11 December 2017

East Africa: Disputes Are Eroding Intra-EAC Trade Gains

East Africa's intra-regional trade has declined for the second year in a row, due to the failure by partner states to agree on trade liberalisation and integration. These hitches are eroding the benefits of Customs Union and Common Market.

The East African Community Secretariat, in a draft trade and investment report, says that the total value of intra-EAC trade fell by 14.6 per cent to $4.4 billion in 2016, from $5.1 billion in 2015.

The decline, according to the report dated August 2017, was mainly due to a 33 per cent drop in total trade for Tanzania to $851.3 million, from $1.3 billion in 2015. The total trade for Kenya and Uganda fell by 10.1 per cent and 11.4 per cent respectively.

According to the report, intra-regional trade constitutes only 9.4 per cent of the total trade of the bloc despite the implementation of the Single Customs Territory that provides for removal of tariffs and other barriers to trade among the partner states.

The report cites a trading regime that restricts the export of certain commodities to partner states, lack of product diversification, and non-tariff barriers as hurdles to intra-regional trade.

Kenya, however, continued to dominate intra-EAC trade, accounting for 34.8 per cent while Uganda and Tanzania accounted for 28.3 per cent and 19.4 per cent respectively.

Common external tariff

The Secretariat recommends a review of the common external tariff (CET) and the exemption regimes to allow goods produced in the region to enter the bloc's market with few restrictions.

"The region should consider reviewing restrictive policies on the sale of goods produced under the exemptions and remission schemes as well as restrictions arising from application of the Rules of Origin," the report says.

"Fully fledged Customs integration will also eliminate non-tariff barriers and increase movement of goods." Tanzania's declining contribution is attributed to falling export volumes of rice and dairy products to Kenya due to restrictions. Kenya and Tanzania have been involved in a trade dispute that has seen them trade import bans on some commodities.

Tanzania has banned cigarettes and dairy products from Kenya while Nairobi has banned wheat flour and liquefied petroleum gas from Tanzania.

EAC trade has continued to be dominated by agricultural commodities: Coffee, tea, tobacco, cotton, rice, maize and wheat flour.

Manufactured goods such as cement, petroleum, textiles, sugar, confectionery, beer, salt, fats and oils, steel products, paper, plastics and pharmaceuticals were also traded across the region.

According to the report, the decline in intra-EAC trade for Uganda was due to a fall in the import bill for petroleum products coupled with a reduction in imports of manufactured goods like cement, pharmaceuticals, iron and steel and sugar arising from increased industrial production.

Burundi and Rwanda recorded an increase in intra-EAC trade during the period under review, with Bujumbura reporting a 2.2 per cent increase to $169.5 million, from $165.9 million in 2015.

Rwanda's intra-EAC trade increased by 0.2 per cent to $596.4 million, from $593 million in 2015.

EAC trade declines, countries cast net wider to other blocs

EAC scorecard highlights barriers to trade

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