EAC: From Independence to Interdependence

The new customs union came into full effect this week with the goal of a single market hoping to be achieved by 2015. The long waits that goods have at borders are soon to be a thing of the past, the delays, the bribes, and the endless bureaucracy were the biggest obstacles to regional trade and development.

The new customs union came into full effect this week with the goal of a single market hoping to be achieved by 2015.

The long waits that goods have at borders are soon to be a thing of the past, the delays, the bribes, and the endless bureaucracy were the biggest obstacles to regional trade and development.

The other main obstacle still persists, the roads are still bad though they are being repaired. On a recent trip around East Africa I saw that the roads were being fixed but I wonder how long that will take.

It is a joyful occasion but we must work hard to make it benefit all. At the moment it is Kenyans who are most hopeful but the other countries are somewhat pessimistic.

The creation of a common market relies on the free movement of capital, goods and labour. We all want the free movement of capital and goods but it is with labour that East Africans have particular worry, the fear I heard repeated over and over was the fear of Kenyans taking the jobs of other East Africans.

It is true that Kenyans workers are better skilled and educated but not all want to move away just to take the jobs of Ugandans or Rwandans.

In the EU they had natural barriers to emigration such as language and culture but in the EAC English and Swahili make it easier to migrate.

Kenya lifted all restrictions on EAC labour in the hope of convincing the other EAC countries to do the same but most other EAC countries are skeptical and restricting free labour to certain sectors.

A customs union requires certain prerequisites such as a CET (common external tariff) duty free trade between members and common customs procedures. Kenya lobbied a rate of zero percent for raw materials, 10 percent for intermediate goods and 25 percent for finished goods, there were calls for a higher rate for finished goods.

At the moment the business community is more optimistic than the economists. Economists in the Overseas Development Institute predict that Kenya will benefit the most, initially from trade diversion as opposed to trade creation.

This confirms the fears of other EAC economies smaller economies compared to Kenya. It is important to engage in trade creation to benefit all, although Kenya’s manufacturing sector will benefit first.

In the long term there is no doubt that it will benefit all nations equally but other nations will have to find a way to make it work for themselves. In the EU, Germany was the first country to benefit from the common market but these benefits eventually rolled out to other nations.

The free movement of goods should mean that raw materials will move around quicker and speed up the manufacturing process and reduce costs. The Bujagali Falls Dam in Uganda should reduce the energy costs there and create an industrial hub.

Tanzania should be the main supplier of raw materials to the EAC and that will trigger the manufacturing boom. Rwanda can be an ICT and services hub as well as being a conduit for trade with DR Congo while Burundi will also find its niche. Everyone is a winner but some will win more than others.

Ends

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