Opinion & Analysis
How customs union can boost trade
From left: President Amani Abeid Karume of Zanzibar, President Kibaki, Rwanda President Paul Kagame and Deputy Prime Minister of Uganda, Eriya Kategaya, during the East African Community Investment Conference in Nairobi. A fully fledged customs union is bound to continue to bear more fruits. Photo/FILE
Intra-EAC trade is on the rise for the member states, the most prominent is the increase in Kenya’s trade with the neighbours, which means demand for her goods (especially manufactured goods), is increasing at the expense of third-party imports.
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 each other (as evidenced by increased cross-border trade), lower levels of non-tariff barriers similarities in culture, language, product differentiation and regional infrastructure improvement.
To become a fully fledged customs union, one expects there would be no barriers to trade.
Unfortunately, there is no world of perfection.
Non-tariff barriers have been addressed through the EAC mechanism for the elimination of NTBs.
This is a joint initiative of the East African Business Council and the EAC Secretariat.
The third and most critical area of customs union is the Rules of Origin and its application.
Rules of Origin are integral part of the EAC customs union.
Partner states have adopted simplified Rules of Origin in a bid to make it easier for small businesses to engage in cross-border trade.
There are two Rules of Origin criteria applicable in EAC namely, wholly obtained and substantial transformation.
The former refers to products which are wholly produced in one partner state, while the latter refers to products whose processes of production constitute a substantial transformation.
The purpose of the EAC Rules of Origin is to distinguish between goods produced within the EAC for purposes of eligibility for EAC preferential treatment against those produced outside the EAC customs territory that attract duties.
But issues have been raised with regard to the application of the Rules of Origin.
The understanding and interpretation of the rules of origin is limited in most partner states, particularly for companies that produce for the local market.
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