Implications of Import Tariff Elimination on Sugar Industry in Kenya

This study seeks to assess the implications of the partial expiry of the safeguard by focusing on the elimination of import tariff. This is accomplished through; analyzing its effects on the domestic price of sugar in Kenya; and determining the effects of price changes on producer and consumer surplus as well as foreign exchange availability to the Kenyan economy, using time series data (1972 -2006) collected in May/June 2007. Based on economic analysis, the elimination of import tariff is justifiable, but the political realities that characterize policy making in sugar industry dictates otherwise. Sugar is a highly "politicized" commodity and with the current legal and institutional framework skewed in favor of producers who have more weight in agricultural economy such as Kenya, the policy makers should pursue gradual reduction in import tariff, increase import quota and enhance transparency in its administration, besides facilitating effective public private partnerships aimed at increasing investments in the industry with a view to reducing the production cost of sugar in Kenya.