The COVID-19 crisis has had a profound impact on the global economy, and obviously East Africa has not been spared from the fall-out. Thus from the perspective of trade, volume of intra-regional trade is expected to decline by close to 50 percent this year.
According to the research by TradeMark East Africa, because of the time lags in international trade due to logistical constraints, its impact will be staggered over many months, latest trade data shows.
The development comes after trade between East African Community member states had increased by 60.75 percent from $3.72 billion when the Common Market Protocol was launched in 2010 to $5.98 billion in 2018, the research indicated.
"The Common Market Protocol has boosted trade in the region by easing cross-border movement of goods and people, although numerous non-tariff barriers (NTBs) continue to hold back the region’s potential,” the research reads in part.
The EAC Trade and Investment Report shows that the value of intra-regional trade increased to $5.98 billion in 2018 from $5.46 billion in 2017.
This growth according to the report is 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.
Unexpected Impact of Covid-19 on intra-regional trade
Due to the current coronavirus pandemic however, regional trade has been heavily impacted leading to a rise in NTBs, with manufacturers opting to local markets.
For instance, the report highlights that directional trade statistics from Kenya National Bureau of Statistics (KNBS) confirm a sharp decline in both imports and re-exports with a dramatic fall in Kenyan exports to fellow EAC member states including Rwanda.
However, "Considering Kenya’s leading role in intra-EAC trade, these trends are worrisome.”
On the other hand, EAC member states, "especially the landlocked countries, may not be so lucky in terms of the overall trade impact: The figures for re-exports and intraregional exports suggest a worrying scale of disruption to intra-regional commerce”
What are the recommended policies?
According to the research, in order to facilitate the recovery of struggling economies, a coordinated EAC-wide approach is required to ensure trade continues to flow and vulnerable countries are cushioned from the fallout.
According to the report, all EAC member states save for Burundi recorded growth in trade with their regional counterparts.
Besides, in the face of disruptions to traditional transport corridors, there is a need to be flexible in the utilization of different modes of transport.
For example, where as in May 2019, 18 percent of Rwandan exports were shipped by air, by May 2020, it had increased to 73 percent, according to figures from National Institute of Statistics of Rwanda (NISR).
"Air transport is, of course, more costly and as a long-term measure it may not be viable for all traded goods. However, as a short-term measure, it is a way to avoid the collapse of both export revenues and essential imports.” The report reads in part.
Against this backdrop, therefore, "The urgency of implementing the African Continental Free Trade Agreement (AfCFTA) is even more palpable. Its rapid implementation, accompanied by additional trade facilitation measures, could significantly mitigate COVID-19's negative impact on the continent’s economy.”
In 2018, Rwanda’s total trade with EAC increased by 13.4 percent to $638.8 million from $563.2 million in 2017, While Kenya’s trade with EAC partner states increased by 4.7 percent to $1.95 billion from $1.86 billion 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