As far as trading blocs go, the European Union (EU) has been a global case study of turning a free market into a common market. Faced with notable challenges in the integration process such as the consecutive crises in the Exchange Rate Mechanism in the early 90s, the EU defied all odds and continued to expand in depth and geography in a historic feat.
However, only two years ago, this ideal trading bloc took a hit with the Brexit vote, which triggered a global conversation on regional trading, agreements and integration towards creating shared prosperity for the countries involved.
In our own context, a snapshot of intra-East African Community (EAC) trade in the past few years will reveal tension-filled and sometimes hectic trade-relations, as well as an overall cloud of uncertainty on the future of the EAC.
Yet with our geographical advantages, natural resources and global reputation, the EAC holds huge potential to set the pace for the Africa Continental Free Trade Area (AfCFTA) and lead the continent into a new age trading with the world on an equal and mutually beneficial platform.
While there isn’t much comparison to be made with the EU, one indisputable thing is that their integration process was marred by political and social differences especially with bringing on board of Eastern European countries. This, many times, caused uproar in member States with populations demanding that their nations’needs come first’. Through the chaos, nonetheless, members designed new institutions with a view to open up markets and ideological alignments.
Our challenges in integration are also hampered by political and social differences, which manifest in seemingly endless Non-Tariff Barriers (NTBs) that threaten to weaken our overall contribution to global trade.
For instance, EAC global trade decreased in 2017 to a meagre 0.2 percent from 0.3 percent the previous year.
The trade deficit also increased by 63.1 percent to $17.4 billion. Our exports to the world also decreased, and of these, only 29.2 percent were destined for Comesa and other intra-regional markets.
The latter numbers can be boosted within the AfCFTA through increased collaboration and goodwill to make use of existing instruments and well-designed policies that will enhance trade and get rid of long-standing barriers.
We have witnessed some progressive steps that have made a significant contribution to the growth of EAC intra-regional merchandise trade. These include elimination of restrictions for imports on sensitive products allowing for greater trade among partner States.
We have also had elimination of NTBs on certain products such as dairy products, as well as increased trading in intermediate products. Bilateral meetings continue to find solutions to rising problems and this addresses the fact that we all have the same vision of shared prosperity.
Going forward, it is important to give priority to collaboration that will see supply chains strengthened across borders and governments laying the groundworks for the ease of movement of goods and people.
This will help in realising the full potential of intra-regional market. Additionally, we need to put into action a robust EAC export promotion strategy for products in other regions and minimise intra-regional rivalry.
It will, similarly, define the role of incentives in trading with future EAC trading partners.
Indeed, the EAC is uniquely poised to be a leading regional bloc in the next few years. We ought not to let what’s in store for us be derailed in the short-term.
Phyllis Wakiaga, CEO of Kenya Association of Manufacturers