10 December 2018

East African Trade Wars

Kampala, Uganda — East African Community economies might be growing at an unprecedented rate but experts say emerging nationalism and protectionism policies could hurt integration in the long run.

Uganda, Kenya and Tanzania are currently locked in several trade disputes and experts are worried that unless the emerging trends are checked, these disagreements could have negative implications in and beyond the regional bloc's borders.

In 2010, the five East African Community partner states signed a comprehensive Common Market Protocol, officially binding member states to open up their borders for free movement of goods, labour and capital across the region.

But, partner states have accused and counter-accused one another of flouting the rules spelt out in the protocol over the years.

The latest incident happened on Nov.19 as Ugandan dealers in agricultural produce ran out of patience and staged a demonstration at the southern border post of Mutukula citing unfair treatment by Tanzanian customs officials who for months have denied them opportunity to ferry and sell tonnes of beans and maize in Tanzania.

It was ironic that the demonstrations were taking place at Mutukula where just 12 months ago, President Yoweri Museveni and his Tanzanian counterpart, John Pombe Magufuli, launched a magnificent one stop border post complex-- one of 15 facilities built to ease trade across borders in the EAC region.

The demonstration only fed into what appears to be a hushed trade war brewing between Uganda and Tanzania, that regional observers say, is one of several disputes said to be eroding gains of the East African Community Common Market Protocol.

Disputes over sugar, carrots and chickens

In August, this year, Tanzania cracked the whip on sugar imports from Uganda, claiming the sugar had been sneaked into Uganda from Kenya.

The Tanzanian government imposed a 25% import duty on Ugandan made sugar, which the Ugandan government said was a violation of the Common Market Protocol and the EAC rules of origin.

At the same time, the cross-border trade wars between Kenya and Tanzania escalated when, Jerry Muro, a newly appointed Arumeru District Commissioner announced a blanket ban on Kenyan carrots in a bid to protect local producers from competition.

Muro reportedly said that he and all Tanzanian carrot farmers would stand along the Arusha-Moshi Highway to inspect all lorries to ensure middlemen do not import a single carrot from Kenya.

In the same month, Kenyans protested at the Namanga border post after milk traders were arrested and placed in custody by Tanzanian officials. And, in an apparent act of retaliation, Kenya announced on Sept.15 that it would stop importation of rice from Tanzania.

Prof. Adolph Mkendi, Tanzania's Permanent Secretary in the Ministry of Foreign Affairs and International Cooperation told The Citizen newspaper that the Kenyan government had stopped the importation of rice from Tanzania over claims of standards and packaging.

Kenya also imposed new tariffs on Tanzanian products like flour after the neighbouring country ignored a deal that granted Kenyan-made confectioneries unrestricted entry into its market.

The trade disputes between Tanzania and Kenya, which are the biggest economies in the region, have also spilt into livestock and the tourism sectors.

'Tourism sabotage'

In July, this year, Tanzania was forced to deny claims by Kenyan tour operators that it had deliberately started fires to delay the migration of wildebeest gathering to migrate from the Serengeti National Park to Kenya's Masaai Mara National Park--one of the most spectacular events in the global tourism calendar.

The sight of wildebeest crossing the Mara River that straddles the border of both countries has been described as a wonder of the world and both countries earn millions from tourists watching the annual spectacle. Apparently, the annual migration was expected in mid-June when the fire exploded.

"They (Tanzania are starting the fires intentionally--may be with the hope that the tourists will stay longer in Tanzania," Kenyan tour operator Frankras Karema told the BBC. Karema said the delayed crossing had disappointed tourists and could affect business next year.

But Tanzania said the fires are a common practice to allow fresh grass to grow. The Tanzanian tourism officials added that the longer rain season may also have led wildebeest to stay longer in the Serengeti.

In response, the Kenyan tour guides and drivers blocked their Tanzanian counterparts from entering the Masaai Mara Game Reserve, arguing that the Tanzanians had also stopped them from gaining access to the Serengeti National Park.

Meanwhile, in November, 2017, Kenyan authorities were left furious after Tanzanian police intercepted and burnt 6,400 one-day old chicks from Kenya at Namanga border post, on suspicion that they could spread bird flu.

Earlier in the year, Tanzanian authorities had also seized and auctioned 1,300 cattle belonging to Masaai herdsmen from Kenya. The cattle had strayed across the border to graze in a region where herdsmen rarely pay attention to territorial frontiers.

Rwanda-Burundi bickering

On a smaller scale, Burundi and Rwanda's political differences shifted gears and took on an economic angle when in July, 2016; the Burundian government banned the export of fruits and vegetables to Rwanda and closed the border between the two countries leaving hundreds of travellers stranded.

Burundi particularly blocked the entry of Rwandan and Ugandan registered buses into the country, accusing the transport companies of contravening the export ban.

Officials in Bujumbura said Burundi was retaliating against Kigali for destabilizing Burundi. Francois Kanimba, Rwanda's then Minister of Trade and Industry said Burundi's decision was a setback to regional integration although he downplayed the impact on the economy.

While regional integration has been the tune of the EAC heads of state and regional policymakers, the key question is whether this dream will ever be realized, going by the persisting trade wars among the member states.

A statement released in March, this year, by the East African Community Secretariat noted that the regional bloc administrators are working to enhance market access to regional and international markets through a comprehensive export promotion strategy.

But then, what explains the endless trade disputes even in the midst of a seemingly functional Common Market Protocol?

