Anti-dumping law can play big role in eradicating hurdles

A cargo ship arrives at the port of Mombasa. FILE PHOTO | NMG
A cargo ship arrives at the port of Mombasa. FILE PHOTO | NMG 

In July, President Uhuru Kenyatta signed the Trade Remedies Act 2017, which came into force on August 16. Its purpose is to establish the Kenya Trade Remedies Agency to investigate and impose anti-dumping, countervailing and safeguard measures.

If the agency is successfully set up, Kenya shall join other African countries that have recently established investigating authorities, such as Madagascar and Tunisia.

To date, very few countries on the continent are users of trade remedies, whose purpose is to counter unfair trade (for anti-dumping and countervailing measures) or fair trade when conditions of imports cause or threaten to cause serious injury to the domestic industry (safeguard measures).

Without an investigating authority, Kenya was precluded by the rules of the World Trade Organisation (WTO) from imposing such measures. In the recent past, there has been a rapid increase in imports of agricultural, industrial and textile products into Kenya.

Closure of manufacturing plants in Kenya, such as Eveready East Africa, has been attributed to cheap imports, rendering domestically produced goods uncompetitive. This has led to pleas from manufacturers, fishers and farmers for the government to act. The Trade Remedies Act is therefore seen as a relief for many.

While this may be the case, there are concerns that the agency and the government at large would need to consider.

Kenya is one of the most protectionist members of the WTO by tariff bindings, as the current simple average bound tariff is 95.1 per cent, while the simple average of the applied duties in 2016 was 12.8 per cent.

Further, Kenya’s tariffs binding coverage is 14.8 per cent, leaving 85.2 per cent of the tariff lines as unbound.

Kenya could therefore, consistently with rules of the WTO, increase tariffs to respond to an influx of imports which cause harm to the domestic industry, without having to impose trade remedies measures.

However, the increased duties would have to apply to all countries on a Most-Favoured Nation basis.

Anti-dumping and countervailing measures would enable Kenya to impose measures targeted at countries which subsidise their producers or whose exporters dump their products in Kenya.

Investigation of dumping, subsidization and injury is a tedious, costly and technical process.

The agency could seek the assistance of entities such as the WTO and TradeMark East Africa for training, or the Advisory Centre on WTO Law and TradeLab for legal advice. In the past, countries have sought the assistance of their more experienced counterparts.

Domestic producers seeking the imposition of these measures would also require training and legal assistance, as the documentation required in investigations tends to be bulky and time consuming.

While the Act provides for public interest considerations in imposition of safeguard measures, it lacks equivalent provisions on anti-dumping and countervailing measures.

Kenya’s manufacturing industry is not well developed, and relies on imports for inputs or intermediate manufacturing products.

The same applies to the agricultural industry and its reliance on imported agricultural inputs. There are bound to be competing interests between sectors, with upstream producers requesting for protection from cheap imports, and downstream producers requiring access to cheap inputs, even if traded unfairly in the domestic market, as they aim to maximise their profit margins.

Saweria Mwangi is a lawyer in International Economic Law and Policy.