Partner states to implement WTO trade deal

Saturday March 14 2015

The region needs to push for direct flights to increase its exports to America. PHOTO | FILE

The East African partner states have taken the final step towards implementing the World Trade Organisation Trade Facilitation Agreement, which is expected to widen the market for the region’s goods and services.

The five partner states are expected to ratify the WTO protocol before March 31 in order to show their commitment to the trade pact they recently signed with the US.

It is expected that once the protocol is implemented, it will help reduce the cost of doing business between the EAC and other economies by almost 14.5 per cent, adding to trade reforms already underway in the region.

READ: Africa to present unified stand on issues at WTO meeting in Kenya

James Kiiru, an external trade officer at Kenya’s Ministry of Foreign Affairs and International Trade, said final preparations are underway to ratify the protocol not only because of the deadline but also because Kenya will be hosting the WTO summit towards the end of the year.

“A well-functioning trade facilitation regime will allow easier and faster flow of goods across borders. The EAC will be viewed as progressive and ready to attract investments and also promote intra-regional trade,” said Mr Kiiru.


In the new deal, recently signed in the US, the two parties agreed to adopt the WTO Trade Facilitation Agreement signed in Bali in 2013, which commits countries to ensure that trade issues, including Customs, documentation procedures along their transport corridors and ports are completely abolished to reduce the cost of doing business.

“The US has committed to supporting the member states to implement the WTO agreement and to team up with other governments and the private sector on trade issues,” said Mr Kiiru.

In November last year, WTO members adopted a protocol to add the Trade Facilitation Agreement to the WTO deal opening the process up for individual WTO members to formally accept the agreement. So far, only China, Korea, Russia, Mauritius and the US have ratified the protocol.

The WTO agreement will enter into force only when two-thirds of WTO’s members have completed their domestic legal procedures and submitted their instruments of acceptance.

“The focus of the US-EAC trade agreement is on trade and investment,” said Mr Kiiru, adding that US companies like IBM, Fedex and DHL are keen on investing in the region while the ones already here plan to expand.

In the agreement, the US will provide access to its markets for East Africa’s agricultural produce and in return the region will cut tariffs on imported manufactured goods from the West.

Currently, the EAC products access quota-free markets in the US through the the Africa Growth and Opportunity Act (Agoa), which is expected to be renewed after the September expiry for another 15 years.

“We are however not utilising this opportunity as the region is only able to export up to five products to the US,” said Mr Kiiru, adding, “The challenge the partner states have is on poor product standards, which hinder them from selling more products in the US.”

The two parties will work together to develop and advance trade facilitation initiatives on sanitary and phytosanitary (SPS) measures to meet international standards and guidelines.

“No later than 18 months after the coming into force of this agreement, each EAC partner state shall establish an effective process to ensure that it notifies all proposed SPS measures to WTO,” read the EAC-US trade agreement.

The main exports from East Africa to the US are agricultural goods and textiles, while US exports have so far consisted of heavy machinery and aircraft.

Jane Ngige, the CEO of the Kenya Flower Council, said the main challenge for horticultural products in accessing the US market is lack of direct flights.

“We currently have no direct flights and as a result of routing through Holland it takes longer for our fresh produce to get to the US market,” said Ms Ngige, adding that the EAC partners need to also negotiate for direct flights.

Andrew Luzze, executive director of the East African Business Council (EABC), said that by adopting the WTO trade agreement, the region will build on the reforms being pursued by the partner states, which have resulted in substantial reductions in the time and cost of moving goods across borders within the EAC.

“The US has had bilateral partnerships with individual EAC states since 2013 but this agreement marks the first of its kind with the regional trading bloc,” said US trade representative Michael Froman.

Trade between the US and the EAC countries in 2014 increased by 52 per cent to $2.7 billion. Imports from the US totalled $2 billion; Exports totalled $743 million.

According to Eric Musau, a business analyst at Stanbic Investment Bank, the US wants to maintain its presence in Africa since China, India, and the EU have all increased their economic links and trade deals with African countries over the past decade.

“This will not have much impact on economic development in the region but will help with capacity building on the areas of transport and trade facilitation,” said Mr Musau.