Non-tariff barriers remain a major threat to the business community in the EAC region and are a major bottleneck to efforts by the EAC to deepen regional trade, a new report has shown.
The report, titled, 'Trade Creation and Diversion Effects of the East African Community Regional Trade Agreement," was compiled by Isaac Shinyekwa and Lawrence Othieno of the Economic Policy Research Centre at Makerere University. It notes states that there have been other "serious impediments to the full and smooth implementation of the EAC Customs Union."
It says over 35 NTBs have been identified by the EAC Secretariat and these remain a major problem to trade and business development in the EAC. It says NTBs that are affecting intra-EAC trade include non-harmonized technical regulations, sanitary and phyto sanitary measures, customs procedures and documentation, and police road blocks.
"The region should use the identified NTBs to implement regulatory reforms and reduce trade restrictive measures. This will require legally binding mechanisms with sanctions for non-compliance and should be stronger than the existing NMCs," the study recommends in part.
It adds that the EAC Partner States should fully harmonise individual members' trade policies applied to non-partner states; and expedite the process of standardization of customs formalities and harmonise their various documentations and procedures.
Speaking at the dissemination of the study in Kampala recently, Shinyekwa outlined many advantages of trading with a neighbor. "If two countries' export products are similar, trade creation is more likely to occur since both countries can choose to import from the more efficient supplier," he said. On the other hand, he added, if they are different, preferential agreement could lead to trade diversion.
The report further calls on governments to deal with the poor infrastructural services - mainly physical infrastructure (roads and rail) - and the high costs of energy in the EAC, all of which have resulted into high costs of doing business in the region.
It adds that the overlapping membership of the EAC countries to various regional arrangements (SADC and COMESA) has also posed a challenge for the EAC due to different rules of origin requirements.
Shinyekwa stressed that EAC Partner States need to formulate and implement policy interventions to deepen regional trade by signing legally binding mechanisms with sanctions for non-compliance. He said these should be stronger than the existing National Monitoring Committees (NMCs).
He added that the EAC region should actualise the treaty and CU protocol provisions aimed at the promotion of exports through the creation of export promotion zones and harmonization of investment codes to attract regional investment projects.