EAC bloc has come a long way since birth of Customs Union

When the EAC partner states agreed to establish a Customs Union in 2005, they also agreed that its implementation will be progressive.

This has come to pass and significant progress has been made in the implementation of the Customs Union protocol. This has resulted in huge increases in the volume of intra-EAC trade since 2005.

The elimination of internal tariffs among partner states was to be achieved in five years. A common external tariff (CET) with a minimum rate of zero per cent for raw materials and capital goods, 10 per cent for intermediate products and 25 per cent for finished products, was to be achieved within the same period.

For sensitive goods, the rates of the CET were set higher than 25 per cent in order to allow domestic production within EAC and industries to grow.

A third aspect of Custom Union is the elimination of Non Tariff Barriers (NTBs) to trade in the Community. The Custom Union also provided for the application of the principle of asymmetry, rules of origin, duty drawbacks, refund and remission of duties and taxes, customs cooperation, simplification and harmonisation of trade documentation and procedures as well as exemption regimes among others.

Initially, elimination of internal tariff appeared to favour the other partner states and disadvantaged Kenya, which eliminated all internal tariffs immediately in 2005 but whose exports in some categories to the other partners continued to attract tariffs until December 31, 2009. However, this did not adversely affect our exports to the EAC. In real terms, however, all countries of the region have benefited.

The EAC countries have continued to be major export destinations for Kenya. In 2008 for example, Uganda was Kenya’s number one export destination, Tanzania was fourth and Rwanda tenth. In the same year, Kenya’s exports to the EAC have accounted for 51.6 per cent of its exports to Africa.

Kenya’s total exports to EAC between 2004 and 2008 to the four partner states increased from Sh64 billion to Sh84 billion.

Uganda is Kenya’s largest export market followed by Tanzania accounting for 50 per cent and 11 per cent respectively. Kenya’s imports from the region increased from Sh3 billion to Sh12.6 billion between 2004 and 2008. The largest share of imports from the EAC is Tanzania accounting 58 per cent. Overall Total Value Exports from Kenya grew 31 per cent while imports from Tanzania and Uganda grew by 300 per cent.

Intra-EAC trade is on the rise for all the partner states, the most prominent is the increase in Kenya’s trade with partner states, which means demand for her goods (especially manufactured goods), is increasing. The challenge will be for producers and manufacturers to meet this increased demand.

Consumers may also find it more compelling to buy goods produced within the region due to proximity to as evidenced by increased cross border trade), lower levels of NTBs, similarities in culture, language, product differentiation and regional infrastructure improvement which promotes trade.

And now that the Custom Union is fully fledged, one expects that there will be no barriers to trade. However this is not a perfect world and the EAC is no exception. NTBs have manifested themselves in various forms in the region. The barriers are being addressed through the EAC mechanism for their elimination.

This is a joint initiative of the East African Business Council and the East African Community Secretariat. The objective of the mechanism is to facilitate the process of identifying, reporting and monitoring the elimination of current and future NTBs within the EAC partner states so as to consolidate the gains made from the Customs Union.

At the country level, National Monitoring Committees on NTBs have been established and meet monthly to monitor the progress made in addressing a number of identified NTBs at the regional level for elimination and to receive reports on the eliminated and new NTBs.

Since the establishment of these committees, the progress in the reporting, monitoring and elimination of the NTBs has been remarkable. But what will be critical for the partner states to realise the full potential of the Custom Union is the rules and their application.