| Date | May 2017 | Marks available | 4 | Reference code | 17M.2.HL.TZ0.01 |
| Level | Higher level | Paper | Paper 2 | Time zone | Time zone 0 |
| Command term | Explain | Question number | 01 | Adapted from | N/A |
Question
Relief as Kenya raises tariff for steel and iron imports
- Steel manufacturers in Kenya are set to benefit as the government moves to protect the local manufacturing industry from cheap steel and iron imports.
- In 2014 a government official announced an increased tariff on steel and iron imports. “Our steel mills are closing down due to unfair competition from cheaper imported iron and steel products,” he explained. “To protect and create more jobs in the iron and steel industries, tariffs on a wide range of imported iron and steel products will be increased from 0 % and 10 % to 25 %,” he said. The government official further stated that as well as protecting the local industries from cheaper imports, the protectionist measures would raise an additional 2.6 billion Kenyan shillings (Kenya’s currency) annually in government revenue and support economic growth.
- The potential of local industries to expand and create jobs through trade has been held back by a number of administrative barriers. The government remains focused on improving the business environment. Over the past six months, the government has made it easier to register a company and trade across borders. The time taken to move goods out of the main harbour has fallen sharply; non-tariff barriers such as roadblocks have also been reduced. Importers of refined industrial sugar and wheat are also pleased after the government scrapped requirements to pay unnecessary administrative charges.
- However, there is a belief among manufacturers that there is a need for more deregulation to lower their costs of production and in effect reduce the cost of doing business.
Kenya sees gross domestic product (GDP) growth picking up but current account a concern
- Good economic growth rates in neighbouring countries like Uganda help to boost Kenyan exports, particularly for agriculture that makes up nearly a quarter of the Kenyan economy. The government suggests that the main risks to growth are the slow performance of developed economies that are key export markets for Kenyan goods and services, and Kenya’s large and persistent current account deficit of over 10 % of gross domestic product (GDP) in the last three years. This is a major concern for sustained economic growth and the value of the Kenyan shilling.
[Sources: adapted from www.standardmedia.co.ke, 13 June 2014; www.af.reuters.com, 25 July 2014 and www.cnbcafrica.com, 25 November 2013]
Using an AD/AS diagram, explain how “good economic growth rates in neighbouring countries like Uganda” benefit Kenya’s economy (paragraph 5).
Markscheme
Level
0 The work does not meet a standard described by the descriptors below. [0]
1 There is a correct diagram or an accurate written response. [1–2]
For drawing a correctly labelled AD/AS diagram showing a shift of the AD curve to the right and an increase in the real GDP or for providing an explanation that economic growth in neighbouring countries is likely to lead to an increase in Kenyan exports, leading to an increase in AD and real GDP.
2 There is a correct diagram and an accurate written response. [3–4]
For drawing a correctly labelled AD/AS diagram showing a shift of the AD curve to the right and an increase in the real GDP and for providing an explanation that economic growth in neighbouring countries is likely to lead to an increase in Kenyan exports, leading to an increase in AD and real GDP.
Candidates who incorrectly label diagrams can receive a maximum of [3].
For AD/AS, the vertical axis may be price level or average price level. The horizontal axis may be output, real output, national output, real national output, national income, or GDP. A title is not necessary.
Examiners report
