Overlapping membership in several trade areas is impeding “free circulation of goods” within the East African Community-members states, a regional integration and trade expert has said.
Alfred Ombudo K’Ombudo, the Coordinator of the EAC Common Market Scorecard team, has told The News Times that belonging to other trade blocs outside the EAC makes members reluctant to remove internal borders to allow goods to move more freely.
According to K’Ombudo, a Common External Tariff (CET) is critical to ensure free circulation of goods through the application of equal customs duties. The EAC Customs Union protocol has a three-band structure of 0 per cent duty on raw materials, 10 per cent on intermediate goods and 25 per cent on for finished goods.
However, of the five partner states, Tanzania is a member of the SADC and subscribes to a different structure while Burundi, Kenya, Rwanda, and Uganda, are members of the Common Market for Eastern and Southern Africa (Comesa). On the other hand, Burundi belongs to the Economic Community of Central African States (ECCAS).
This, according to the expert is “perforation of the bloc’s CET,” drilling a hole in the regions tariff structure as member- states trade with other countries below the agreed tariffs.
“This makes EAC countries less willing to remove internal borders because they are not sure whether goods may have come from other blocs. This is a serious structural problem that is difficult to solve because the customs union legally recognises other blocs that members belong to,” K’Ombudo noted.
Burundi, Kenya, Rwanda and Uganda’s participation in Comesa and Tanzania’s membership to SADC is recognised by the EAC, but no exception is granted to Burundi for participating in the ECCAS.
Article 37 of the bloc’s Customs Union Protocol recognises other free trade obligations of partner states but it requires them to formulate a mechanism to guide relationships between the protocol and other free trade arrangements.
EAC Secretary General, Richard Sezibera, told The New Times during the launch of the Scorecard in Arusha, that there have been efforts to address the issue of overlapping membership.
“They [EAC leaders] have done two things to [try] addressing it: One is to harmonize the CET of the EAC and that of COMESA. This makes it easier for COMESA states to reduce the level of perforation,” he explained.
He added that in 2008, the heads of state decided to negotiate a free trade area between the EAC, COMESA and SADC as another way of fixing the problem.
Dr Catherine Masinde, the Head of Investment Climate, East and southern Africa at the International Finance Corporation (IFC), said: “If we were not to perforate the EAC would end up with a bigger volume of trade figures”.
She noted that since the launch of the EAC Customs Union, in 2005, the region has witnessed strong growth in intra-regional trade, rising from $1.6 billion to $3.8 billion between 2006 and 2010. Intra-EAC trade to total EAC trade grew from 7.5 per cent in 2005 to 11.5 per cent in 2011.
“This is significant growth but, I am told that this is, in fact, a drop in the ocean. That it is far from the potential of the market. I was given a figure, that $22.7 billion [in inter-regional trade] was actually lost to other regional blocs, from this region, [between 2005 and 2012] because of non-compliance with the common market protocol.”
The Scorecard, Masinde hopes, will solve various EAC compliance issues as well as energize reforms to spur the bloc’s development.