The impact of trade barriers On E. African Economies

by Christopher Kiiza
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NTBs refer to any obstacles to international trade that are not import or export duties. NTBs may take the form of import quotas, subsidies, customs delays, technical barriers, or other systems preventing or impeding trade.

These barriers create challenges for exporters and importers by increasing costs, delaying shipments, and limiting market access.

These trade barriers have put to test the implementation of the East African Common Market Protocol – an agreement signed by the member states of the East African Community (EAC) to establish a common market within the region.

A common market involves the elimination of all obstacles to intra-community trade in order to merge the national markets into a single market bringing about the conditions as close as possible to those of a genuine internal market.

Article 1 of the EAC Treaty defines a Common market as: “The Partner States’ markets integrated into a single market in which there is free movement of capital, labor, goods and services.”

Article 6 of the EAC common market protocol provides for free movement of goods within and between the Partner States of the EAC region. It allows intra-trade in goods locally produced within the region.

Additionally, Article 5(2)(a) of the EAC common market protocol provides for elimination of tariffs and equivalent measures; and elimination of Non-Tariff Barriers (NTBs) and technical barriers to trade.

The Partner States which include; Uganda, Kenya, Tanzania, Rwanda, Burundi, South Sudan, and DRC committed to remove tariffs, non-Tariff barriers and measures of equivalent effect.

Individual countries are undertaking initiatives to have this achieved.

For instance, Uganda is undertaking joint projects with DR Congo and implementing interventions to reduce transportation costs and improve the border infrastructure to facilitate trade and financial services across the region. 

“We are undertaking joint projects in the roads sector and electricity to Eastern DR Congo. Securing this market is good for Uganda in terms of exports and jobs. The Uganda Government and President [Felix] Tshisekedi of DR Congo, will continue to work together to improve the security situation in Eastern Congo,” said President Museveni in his address to the nation on January 25, 2024.

He noted that Uganda has gained competitiveness in recent years in a number of tradeable goods including animal products such as beef and milk, agricultural products especially coffee, tea, fish, sugar, fresh and processed food and industrial products such as cement, iron and steel products, light manufactured goods among others.

According to Uganda Bureau of Statistics (UBOS), the EAC, as a single trade bloc, remained the major destination of Uganda’s exports in the 12 months to October 2023, accounting for 43.5 percent of total exports followed by the Middle East (18.1 percent) and Asia (17.6 percent).

Within the EAC region, the top three destinations for Uganda’s exports in the same period were Kenya (31.5 percent), Democratic Republic of the Congo (24.6 percent) and South Sudan (23.3 percent).

In the 12 months to October 2023, Uganda traded at a surplus worth USD 716 million with EAC Partner States.

However, the trade balance with Kenya and Tanzania was a deficit, meaning Uganda imported more in terms of value from those countries, than exports to them. In the 12 months to October 2023, Uganda exported goods worth US$ 890 million to Kenya, US$ 696 million to DR Congo, US$ 659 million to South Sudan, US$ 298 million to Rwanda, US$ 213 million to Tanzania and US$ 72 million to Burundi.

In total Uganda’s exports to the EAC were worth US$ 2,828 million out of a total export of 6,498 million to all its trading partners.

However, Museveni said that Uganda continues to face non-tariff barriers to its exports, but added that the matter is being resolved through discussions with the leaders of the EAC and the Common Market of Eastern and Southern Africa (COMESA).

“If we did not have non-tariff barriers by some of our brothers and sisters, Uganda would be exporting much more, but this will be solved. I am talking to all of them, it will be solved,” he said.

This shows that despite the EAC Treaty achieving some success in fostering trade and economic integration in East Africa, various obstacles, such as partner states’ non-compliance to signed protocols pose significant barriers to its effective implementation.

The Chairperson of the EAC Sectoral Council on Trade, Industry, Finance and Investment (SCTIFI), William Anyoun Kuol Wol, however, says that there are commendable efforts to reduce NTBs within the EAC.

“To sustain this progress, it is imperative for all stakeholders, including the private sector, to play a pivotal role in holding the EAC accountable and in devising effective mechanisms to address and monitor the reduction of NTBs,” said Wol during the Ministerial Session of the 43rd EAC Sectoral Council on Trade, Industry, Finance and Investment (SCTIFI) held at EAC headquarters in Arusha Tanzania on Saturday, February 10, 2024.

Mr. Wol further highlighted the progress in implementing the Single Customs Territory and the impact of One Stop Border Posts on reducing transit costs, as notable achievements but pointed out that it was vital to engage in outreach programmes that educate East Africans about the integration process and its relevance in their lives.

Elimination of Non-tariff Barriers

Article 14 of the Protocol on the establishment of the East African Community Customs Union provides that, goods shall be accepted as eligible for the community tariff treatment if they originate in the Partner States.

Rule 4 of the East African Community Customs Union (Rules of Origin) Rules, 2015 (“EAC Rules of Origin”) provide for the origin criteria whereby goods are to be considered to have originated in the partner state if they are (a) wholly produced in the Partner State; or (b) produced in the Partner State incorporating materials which have not been wholly obtained there, provided that such materials have undergone sufficient working or processing in the Partner State.

