* Competitiveness edge off locally-produced goods, services eroded
* Lack of a single entry customs collection
* ‘Thinking East African’ has to become real
* Deliberate protectionism, administrative non-tariff barriers
* Unnecessary bureaucracy
MNAKU MBANI
THE five member countries of the East African Community (EAC) HAVE formally
adopted a Common External Tariff (CET) regime.
There still are some formidable challenges to overcome before such an ideal
situation becomes a reality on the ground.
For example, Business Times has established that poor infrastructure,
non-tariff barriers (NTBs) and protectionism tendencies in the member states
constitute major hurdles in the way to fully realising the EAC goals.
In that regard, stakeholders in regional integration – including especially
members of the business communities within EAC – are of the general view
that much still remains to be done in effectively addressing all the
challenges.
People must be sensitized to the importance of ‘thinking East African’ if
the spirit of the East African Community is to be enriched, nurtured and
sustained.
Analysts say the route of protectionism and administrative non-tariff
barriers is being deliberately taken in efforts to protect the interests of
the states involved. But, then, this flies in the face of the EA Customs
Union Protocol!
Policy- and decision-makers in the region have also been criticised for
being slow in adopting laid-down EAC policies in letter and in spirit.
This, members of the business community in Tanzania who spoke to Business
Times say, has led to increased costs – including the cost of doing
business. And, at the end of the day, it erodes the competitiveness edge off
locally-produced goods and services at the regional and international
marketplace.
“Non-Tariff Barriers have been the main challenge on the road to a Common
External Tariff,” says Adrian Njau, a trade economist with the East African
Business Council.
Speaking to Business Times in Dar es Salaam during a two-day seminar on ‘EAC
Common External Tariff and Rules of Origin’ early this week, Njau said this
might be caused by lack of awareness among the business communities in the
region regarding the Customs Union Protocol.
Most of the barriers are intentionally imposed by government officials.
Sometimes, however, they come into being because some businesspersons do
not fully understand the procedures and rules of doing business under the
new regime.
Other non-tariff barriers towards a Common External Tariff, Njau said, are
overlapping and/or multiple memberships in other trading blocs by some of
the EAC states, as well as the “lack of a single entry customs collection.”
Again, smaller economies like Tanzania harbour the fear that adoption of a
comprehensive EAC Customs Union could result in their economies being
swallowed up by the regional economic giant Kenya – thereby reducing their
ability to collect taxes and adequately provide social services to their
nationals.
Responding, to such fears, Njau maintained that the adoption of the proposed
single external tariff regime would nor bring about any economic distortion
among member states; rather, this would strengthen their economies!
“If we open up our borders, we would have the assurance of attracting
external taxes,” the man said during the seminar, which involved
participants from both the private and public sectors.
According to Njau, the EAC Secretariat has already put in place a Non-Tariff
Barriers monitoring mechanism which would also deal with cases that tend to
distort the intended effects of the envisaged Common Market.
Adoption of the envisaged Common External Tariff would actually increase the
volume of trade, as well as boost other sources of revenue including
value-added tax and excise duty.
Ally Alexander, the customs officer responsible for Tariff Valuation at the
EAC Directorate of Customs & Trade, believes that the adoption of a single
external tariff regime would help to promote production efficiency and
regional intra-trade.
“No country would be allowed to apply any tariff without the consent of
other regional member states,” he says.
A study on Common External Tariffs that was conducted by the East African
Business Council during the five-year grace period (2005-09) towards a
full-fledged EAC Customs Union shows that Customs revenues of the Community
member states have increased in direct proportion to increased volumes of
trade within the region.
The Customs Union as it is today was inaugurated in early 2005 by the
original three EAC countries of Kenya, Uganda and Tanzania. It has since
then exhibited tangible dividends with significant trade growth and volumes
among the member countries.
Charles Mbogori, the EABC executive director, believes that EAC member
countries should all take advantage of the burgeoning regional integration.
The three founder members have seen their total growth of intra-EAC trade
flows increase by over 40 per cent from 2004 to date.
In 2007, records show, total intra-EAC trade increased by 22 per cent –
reaching the highest value of US$1,973 million on account of increased
intra-EAC imports and exports – compared to the previous year.
The rise in intra-EAC total trade could be attributed to considerable
increases in exports and imports for Kenya and Uganda. Tanzania and Uganda
accounted for 48.4 per cent of all the intra-trade.
Tanzania is said to benefit more from the arrangements. In the event, the
country has boosted its trade balance with Kenya from years of deficits in
the distant past to surpluses over the last five years.
The joining of EAC by Rwanda and Burundi further enlarged the CU’s market
size with a combined population of 120 million and a total GDP of around
US$60 billion.
It has been suggested in certain quarters that Tanzania and other EAC
members should terminate their memberships in other trading blocs so as to
smoothen the adoption of EAC regional policies.
In what is described as ‘dual membership confusion,’ Tanzania is also a
member of the Southern Africa Development Community (SADC) while the other
four EAC members are also members of the Common Market of Eastern and
Southern Africa (COMESA).
***bUSINESS tIMES