In his classic, The Wealth of Nations, Adam Smith stated that man is an animal that makes bargains; no other animal does this—no dog exchanges bones with another.
Trade is a selfish social and economic endeavour in which human beings seek to exchange what they can produce at a relatively cheaper cost for what they cannot produce at the same cost. In return, what is envisaged is a win—win scenario for both traders.
As countries explore trade agreements, they seek to exploit their competitive advantage, thus creating opportunities for their citizens, resulting in economic growth.
This is what should guide Kenya, and indeed, sub-Saharan African countries, in trade negotiations. That, or the countries will not tap into their economic opportunities.
A good example is in the failed avocado deal between Kenya and China. In this deal, only one in a hundred farmers met China’s stringent rules for avocado export. This agreement required farmers to install equipment to cool the fruit.
Further, the farmers and traders were to freeze the fruits to -30 degrees Celsius after peeling off the skin then freeze further to -18 degrees Celsius while in transit.
It is the very same China facing trade related disputes, from the United States and Europe, both of the latter mainly accusing it of dumping, pursuing protectionism, forced local content and technology theft.
But, what and where is the problem? How do we address it to ensure the country’s trade interests are protected?
From the Kenya-China avocado trade agreement, the mentioned standards can be interpreted to be barriers to trade. More specifically, regulatory, non-tariff based barriers to trade.
These can be defined as any “legal” barriers that try to restrict imports. These include safety and pollution standards set by the local government that a product should meet or exceed.
In this case, China used stringent product standards that it could argue are sanitary and phytosanitary measures.
All governments accept that some trade restrictions may be necessary to ensure food safety and animal and plant health protection.
However, governments are sometimes under pressure to go beyond what is needed for health protection and to use sanitary and phytosanitary restrictions to shield domestic producers from economic competition.
Before entering an agreement, the selfish thought of how it will benefit you should kick in as trade is hardly a charitable affair, but an opportunity for self-improvement.
Such a trade agreement is a clear example of institutional weakness. It is a disconnect between the government and the economy at large, thus explaining its failure to understand the standards and needs of the producers.
Principally, whether a country benefits from trade or not depends on how easily entrepreneurs can take advantage of new opportunities afforded by the trade agreement.
If the standards are too high and strict for the entrepreneurs, trade-led growth sought by countries such as Kenya cannot succeed. It is for the Kenyan government to approach trade negotiations with the intent of benefiting the producers.
A trade agreement such as that between Kenya and China on avocados lacks understanding of the true drivers of growth. What the Kenyan government perceives as the driver of trade and growth are large companies, whereas globally, as revealed by both the International Trade Centre and the World Trade Organization, it is micro, small and medium-sized enterprises that are the engines of global trade, accounting for 70 per cent of all trade globally.
Negotiating an agreement whose standards are attainable to MSMEs should therefore be an imperative.
Further, trade negotiations in Kenya are largely conducted by the government through its agencies. This approach is flawed as it lacks inclusivity and transparency as required by the Constitution.
If the government took its time to consult and involve stakeholders, trade relations would be information-based and their impact assessed based on the intended goals.
In the China avocado deal, for example, there was a lack of understanding of our country’s competitive advantage; otherwise, the government negotiators would have targeted the youth, women and rural dwellers who are not in a position to access such capital and information.
Further, it would inform the needs of both parties in the negotiations. For example, noting that China is highly in need of pork and soybeans, and that Chinese manufacturers are trying to shift their manufacturing away from areas affected by the trade war with the US, Kenya’s negotiators would have pushed to include other products or sectors.
Trade negotiations should not be an exclusive mandate of the government. Public participation as enshrined in the Constitution should be norm.
The inclusion of policy researchers, business societies and special interest groups such as the youth and women in agriculture will ensure that negotiations are alive to the circumstances within Kenya’s socio-economic setting.
Adoption of an information-led trade strategy is important as it ensures the negotiators are aware of our competitive advantages. An understanding of our competitive advantage means that we are aware of its exploitation.
Areas of weaknesses such as quality of products, market linkage and access ought to be ironed out at the negotiation stage. Expanding negotiations to include trade assistance, knowledge and skills exchange should also be priorities in order to improve Kenya’s produce quality and competitiveness abroad.
Overall, a trade policy linked to the national industrial policy is important. In the creation of such policies, coherence and national ownership that lead to equitable growth should be among the guiding principles.
In the end, we shall avoid the avocado trade scenario that exists among other developing and least developing countries.
Edwin Kimani is an advocate of the High Court of Kenya.