Factors Influencing Bilateral Trade Between Kenya and Her Trading Partners

Abstract

African countries continue to be the major destination of Kenya's exports followed by the European Union. It has however, been observed that some of the traditional trade partners of Kenya seem to be taken over by newcomers. This study sought to determine the factors that influence bilateral trade flows between Kenya and her trading partners. The study was designed as a descriptive survey. The population was Kenya‟s trading partners and the subsequent sample was therefore nine countries. Primary and secondary data was collected. Secondary was collected on trade and economy from the Kenya National Bureau of Statistics and the World Bank Database while colony, culture and distance were searched from the internet. The model employed was the standard gravity model. Primary data was collected using questionnaires and interviews from key informants. Data was analysed using descriptive, correlation, and regression analyses. The study found that consistent with literature, distance was negatively related with trade while colony, culture, and economy were positively related with trade. The model explained 41% of the variance in trade. However, the model was not significant in explaining the relationships and none of the determinants tested was significant at 5% level. The study concluded that standard gravity equation variables (colony, distance, border, culture, and economy) were not significant determinants of bilateral trade between Kenya and her trading partners. The study recommended that the Ministry of Trade should focus on institutional factors rather than those studied here inorder to improve the bilateral trade as the factors studied here were not major determinants of trade.