Who are the Real Gainers of Trade Liberalization in Kenya's Maize Sector?

In Kenya, trade policy reforms in the cereals sector were initiated as a key componentof the economy-wide structural adjustment programmes (SAPs) during the mid 1980s.The SAPs were later strengthened and made irreversible by Kenya’s commitments atthe multilateral trade negotiations. However, the welfare effects of these trade policyreforms remain controversial. This paper to quantifies the market and welfare impactsof trade liberalization in Kenya’s maize sector using a partial equilibrium model withmarket interrelationships at the farm, wholesale and retail levels. The model iscalibrated to simulate a 24 percent reduction in maize import tariffs and a completeabolition of tariffs. The simulations results suggest that tariff reductions yield pricedecreases across the three market levels. The declining prices increase maizeconsumption but reduce domestic production. Consequently, consumer surplusincreases while producer surplus decreases. However, the gain in consumer surplus isnot sufficient to compensate the loss in producer surplus. Thus, the implementation ofthe multilateral agricultural trade agreement is likely to leave Kenya’s maize sectorworse off and cannot be considered as a viable policy based on the compensationprinciple.