Nhif Attachment Report

Kenya’s Trade Liberalization of the 1980s and 1990s:

Policies, Impacts, and Implications1

Geoffrey Gertz2

As one of the first countries to sign a Structural Adjustment Loan with the World Bank, Kenya

spent much of the 1980s and 1990s liberalizing its economy. This reform program included

significant changes in trade policy, as the country’s post-colonial import substitution policies were

replaced with an outward-looking, export promotion program. Though the country achieved

targeted successes in the horticulture and apparel industries, overall Kenya’s trade liberalization

failed to produce sustained growth, promote decent employment opportunities, or lessen the

incidence of poverty and inequality. As the country shapes its future trade policy, an effort to

coordinate trade with other development strategies, to balance between global and regional trade

integration, and to focus on job creation can help Kenya maximize the benefits from trade.

1

This is a background paper for the recent report The Impact of the Doha Round on Kenya published by the

Carnegie Endowment for International Peace, which can be downloaded at

http://www.carnegieendowment.org/files/impact_doha_kenya.pdf.

2

The author was a Junior Fellow in the Carnegie Endowment for International Peace’s Trade, Equity, and

Development Program from July 2007 to July 2008. He is currently Senior Research Assistant at the

Wolfensohn Center for Development, Brookings Institution.

I. Introduction

In 1980, Kenya became one of the first countries to sign a Structural Adjustment Loan

with the World Bank. Over the next two decades, reluctantly at first but with renewed commitment

from the mid-1980s on, Kenya replaced the import-substitution policies it had pursued since

independence with an open, liberalized trading regime. Tariffs were decreased, controls on

imports were loosened, and the government encouraged trade through a series of exportpromotion platforms.

Broadly speaking, Kenya’s trade liberalization...