EDITORIAL: We all lose when barriers to trade are deployed

Tuesday August 29 2017

A wholesome harmonisation of trade and capital

A wholesome harmonisation of trade and capital laws will be the ultimate cure to fears in the East African Community. PHOTO | FILE 

By The EastAfrican
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The reading coming out of the East African Community Common Market scorecard 2016 is depressing.

At best, you find a checkered approach to the integration project with bright spots of forward thinking here and there that stand in sharp contrast to stubborn holdouts that almost make a mockery of regional protocols.

After a window of hope that saw the region roll back tariff and non-tariff barriers, the latter increased in Tanzania more than threefold — from seven to 24, closely followed by Kenya, where they doubled to 20.

On the other hand Kenya, Uganda and Tanzania all appear to have adopted an inward looking stance regarding their mining and energy sectors.

Almost invariably across the region, local content is taking precedence as governments try to give nationals a reasonable stake in their economies. What may have escaped the attention of the framers of these rules is how to define nationality. What is going to be the meaning of nationality in a supranational market?

Should we have a supranational regional identity comparable to what one sees in the European Union, or hold on to our national identities with all the conflict they are likely to find themselves in relative to the common market?

In this respect, Uganda appears to be leading the pack. The country is proposing amendments to its investment code that would treat EAC residents and citizens as domestic investors.

Countries craft laws that are supposed to create a degree of parity in the marketplace so that the more efficient producer makes hay while consumers get the best products at the most competitive price.

However, recent action suggests that East African governments have been hell-bent on protecting the status quo and vested interests than giving citizens the best deal.

That is what has been at play in the Kenya-Uganda sugar politics and more recently maize, as well as the Kenya-Tanzania gas and milk debacle.

The simple reality though is that in both instances, consumers have been denied cheaper options and balance of payments positions stressed since most of this regional trade is conducted in national currencies.

East Africa needs to learn from its history. These developments reflect the weak fundamentals on which regional integration is premised. Oversensitivity over national interest is a reflection of the inherent economic inefficiencies of many production units in the region.

The old community partly failed because of ill-informed duplication of production capacity across many industries just for the sake of job creation. It is true that units set up during that era or those whose technology is too inefficient to compete economically cannot survive in a liberalised regional market.

But they should be the exception rather than the norm and if they must be helped, they need to be supported by means other than barriers to trade.

A wholesome harmonisation of trade and capital laws, ironing out all the contradictions will be the ultimate cure to our fears.

Until an equilibrium in which everybody is a winner is found is established, a fully-fledged common market is a long way off.