By virtue of Article 14 of the Protocol on the Establishment of the East African Community Customs Union, Partner States committed to remove, with immediate effect, all the existing non-tariff barriers to the importation into their respective territories of goods originating in the other Partner States and, thereafter, not to impose any new non-tariff barriers.

The Customs Union Protocol defines non-tariff barriers as “laws, regulations, administrative and technical requirements other than tariffs imposed by a Partner State whose effect is to impede trade.”

Article 5 (2) (a) of the EAC common market protocol identifies the elimination of non‐tariff barriers to trade as one of the key obligations to facilitate the free movement of goods across the region.

The EAC Non-Tariff Barriers Monitoring Mechanism was developed as a joint initiative of the East African Business Council (EABC) and the East African Community Secretariat. Its objective is to facilitate the process of identifying, reporting and monitoring the elimination of current and future NTBs within the EAC Partner States, so as to consolidate the economic integration process under the EAC Customs Union.

Despite the establishment of the EAC Non-Tariff Barriers Monitoring Mechanism, the NTBs still exist, and the partner states have not fully implemented the common market protocol which provides for free movement of goods within and between the Partner States of the EAC region.

As a result, the full implementation of the Common Market protocol remains challenging. Subsequently, the free movement of persons and factors of production anticipated to spur regional economic growth remain restrained.

There are still a number of trade barriers that restrict the free movement of goods, services, and people within the EAC. These barriers include tariffs, non-tariff barriers, and regulatory differences.

For instance, Kenya has severally imposed a ban on Ugandan agricultural products that include; milk, eggs, chicken, sugar among others.

In July 2020, Kenya banned sugar imports, opting to solve challenges facing the country’s sugar industry. It banned all sugar imports and subsequently revoked all sugar import permits, some of which were held by Ugandan manufacturers and exporters.

Kenya would in January 2021 rescind the ban, and permit the importation of 90,000 tonnes of sugar from Uganda following clarification from Uganda, conveyed by the Uganda Manufacturers Association (UMA), affirming that Uganda had an adequate supply of sugar for both domestic and export markets and had not imported sugar from outside the Common Market for Eastern and Southern Africa (COMESA) region.

Before the ban was lifted, the two EAC allies agreed that the Kenyan Government would post trade facilitation officials in Uganda to gather information, intelligence, monitor that Ugandan sugar exports into Kenya were wholly obtained from Ugandan factories, and that Kenyan Government would send a bilateral sugar verification mission to Uganda.

Similarly, in May last year, more than 74 trucks registered in Uganda, transporting maize flour, were detained and restricted from traveling to Juba by the South Sudan authorities.

The South Sudanese government alleged that the trucks were carrying maize flour contaminated with aflatoxin, deemed unfit for human consumption.

Despite Uganda’s plea for the release of both trucks and drivers to return to Uganda for other business ventures, South Sudan turned a deaf ear until the matter was diplomatically escalated to the East African Community (EAC), and a meeting between the leaders of both countries was held, leading to the release of the cargo trucks.

EAC Elimination of NTBs Mobile App

The Ministerial Session of the 43rd EAC Sectoral Council on Trade, Industry, Finance and Investment (SCTIFI) held in Arusha, Tanzania last week, directed the East African Community Secretariat and Partner States to operationalise the EAC Elimination of Non-Tariff Barriers Mobile Application including sensitisation by April 30, 2024.

The EAC Elimination of NTBs Mobile Application was developed to ease the reporting, monitoring and elimination of NTBs in the Community.

The EAC Elimination of Non-Tariff Barriers (NTBs) Mobile Application was finalised and piloted during the National Monitoring Committee (NMCs) meetings in March 2023.

On the status of resolution of NTBs for the period July – November 2023, the Ministers were informed that nine (9) NTBs remain Outstanding while two (2) NTB were resolved. Cumulatively, 269 (Two Hundred and Sixty-Nine) NTBs were resolved cumulatively since 2007.

The meeting directed the Republic of Uganda and Republic of Kenya to hold a bilateral meeting to resolve NTB 000-864 on discriminatory excise duty on juice by 30th June, 2024 and report to the 45th SCTIFI.

The Sectoral Council also directed the Republic of Kenya and the United Republic of Tanzania to undertake a joint verification on motorcycle accessories transferred from Kenya to Tanzania by 30th June, 2024 and report to the 45th SCTIFI.

How Would EAC Trade Fare If There Were No Obstacles?

If there were no impediments hindering trade within the East African Community, commerce would experience significant growth and prosperity.

For instance, in the financial year 2021 / 2022, intra-trade reached US$ 8.7 billion, followed by a further increase to US$ 9.4 billion in the financial year 2022/2023.

“This demonstrated a robust trading environment among EAC Partner States, with a notable growth of approximately 7.98%,” said EAC Secretary General, Dr Peter Mathuki during the Ministerial Session of the 43rd EAC Sectoral Council on Trade, Industry, Finance and Investment (SCTIFI) held at EAC headquarters in Arusha Tanzania on Saturday, February 10, 2024.

Dr. Mathuki urged the Ministers to address issues relating to denial of preferential market access for EAC originating goods, non-ratification of key EAC instruments, finalisation of EAC Tariff Offers for Category B and C to give impetus to Intra-African trade, cross-border challenges affecting the free movement of goods and persons and resolution of existing NTBs.

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