TITLE:
Kenya-China Trade in Manufactured Goods: A Competitive or Complementary Relationship?
AUTHORS:
Nancy Muthoni Githaiga
KEYWORDS:
Kenya-China Trade, Manufactured Goods, Revealed Comparative Advantage, Nature of Trade, Competition
JOURNAL NAME:
Open Journal of Social Sciences,
Vol.9 No.3,
March
12,
2021
ABSTRACT: Trade between Kenya and China has increased in recent years, with a
significant increase in imports from China. This study’s objectives were to
examine the nature of trade between Kenya and China in manufactured goods,
analyze the Revealed Comparative Advantage
(R.C.A.) and make recommendations for
improving trade. This study was based on the Comparative Advantage Theory and used data from the United Nations Commodity Trade Statistics Database
(U.N. Comtrade) from 1984 to 2015, as this period had complete data. The
results suggest that the nature of trade in manufactured goods between Kenya
and China is characterized by high imports from China and very low exports from
Kenya-a large proportion of Kenya’s manufactured exports end up in countries with which it has a clear
trade framework. Moreover, Kenya lacks
a comparative advantage for manufactured goods, while China has a high
comparative advantage; therefore, Chinese exports complement Kenya’s import
needs. The research identified the lack of a comprehensive trade policy and strict rules of origin as serious challenges to
trade between Kenya and China. In addition, Kenya’s trade orientation in
the manufacturing sector has been reduced by inadequate investment, limited
value addition, and high labor costs. Resolving these obstacles is vital to
overcoming trade imbalance and boosting Kenya’s competitiveness, as the
potential for future growth in trade in manufactured goods from Kenya to China
is weak, based on existing economic specialization.
Kenya should focus on a comprehensive trade policy with China, support
more FDI in manufacturing, innovation, and technology, improve labor
productivity and infrastructure, enhance its global value chains, and create
new comparative advantages among others. This will improve the competitiveness
of its products and increase trade orientation on the Chinese market and globally.
The study concludes that Kenya-China trade in manufactured goods is complementary.
This conclusion can only be applied in genera since the study used aggregate
data. The findings confirm the Comparative Advantage theory that countries
export what they have in abundance and import goods that they cannot produce
effectively.