Intra-EAC trade up 60pc in decade of Common Market
Tuesday July 14 2020
Busia one-stop border crossing between Kenya and Uganda. The Common Market Protocol has boosted trade in the region by easing cross-border movement of goods and people. FILE PHOTO | NMG
Trade between East African Community member states has increased by 60.75 percent from $3.72 billion when the Common Market Protocol was launched in 2010 to $5.98 billion in 2018, latest trade data shows.
The Common Market Protocol has boosted trade in the region by easing cross-border movement of goods and people, though numerous non-tariff barriers (NTBs) continue to hold back the region’s potential.
The volume of trade among EAC member states increased rapidly between the years 2010 to 2013, but dropped for three consecutive years from 2014 to 2016.
The EAC Trade and Investment Report shows that the value of intra-regional trade increased 9.4 percent to $5.98 billion in 2018 from $5.46 billion in 2017.
This growth was partly attributable to EAC member countries’ increased preference to trading with each other to offset falling demand for the region’s products in European and US markets.
According to the report, all EAC member states save for Burundi recorded growth in trade with their regional counterparts.
The Covid-19 pandemic has heavily impacted regional trade, which has seen a rise in NTBs, with most manufacturers now shifting attention to local markets, the East African Business Council said.
Unforeseen hiccup
The Council’s Executive Director, Peter Mathuki, told The EastAfrican that the volume of intra-regional trade is expected to decline by close to 50 percent this year.
“The Covid-19 pandemic has wrought havoc on intra-EAC trade, leaving most businesses in the private sector badly affected. Because this pandemic was not foreseen, people have changed their focus to survival while some businesses have shut down,” he said.
In 2018 Kenya’s trade with EAC partner states increased by 4.7 percent to $1.95 billion from $1.86 billion in 2017, mainly on account of increased business with Uganda, Tanzania, and Rwanda.
Kigali’s total trade with EAC increased by 13.4 percent to $638.8 million from $563.2 million in the same period.
Tanzania’s trade with other EAC partner states increased by 14.6 percent to $811.3 million, from $707.7 million, while Uganda jumped by 21.2 percent to $2.05 billion from $1.69 billion.
EAC’s exports included products such as maize, sugar, rice, coffee, and tea as well as manufactured goods.
In the first three months (January-March 2020) Kenya’s exports to neighbouring EAC countries grew by 30 percent to Ksh42.9 billion ($429 million) from Ksh32.92 billion ($329.2 million) in the same period last year while total imports declined by 10 percent to Ksh12.04 billion ($120.4 million) from Ksh13.35 billion ($133.5 million) during the same period, Kenya National Bureau of Statistics data shows.
Uganda remained the leading export destination for Kenyan goods contributing 28.4 percent of the total export earnings from Africa during the period.
On the other hand, Kenya’s export earnings from Rwanda, Uganda, Sudan, and South Sudan jointly accounted for 55 percent of total exports to Africa during the period.
The EAC Customs Union, the first pillar of integration that came into effect in 2005, provided for a free trade area where partner states reduce or eliminate taxes on goods originating from within the bloc and impose common tariff on goods imported from other countries.
Goods moving freely within the EAC must, however, comply with the Rules of Origin.
Rules of Origin
Under the Customs Union Protocol, members also committed to remove with immediate effect all existing NTBs to trade and, thereafter, not to impose new ones.
However, East Africa’s intra-regional trade has been hampered by persistent trade disputes among partner states over Rules of Origin, safety and quality of products traded in the region.
In 2018, Tanzania imposed a 25 percent import duty on Kenyan confectionery such as juices, ice cream, chocolate, sweets and chewing gum, claiming Kenya had used zero-rated industrial sugar imports to produce them.
Kenya and Tanzania also resolved 75 percent of the NTBs that had affected trade between them and sparked persistent disputes.
In December last year, Kenya and Uganda agreed on the tax treatment of pharmaceuticals, juices, and milk products that had threatened to push the two countries into a trade stalemate.
Uganda agreed to abolish the 13 percent exercise duty on Kenyan juice and remove 12 percent verification fees on Kenyan pharmaceuticals by June 30, 2020.
Uganda had introduced the discriminative excise duty on Kenyan juices and verification fees on pharmaceuticals.