Kenneth Bagamuhunde, the EAC Director General, Customs and Trade said while the community has developed a number of key strategies and policies aimed at boosting trade, the biggest challenge remains how to implement them.

Africa Kizza, the programme officer, trade policy and negotiations at the Southern and Eastern Africa Trade Information and Negotiations Institute (SEATINI) told The Independent on Nov.29 that the current trade wars only go far to explain how the EAC integration process seems to be stalling as members appear not willing to open up.

A case in point, Kizza said, is when in 2016, the EAC issued a statement that it would punish member states that had not shown any effort to deal with non-tariff barriers.

Interestingly, just two months after that pronouncement, five new tariff barriers were re-introduced and added onto the already existing barriers by a member state. He, however, declined to reveal the state.

Gideon Badagawa, the executive director at the Private Sector Foundation-Uganda (PSFU) said he thinks EAC integration is ill-fated.

"When we sign protocols and agreements in Arusha we need to come back and abide by those protocols and agreements but if a country goes back and instead lays non-tariff barriers for another country--at the pretext of being a sovereign partner-- that is very unfortunate because then we cannot advance in integration."

"While the politicians seem to agree on how to move forward, the technocrats do not seem to do what is required unfortunately."

Bigger constraints

Badagawa told The Independent that following eight years of the protocol coming into force, one would have expected that free movement of goods across borders has been eased yet that is not the case.

"What we see now is a bigger constraint especially when you look at countries like Tanzania. Kenya is complaining about Tanzania, Rwanda is complaining about Tanzania and Uganda is complaining about Tanzania whether you look at sugar, rice or other goods," he said, "This is a big challenge."

Badagawa says it is the transport and tourism business that are at the moment most affected by some of the non-tariff barriers that have been laid by some of these partner countries.

"When you have a tourist truck that is going to be charged US$500 before it is allowed entry into Tanzania from Uganda, how are you going to promote tourism in the region with this attitude? The whole issue is about political commitment from the presidents."

Badagawa said the private sector feels the governments in the region are not "walking the talk."

"I cannot point to anyone in Kenya, Uganda or Tanzania being fired for frustrating regional integration efforts," he said.

Shrinking market space

But Fred Muhumuza, an economist based at Makerere University told The Independent on Nov.29 that the trade wars East Africans are witnessing is as a result of a shrinking market space.

"People are fighting for a small set of buyers for whatever product that they have," he said, "So each country is trying to leverage whatever they can and in this case each one is trying to put up border barriers."

Muhumuza said when the Common Market Protocol was passed, the assumption was that this market would grow and incomes would rise and that there would be enough space for people to buy and sell goods and services across the region.

"But that has not happened in reality, he said; "Now each country is complaining that the 'other people' are coming and taking away the economic space."

"So what we see is that the economics is becoming stronger than the politics because economic realities will always be realities which you can't wish away."

Enock Twinoburyo, a senior economist at the Kigali based SDG Centre for Africa added that the inward looking national policies of some countries, for instance the Buy Uganda, Build Uganda policy and the Made in Rwanda policy is a clear manifestation of how the member states contravene the EAC Common Market protocols.

Twinoburyo says member states could be struggling with their import bills and some non-tariff barriers are political and they are mounted to ensure that the trade gap is closed.

For example, trade between Tanzania and Uganda shows that Uganda is exporting more than Tanzania does here.

Ambassador Nathan Irumba who is the regional executive director of SEATINI told The Independent on Nov.30 that domestic politics are partly to blame for the current squabbles.

Irumba, who spent two decades in Geneva and New York negotiating trade agreements on behalf of Uganda, said despite the public rhetoric, East Africans are not yet psychologically tuned to regional integration.

"Whereas member states profess to the EAC regional market, they seem to be concerned more about competition between themselves," he said, "Instead of seeing each other as complementary, they see each other as rivals."

Irumba's sentiments were echoed at a regional summit in November when some senior officials in the region accused other member states of undermining cross-border trade, hence slowing down growth in the region.

"How can we implement the AfCFTA when politicians in some EAC countries are holding onto protectionism and nationalism? They think they will lose their power if they let go," said Matia Kasaija, the Ugandan Minister of Finance, Planning and Economic Development during the summit in Kigali on the implementation of the AfCFTA in East Africa.

Kasaija noted that although the EAC was performing well, it was not doing as expected, thanks to the persistence of non-tariff barriers in the region.

"Some states do not recognize the essence of trading with each other even when they keep talking about the need to do so," Kasaija is quoted as saying by The East African, "For example, Uganda has excess sugar and maize of about five million tonnes, but some of our EAC partners go and import sugar from outside the region. If this can be stemmed, real integration and the CFTA are possible."

This development comes as the economic experts warn that although the East African economies are growing at an unprecedented rate, the strong nationalist and protectionist stances could have ramifications for the implementation of the African Continental Free Trade Area (AfCFTA).

A recent report by the United Nations Economic Commission for Africa (UNECA) noted that rising trading tensions among East African Community member states could result in the decline of intra-regional trade, as the bloc now trades at just half of its potential.

Possible solutions

Going forward, Irumba said it is high time East Africans accepted the fact that competition is good for growth of their economies.

"If there is shortage in one country and the traders in another country meet the standards, they should be allowed to freely supply the goods."

"When we see Kenyan banks in the Ugandan market, we should not say the banks are taking the Ugandan market because we have not developed our local banks. But would we rather see Standard Bank (South Africa) here than a Kenyan bank?" He said there's also need to create a strong dispute resolution institution like it is in European Union (EU Court of Justice).

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