NTBs and disputes blamed for the slowdown in trade among East African states - The East African

NTBs and disputes blamed for the slowdown in trade among East African states

Wednesday February 27 2019

confectionery

A trader arranges sweets at a factory in Industrial Area, Nairobi. Last year, Tanzania and Uganda imposed a 25 per cent import duty on Kenyan confectionery claiming Kenya had used zero-rated industrial sugar imports to produce them. PHOTO | PHOEBE OKALL | NMG 

JAMES ANYANZWA
By JAMES ANYANZWA
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East Africa’s intra-regional trade is falling by the day as trade disputes and non-tariff barriers persist, giving way to the creation of new trade alliances by frustrated partner states.

Official data shows that the volume of trade among the East African Community partner states is not high enough, to prevent trading partners such as China and India makin major inroads into the region.

According to the EAC Secretariat, the overall intra-regional trade has been meagre, accounting for a paltry 0.2 per cent of global trade in 2017, compared with 0.3 per cent in 2016.

According to the EAC Trade and Investment Report 2017, the region’s merchandise trade with the rest of the world recorded an 8.6 per cent growth to $46.9 billion in 2017, up from $43.1 billion in 2016.

Intra-EAC imports and exports accounted for only 7.7 per cent and 18.7 per cent of total imports and exports respectively, signalling that intra-regional trade constituted a small proportion of total EAC trade in 2017.

East Africa is heavily dependent on imports from the Far East and Europe, with petroleum products, machinery, electronics, motors and iron and steel and foodstuffs such as rice and wheat being key items.

“There is a risk of falling intra-EAC trade due to existing challenges to the trade environment at the regional and international levels,” the EAC Secretariat says.

Hurdles

The challenges facing intra-regional trade include persistent trade disputes, inadequate value addition to the agricultural sector, which has affected export prices, NTBs and a restrictive trade regime that limits the capacity of manufacturers to enter the regional market for products that are produced from raw materials that benefit from exemptions and remission schemes.

Other barriers are competition for the regional market from other producers and regional blocs that benefit from export subsidies from their respective governments.

The latest data compiled by the Central Bank of Kenya shows that China has become the country’s largest trading partner, with imports constituting 22 per cent of total imports during the 12 months to June 2018.

These imports largely comprised machinery and transport equipment related to the construction of the standard gauge railway.

During the period, Kenya’s imports from the European Union accounted for 12.4 per cent of total imports while the share of imports from African countries stood at 14 per cent.

On the other hand, Kenya’s exports to the EAC declined to 21.2 per cent in 2018 from 22.7 per cent previous year while exports to Common Market for Eastern and Southern African (Comesa) countries declined to 24.1 per cent from 25.8 per cent.

Kenya’s exports to the rest of the world — the UK, Netherland, US, Pakistan, United Arab Emirates, Germany, India and Afghanistan — increased to 64.1 per cent from 61.4 per cent. Exports to Uganda decreased to 9.9 per cent from 10.7 per cent while exports to Tanzania and Rwanda remained unchanged at 4.9 per cent and 2.9 per cent respectively.

Collectively, Kenya’s exports to Africa declined to 35.9 per cent, reflecting lower exports to the EAC particularly Uganda and the Comesa region mainly DRC.

Terms of reference

Last year, China applied for a free trade area with the EAC after the EAC’s Sectoral Council of Ministers of Trade, Industry, Finance and Investment adopted the terms of reference for a comprehensive cost-benefit analysis of the region’s trade with third parties.

EAC’s decision to sign free trade area agreements with third-party countries came amid falling intra-EAC trade and differences over the bloc’s trade agreement with the EU.

Among countries that have expressed interest negotiating an FTA with the EAC are China, Turkey, Singapore, the United States and the European Free Trade Area, which comprises Iceland, Liechtenstein, Norway and Switzerland.

Others are Brazil, India and the Gulf Co-operation Council made up of six Middle Eastern countries.

In 2017, Kenya was Uganda’s main intra-regional trading partner; the latter’s imports mainly included petroleum products, cement, iron and steel and pharmaceutical products.

Rwanda’s intra-regional imports were dominated by imports from Uganda and Kenya mainly composed of salt, fats, cereals, soap, iron and steel, plastics and paper.

Tanzania’s intra-EAC imports declined by 18.6 percent to $243.2 million largely due to reduced imports from Kenya.

Tanzania’s key imports from the EAC partners included pharmaceuticals products, soap, plastic items and other consumer goods.

Burundi’s main EAC trading partners was Tanzania and its imports mainly consisted of chemical fertilisers, cement and textile articles.

South Sudan’s imports from the EAC grew by 15 per cent to $462.5 million in 2017 and accounted for 80 per cent of total imports.

The main trading partners were Kenya and Uganda and imports mainly consisted of maize, sugar and manufactured commodities.

However, the EAC the region is deeply embroiled in trade disputes with each country working hard to restrict goods from other member countries citing various reasons.

Last year, Tanzania and Uganda imposed a 25 per cent import duty on Kenyan confectionery such as juices, ice cream, chocolate, sweets and chewing gums, claiming Kenya had used zero-rated industrial sugar imports to produce them.

On its part Kenya banned Tanzanian tour vans from accessing the Maasai Mara game reserve, arguing that Tanzania had also banned Kenyan operators from accessing Serengeti national park.

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