prevailing political factors such as trade control, tariff and non-tariff barriers and local content requirements and social/consumer behaviour including culture, religion, etiquette, language, customs and taboos, education level, consumer preference and attitude towards foreign goods and services. Before venturing into a market, it is important for the company to do thorough market research on the factors above in order to make decisions on components to put in the products, quantity of the product to be supplied to the market, packaging of the products, pricing of the product and advertising channels the company will use in the market.

What are Trade Agreements?

Trade Agreements are contractual arrangements between countries on their trading relationship. These trade agreements can be between two countries (bilateral) or among many countries (multilateral). Trade agreements are a tool used to reduce various unilateral barriers most countries use to regulate international trade. The barriers include tariff barriers, non-tariff barriers and outright prohibition (Trade Agreement | Britannica).

As the world becomes a global village, there are numerous possible collisions of interest between nations and thus the possible unilateral trade barriers that can be imposed by nations are many. Moreover, some trade barriers are created for non-economic reasons such as desire to prevent foreign influence on a nation’s culture and traditions and national security reasons. Therefore, successful trade agreements are very complicated because nations must factor economic and non-economic impacts of the agreements.

One of the first tasks for the potential exporter is to determine what trade agreements will influence their export activities to a given market. Depending on the nature of the agreement, your products could be competitive in the target market. One should also bear in mind that these agreements can change; for example, special preferences granted to a specific product or country may be eliminated in future agreements, reducing the competitive advantage (Otsieno, 2007).

Types of Trade Agreements

There are many types of trade agreements that a country can be part of depending on the terms and concession agreed on by the participating counties. The types of trade agreements are:

Bilateral trade agreements

These are agreements strictly between two countries that aims at improving the trading status between the countries and gives them access to each other’s market.

Regional trade agreements

The term regional trading agreement refers to a contract signed by two or more countries to promote free movement of goods and services between them. The regional trade agreement includes.

1. Free Trade Area - A free trade agreement eliminates all trade barriers between members, allowing them to freely exchange goods and services. The trade policies of each member still apply when it comes to dealing with non-members.

1. Preferential Trade Areas - It requires the least level of commitment from member countries to reduce trade barriers, even though they do not eliminate trade barriers within themselves. Additionally, preferential trade areas do not share common external trade barriers.

1. Custom Unions - Member countries of a customs union remove trade barriers among themselves and just adopt common external trade barriers.

1. Common Market - In a common market members remove internal barriers to trade, adopt common policies when it comes to dealing with non-members, and allow members to freely move resources among themselves.

1. Monetary Union - In an economic union, members agree to eliminate all trade barriers among themselves and adopt common external barriers. They also allow free import and export of resources, adopt a set of economic policies, and ultimately use a common currency.

Kenya’s Trade Agreements

Kenya is a signatory to several multilateral and bilateral trade agreements that open up market access opportunities for Kenyan exporters. The rate agreements include.

Regional Trade Agreements

Kenya is a member of the East African Community (EAC) and the Common Market for Eastern and Southern Africa (COMESA) trade agreements within the African Region. The EAC partner states comprise of Burundi, Democratic Republic of Congo, Kenya, Rwanda, South Sudan, Tanzania, Uganda and Somali. COMESA partner states are Burundi, Comoros, Democratic Republic of Congo, Djibouti, Egypt, Eritrea, Eswatini, Ethiopia, Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Somalia, Sudan, Tunisia, Uganda, Zambia and Zimbabwe.

Membership entails extending preferential tariffs to goods imported from member states subject to agreed conditions (the Rules of Origin). Goods originating in Kenya also enter the other member countries at preferential rates. This provides an incentive to import from or export to other members of the regional trading bloc.

Generalized System of Preferences (GSP)

Under the GSP, a wide range of Kenya’s manufactured products are entitled to preferential duty treatment in the US, Japan, Canada, New Zealand, Australia, Switzerland, Norway, Sweden, Finland, Austria, and other European countries. Almost all agricultural products are covered in addition to footwear, luggage, handbags, leather work gloves, leather apparel, and watches.

Bilateral Trade Agreements

Kenya also has bilateral trade agreements with several other countries such as Argentina, Bangladesh, Bulgaria, China, the Czech Republic, EU, India, Iran, Lesotho, Nigeria, Pakistan, Poland, Romania, the Republic of Korea, Thailand, UAE and Russia. Under these agreements, Kenya and its bilateral partners accord each other the MFN (Most Favoured Nation) treatment in all matters with respect to their mutual trade relations.

Additional agreements under negotiation are with Belarus, Czech Republic, Ethiopia, Eritrea, Iran, Kazakhstan, Mauritius, Mozambique, and South Africa (Kenya - Trade Agreements | Privacy Shield.).

African Continental Free Trade Area (AfCFTA)

Kenya was among nearly 50 African nations that signed a deal to create the AfCFTA in Kigali, Rwanda, on March 21, 2018, marking a historic milestone in the economic integration of the continent. The formation of a free trade area spanning Africa creates a single market.

As of May 2022, 54 countries were signatories, of which 43 (80%) had deposited their instruments of ratification. Eritrea is the only member of the AU that has not signed the agreement. Membership entails extending preferential tariffs to goods imported from member states subject to agreed conditions (the Rules of Origin). Goods originating in Kenya also enter the other member countries at preferential rates. This provides an incentive to import from or export to other members of the regional trading bloc.

African Growth and Opportunity Act (AGOA)

Kenya has been a leading beneficiary of AGOA preferences and was one of the first African countries to export under the program. Current market preferences for Kenya’s export to the USA are unilateral and non-reciprocal. Kenya qualifies for duty free access to the United States of America (USA) market under AGOA. Over 6000 products are eligible for export to the USA duty and quota free under AGOA. Until the AGOA expires in 2025, Kenya can enjoy duty free access to the USA targeting the products across these eligible tariff lines.