The impact of non-technical barriers of trade on import flows in Kenya

Abstract

Kenya Bureau of Standards (KEBS) in conjunction with Kenya Revenue Authority introduced Pre- Export Verification of Conformity (PVoC) programme as a pre-shipment inspection measure to ensure all goods imported or exported meet quality and safety standards requirements and traders are issued with a certificate of conformity (CoC). While PVoC was expected to be a trade facilitator rather than a barrier to trade, import volumes and values declined following its introduction. This study therefore sought to analyse the trend of import flows in pre- and post- PVoC periods and identify the factors underlying the observed trend. Two quasi-experimental techniques; regression discontinuity design and difference in differences approaches were used. The results shows that import values (CIF) declined by an average of Kshs. 1,838,895 while import taxes declined by an average of Kshs. 366,024 following the introduction of PVoC. The decline in imports not only affected products subjected to PVoC but also affected products exempted from PVoC. The introduction of PVoC coincided with a period of decline in credit to private sector, which began in Q4 of 2015 following a monetary policy contraction. If credit finance a substantial amount directly and indirectly through consumption of imports then the decline in credit might have partly contributed to the decline in imports. From the study, there is evidence of minimal movement of products across tariff bands following the introduction of PVoC.