Kenya & Ethiopia Discuss Removal of Trade Barriers

Kenya and Ethiopia have launched a new effort to remove trade barriers. A Kenyan Association of Manufacturers (KAM) delegation has held meetings with Ethiopian business community in Addis Ababa this week.

Ethiopia is hoping to increase its exports to Kenya. Kenya-Ethiopia bilateral trade data shows that Ethiopia is importing more from Kenya. In 2022, Ethiopia exported $26.6M to Kenya. The main products exported from Ethiopia to Kenya were Dried Legumes ($6.26M), Dried Vegetables ($5.01M), and Corn ($2.68M). During the last 27 years the exports of Ethiopia to Kenya have increased at an annualized rate of 23.7%, from $85.8k in 1995 to $26.6M in 2022.

The main products which were from Kenya to Ethiopia were Palm Oil ($12.4M), Metal Stoppers ($7.95M), and Yeast ($6.92M). During the last 27 years the exports of Kenya to Ethiopia have increased at an annualized rate of 4%, from $33M in 1995 to $95.1M in 2022.

Kenya expects Ethiopia to shift part of its exports/imports from Djibouti ports to its Lamu and Mombassa ports. Ethiopia has shown interest in using Kenyan Lamu port. Senior Ethiopian official delegations inspected Lamu port and road infrastructure from the port to the Ethiopia border this year. Reportedly Kenya is offering lower port use tariffs to Ethiopia in comparison with Ethiopia paying at Djibouti ports.

The Kenya Association of Manufacturers (KAM), which held meetings in Addis Ababa this week, stressed the need to remove trade barriers to boost cross-border trade between Kenya and Ethiopia. It mentioned three key challenges which are hampering trade including currency preferences, axle load limits and visa requirements for drivers at the Moyale border with Ethiopia.

Both countries seek to cut on dollar dominance. Currently, Ethiopian Birr is stronger than the Kenyan currency against dollar, trading at 57.53 as compared to Kenya’s 132.82 Kenyan Shilling. If the traders choose to trade on Ethiopian currency, it means that a depreciation of the currency relative to the dollar would signify an annual increase in the prices received for exports.

The second issue is about visa requirements for the drivers which hinders the trade flow at the border. Axle load limits cap the weight of a legal load limit for the vehicles crossing the border, which is another obstacle.

There is a need to overcome all these challenges being encountered in Kenya-Ethiopia Trade and to single out the policy issues that can be fixed through legislation.

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