No TFTA agreement yet on dairy, vehicle taxes
Monday July 02 2018
Rwandan President Paul Kagame tours the assembly line after the launch of the Volkswagen integrated mobility facility on June 27 at Kigali’s Special Economic Zone. PHOTO | CYRIL NDEGEYA | NATION
East African Community member countries and the Southern African Customs Union (SACU) have failed to reach an agreement on the tax on sensitive items such as motor vehicles and dairy products under the Tripartite Free Trade Area (TFTA) framework. The negotiations have now been pushed to December.
SACU comprises five countries — South Africa, Botswana, Lesotho, Namibia and Swaziland.
The member countries could not reach a consensus at a tripartite Council of Ministers meeting in Cape Town on June 18, and suspended negotiations to allow more time for consultation with stakeholders.
“We have agreed largely to immediately liberalise 66-67 per cent of the items, and to move to about 90 per cent in five years. However, there is a list of sensitive items such as motor vehicles and dairy on which we agreed to finalise negotiations by early December, because we need to consult our private sectors,” Principal Secretary in Kenya’s State Department of Trade Chris Kiptoo told The EastAfrican.
“By December we hope to reach a deal on sensitive goods,” he said.
The EAC is reluctant to open up its motor vehicles market to imports from SACU, to protect the Kenyan and Rwandan assembly plants, while SACU, which is largely controlled by South Africa, wants to export vehicles to the EAC.
25pc CET
As a result, the EAC wants to maintain the 25 per cent common external tariff (CET) levied on motor vehicles imported into EAC from SACU: SACU wants EAC to waive the CET .
The EAC is negotiating the TFTA as a bloc while Comesa and SADC are pushing for individual countries’ agendas.
Under the TFTA agreement, partner states are required to subject sensitive products to the same tax treatment as non-sensitive items to ensure fair competition.
Sensitive items that had been granted protection until 2017 included maize, wheat, sugar, cement, textiles, rice, milk and cream and second-hand clothes.
Although more ground has been covered in terms of resolving contentious issues on rules of origin and tariff liberalisation, lack of an agreement on the tax treatment of sensitive items is further delaying the implementation of the TFTA agreement, which has already been deferred for three years.
The member countries of the three regional economic blocs (EAC, Comesa and SADC, 27 in total) expect to further grow their planned market of more than 600 million people and boost economic growth in the region.
The 27 member countries have agreed on the rules of origin for more than 50 per cent of specified products while the Annexes containing the Rules of Origin and Guidelines on Trade Remedies have been completed and adopted by the tripartite ministers.
The TFTA is expected to support and fast-track the implementation of the larger African Continental Free Trade Area (AfCFTA) initiative, which was launched in Kigali in March.