Common external tariffs hurting Rwanda’s trade

Rwanda is losing millions of francs in potential earnings because of the common external tariff on international trade since it joined the East African Customs Union in July 2009.“With higher tariff rates imposed on sensitive items compared to the tariff rates before entering into Customs Union, Rwanda is experiencing higher costs to its economy,” the Minister of East African Community Affairs, Monique Mukaruliza said in an interview.Mukaruliza noted that higher production costs for use of these sensitive items fall on customers.The country’s taxes on international trade reduced to Rwf41.1 billion in the year 2009/2010 down from 63.9 billion in the same period 2008/2009, representing a reduction of 35 percent. Mukaruliza, however, noted that despite the revenue loss, the common external tariff reduces costs of trade, opens up a larger market for exporters and provide consumers with a wide range of cheaper products to choose from.Under the East African Customs Union, member states agreed to list as Sensitive Items (SI) and imposed a tariff on products from outside the region that could be produced locally in a bid to shield regional industries and promote exports.With the establishment of the common external tariff, Rwanda was deprived of tax revenue on products such as petroleum that was rated at 0 percent from the national rate of 30 percent.Experts argue that the decline in cost, Insurance and Freight-CIF value by 11.5 percent and elimination of freight charges in computation of duties on imports by air will affect the service industry, that the country is looking at to achieve its vision of becoming a middle income country.The Common External tariff 2012 review later in July is expected to come up with recommendations to review the implementation of maximum rate of 25 percent, sensitive products and applicable rates.Theodore Murenzi, a businessman says common external tariff affected many traders during the sugar crisis in the region after the region run short of sugar and had to import outside the region which led to increase in prices.The Minister of Trade and Industry, Francois Kanimba, noted that the government wish is to see Non Tariff barriers eliminated to give Rwanda an equal advantage with other countries in regional trade.

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Common external tariffs hurting Rwanda’s trade