The East African Community (EAC) is making strides in conforming to trading requirements under the African Continental Free Trade Area (AfCFTA), after regional Finance Ministers directed experts to convene mid next month and finalize the EAC tariff offer.
The EAC tariff offer currently stands at 85.86% against the AfCFTA modalities of 90%.
According to the EAC Secretariat, the EAC Sectoral Council on Trade, Industry, Finance and Investment (SCTIFI) on Wednesday, November 17, directed the EAC Secretariat to convene meetings with experts, by December 15, to finalize the EAC tariff offer.
Peter Mathuki, the EAC Secretary General, acknowledged that a lot needs to be done to kick off trading under the agreement.
"Regional Economic Communities are major building blocs in the realisation of the AfCFTA. EAC is keen on implementing policies, decisions, and directives, to ease trading under the agreement set to widen integration and increase Intra-Africa trade,” Mathuki said.
On Wednesday, the EAC Secretariat was directed to revise the region’s schedule of specific commitments on trade in services and review the trade in services offers made by state and non-state parties for the AfCFTA. It was also directed to undertake an assessment of the number of additional tariff lines that were moved by each partner state from the various categories.
Rwandan businessman Dennis Karera, who is East African Business Council (EABC) Vice Chairperson as well as the regional business community’s focal point on the AfCFTA, told The New Times that partner states cannot trade under the AfCFTA because the EAC tariff offer has not met the threshold of 90% as agreed under the AfCFTA arrangement.
"Also all partner sates must ratify the Agreement in order to benefit from the trading arrangement,” Karera said.
The AfCFTA, the largest in the world in terms of participating countries since the formation of the World Trade Organization, was brokered by the African Union (AU) and was signed in Kigali, Rwanda on March 21, 2018.
African countries began officially trading under the AfCFTA on January 1 in a pact connecting 1.3 billion people across Africa with a combined gross domestic product (GDP) valued at $3.4 trillion.
Under the agreement establishing the AfCFTA, tariffs on 90 per cent of tariff lines are expected to be eliminated over a period of five-years for developing countries while it is expected to take 10 years for least developed countries.
This gives the business community in the region a possibility of increasing economies of scale, or the cost advantages that enterprises obtain due to their scale of operation, through access to cheaper raw materials and intermediate inputs.
Divergent positions on maximum CET rate
The EABC has proposed that partner states adopt a 35 per cent maximum Common External Tariff (CET) rate, to spur industrialisation and boost intra-regional trade, a position shared by the Confederation of Tanzania Industries (CTI), Uganda Manufacturers Association (UMA) and Kenya Association of Manufacturers (KAM) who are pushing for a 35 per cent rate.
But the Rwanda Association of Manufacturers (RAM), the Association des Industrielles du Burundi (AIB) and the South Sudan Chamber of Commerce, Industry and Agriculture (SSCCIA) support a 30 per cent CET rate. The arguments for the latter’s support of 30 per cent as maximum tariff rate include: the low level of industrialization in their respective countries; need to protect the welfare of the people by charging low rates, and that tariff protection is not the only avenue for addressing competitiveness in EAC against products from Asian countries.
The implementation of the EAC CET began in January 2005 after the coming into force of the EAC Customs Union Protocol. It is now structured under three bands of 25 per cent for finished goods, 10 per cent for intermediate goods and zero percent for raw materials and capital goods.