15 November 2017

East Africa: EAC Reviews Common External Tariff to Ease Doing Business

The East African Community secretariat is revising the Common External Tariffs (CET) to ease doing business in the region's private sector - the engine of growth and development.

The EAC Secretariat director of Trade, Mr Alhaj Rashid Kibowa and the Secretary General Liberat Mfumukeko while meeting a delegation of the regional private sector under their umbrella organisation (EABC) last week, said: "The region is revising the Common External Tariff that will be more effective and predictable."

Regional trade integration is a pillar of EAC partner states' trade policies.

The Customs Union, a first milestone in the regional integration process, was adopted in 2005, committing member states - originally Kenya, Uganda and Tanzania to the adoption of a CET.

Common External Tariff

The EAC-CET comprises a triple band structure for raw materials and capital goods (0 per cent), intermediate goods (10 per cent) and final goods (25 per cent), as well as a Sensitive Items list with exceptions to the three-band rule for specified commodities attracting high rates of duty (notably, all above 30 per cent.

Mr Mfumukeko said: "We are going to look at key priorities that can make a difference in the region and generate results for the integration process."

Mr Mfumukeko wants to create new businesses and trade opportunities among EAC in addition to improving the competitiveness of regional products and services outside the community.

EABC approves

Responding to the fresh pledge by EAC, Mr Jim Kabeho, the EABC chairman, said they are committed to providing a regional platform through which the business community can present their concerns to policy makers to improve the business environment.

"I pledge our commitment and support to the EAC Secretariat towards making our region conducive for investments and doing business at large," Mr Kabeho stated.

Mr Kabeho said the region needs a predictable business environment to build confidence for the private sector to invest.

"Agreeing on Common External Tariff will surely boost intra-EAC trade," Mr Kabeho said.

CET revision

Regional finance ministers are preparing for a review of the Common External Tariff which started in September 2017. This has become urgent to evaluate the impact of the tariff regime in relation to member states' development objectives, examples being export development, industrial competitiveness, employment and poverty reduction.

Mr Garth Frazer, the associate professor of Business Economics in the University of Toronto in his research on the EAC-CET revision for member countries mainly Uganda and Rwanda, said: "The smaller, less industrialised and landlocked countries in the region - like Rwanda and Uganda - will need to negotiate the most effective tariff regime from their perspective."

These countries' industries encounter higher transport costs for imported inputs and exports on one hand, and enjoy natural protection for domestic output markets on the other.

"Moreover, the misclassification of imported intermediate inputs as final goods may have impacted industrial competitiveness in these countries - more so than in Kenya and Tanzania, due to the additional markup for transportation costs of imported inputs," he added.

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