East Africa needs to clear barriers slowing free trade
Saturday September 11 2021
On the streets of Kampala, consumers are mildly aware of the dispute but are opposed to the cheap Kenyan potatoes that are helping moderate the price of potatoes in their own market. PHOTO | FILE | NMG
Kampala has been flooded by potatoes from Kenya this season, bringing relief to consumers. A 90kg bag of Kenyan potatoes is retailing at just under $20, compared with almost double the price for varieties coming from southwestern Uganda.
The potato flood comes as Kenya and Uganda once again spar over market access for their manufacturers. Still running a deficit, Kenya reportedly slashed the export quota for sugar originating from Uganda, kicking up a storm. On the streets of Kampala, consumers are mildly aware of the dispute but are opposed to the cheap Kenyan potatoes that are helping moderate the price of potatoes in their own market. Across the other pole, on the Kenya-Tanzania border, the volumes of maize coming in from Tanzania have helped stabilise consumer prices for the staple grain in Kenya.
What is happening in the regional potato and maize market should be instructive for policy makers in East Africa’s six capitals. With much ceremony and self-adulation, they have in the past signed to protocols supposed to open up trade and business in East Africa. Yet faced with temporary challenges, they are quick to revert to default mode, introducing measures that obstruct free trade.
Trade barriers are a form of invisible tax which makes trade cumbersome, inefficient and expensive. At the end of the day economies perform below potential because enterprise is stifled and demand suppressed through exorbitant prices. Policy makers will feel this through dwindling coffers and be tempted to respond with yet more taxes and barriers. As the EAC trading bloc expands west to the DR Congo, such measures will only become more rampant, driven by the fear of revenue leakages. Far from being a facilitator of smoother trade flows, initiatives such as electronic cargo tracking, can actually become impediments if they are not trusted and allowed to work.
This preoccupation with external taxes, is in itself an admission to the inefficiencies in the domestic tax systems. If there was a way all goods in a given tax jurisdiction, could be effectively subjected to all applicable internal taxes, external tariffs would be of less significance. Failure to think beyond these traditional structures has created a vicious cycle of one step forward, one step back in regional integration. Such a culture also deems prospects for the African Continental Free Trade Area, whose success is in large measure, is going to depend on how well the regional economic blocks work.
To break the cycle, policy makers need to moderate their aversion to risk and pick the courage to experiment with what might be. They also need to embrace the notion of shared prosperity. Trading partners should appreciate that trading partners will only be of value if they have the purchasing power to facilitate their consumption.
It might sound elementary or even hypothetical, but for the region or even continent to actualise shared prosperity, wealth needs to circulate. Trade creates the whirlpools that equitably propel wealth from consumers in need of products to the producers of those goods. That intricate motion would also need people and factors of production to enjoy security, the freedom of movement and establishment anywhere within the trading block. Removing the teething problems and obstacles to the realisation of that vision, should be the focus of policy.