Transcript non-tariff barriers in trading within the east african community (eac)

NON-TARIFF BARRIERS IN
TRADING WITHIN THE EAST
AFRICAN COMMUNITY (EAC)
By
Monica A. Hangi
Economic and Social Research Foundation (ESRF)
Introduction
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Economic, social and political agenda in EAC
Trade as an identified catalyst for growth (the big
market of EAC – 126.6 population
EAC Development Strategy (2001-2005):NTBs Administrative & Bureaucratic inefficiencies;
standards and technical requirements; and
infrastructure and communication networks
One of the solution: The CU Protocol, 2005
The Customs Union Protocol
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Main aim: assuring an even development for all
member countries
Crucial areas under the Protocol: Trade Facilitation;
Anti-dumping measures; Competition Policy and
law; Re-export of goods; Non-Tariff Barriers; and
Standards and measures
Hence removal of the NTBs so as to improve intraEAC trade
Main Problem
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The EABC study of 2005, 8 categories of NTBs
were identified
The declining trade trends in the early 2000s
among EAC member states
Trade IS in fact affected by the NTBs in the region
Multiple membership for member states
Objectives of the Study
MAIN: to promote the sustainable trade sector and the
economic growth through elimination of trade and nontrade restrictions in the East African region
SPECIFIC:
 Identifying the NTBs hindering promotion of the
regional cross-border trade based on member country
comparative advantages;
 Undertaking a review on the implementation of the
current EAC CU Protocol and business environment
promotion efforts; and
 Drawing up recommendation based on the research
findings
Research Questions
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What trade barriers do exist in the region?
How do these trade barriers hamper trade
promotion in the region?
What measures have been employed in removing
these barriers?
What is the impact of the removal of these barriers
to the trade performance within the EAC?
The East African Community (EAC)
I: MACROECONOMIC PERFORMANCE (2008):
 Rwanda recorded the highest growth (11.2%);
Uganda (9.2%); Tanzania (7.4%); Kenya (decline to
1.7%); Burundi (a negative growth,0.025) – Table 1
 Decline in Balance of Payment position for all
members; Fiscal deficit improved to 9.5% (from
10.5%)
 Annual headline Inflation rates: Highest – Burundi
(24.5%) and Kenya (26.2%) – Table 2
...Cont
TRADE PERFORMANCE (2008):
 Tanzania (Table 3): Trade with EAC member
countries declined by 40.9% (to 54.9%); Exports
and imports much to/from Kenya. But generally
Tanzania intra-EAC trade levels have increased
 Kenya (Table 4): Kenya’s share of trade with the
rest of EAC increased to $ 1,031.4 million from $
760.6 million; Exports much to Uganda and
Tanzania and imports much from Tanzania. Kenya
has low trading rates with Burundi and Rwanda
…Cont
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Uganda (Table 5): Uganda mostly trades with
Tanzania; Most of its exports are to Rwanda (with
great improvement of up to $ 136.9 million from $
83.3 million); there is an improvement in the trading
trends with the EAC members
Burundi (Table 6): Burundi is picking up; Imports
from Uganda and Kenya and Exports a bit (very
low) to Rwanda, Uganda and Kenya
…Cont
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Rwanda (Table 7): Improved performance as
compared to previous years; Trades mostly with
Kenya and Uganda. Rwanda exports to Kenya and
very little to the rest of EAC; Imports from Kenya
and Uganda
Findings: The fluctuating trends are due to a number
of reasons (such as the size of the economies;
problem of markets; the quality of the products)
including the NTBs
Non-Tariff Barriers (NTBs)
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Trade barrier: Any restriction imposed on the free
flow of trade. However, the EAC defines the NTBs
as quantitative restrictions and specific limitations
that act as obstacles to trade
Forms of NTBs: Import policy barriers; Standards,
testing, labeling and certification requirements;
Anti-dumping and countervailing measures; Export
subsidies and domestic support and others
NTBs in the EAC
In 2005, EABC commissioned a Business Climate Index (BCI)
survey in EAC, in an effort to eliminate the NTBs in the
region
The 8 identified categories:
 Customs and administrative documentation procedures;
Immigration
procedures;
Cumbersome
inspection
requirements; Police road blocks; Varying trade regulations
among the three EAC countries; Varying, cumbersome and
costly transiting procedures in the EAC countries; Duplicated
functions of agencies involved in verifying quality, quantity
and dutiable value of imports and exports; and Business
registration and licensing
Corruption in EAC
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Corruption: In the region, corruption has carried the
highest weight in slowing down the trade flows; Both
as a portion to the NTBs and independently
Original EAC member countries: the study found
Kenya to have been most corrupt and the TI for all
the EAC countries found Burundi to be more corrupt;
followed by Kenya, Uganda, Tanzania and Rwanda
– Table 8
Elimination of the identified NTBs
Based on the BCI survey done in 2008:
 Uganda has the most favorable conditions; then Kenya,
Rwanda, Tanzania and Burundi respectively
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The BCI Survey 2008 findings (highlighted on Table 9);
But generally: a total sum of 172,236 days are lost
each year as a result of delays at Weighbridges,
roadblocks and customs – with Weighbridges causing
almost half of those delays. In terms of money (paid in
the form of bribes), some 9.8 million USD are paid over
per year – with Weighbridges again taking the largest
share.
Impact of the CU on trade in EAC
Tanzania’s trade performance:
 Tanzania’s imports from Kenya and Uganda have
been on the rise following the establishment of the
CU; Exports have as well recorded a consistent
increase, almost doubling in 2008 compared to
2004
Tanzania and Uganda: the trends before the Protocol
were higher than after; and it’s the similar case for
Uganda as well
…Cont
Tanzania and Kenya: after the protocol, trade rates
more than doubled; imports as well rose by
approximately 50%
Hence, the protocol seem to have had a marginal
effect on the trade shares between Tanzania and
other members of the region
…Cont
Kenya’s trade performance:
Kenya’s trade proportions within the region have been
increasing since 2002 until 2008; with Uganda
being the largest destination for the products and
Tanzania is the largest exporter to Kenya.
There is an issue of re-exports of products to/from
Uganda and Kenya.
Hence, Kenyan performance has managed to
maintain its position within the region
…Cont
Uganda’s trade performance:
Uganda trades more in manufactured goods than
agricultural products. With the protocol, it has
registered both decreasing and increasing trends.
Most of the imports are from Kenya, followed by Tanzania
(even though b4 the protocol, imports from TZ kept
declining until its introduction)
Generally; the protocol has had positive impact on the
trade performance between Uganda and the EAC
member states
Conclusion
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A full economic integration is still a challenge
With the identified catalyst (trade) so as to attain
the aim, the introduction of the CU protocol has had
a role, especially on the elimination of NTBs
But is it managing fully to combat the problem of
NTBs in the region?
The statement by the Director General Customs and
Trade in EAC: More efforts still needs to be done
Recommendations
Apart from just combating the NTBs, the region has to
address the following in order to improve the trade
performance:
 Improvement of the physical infrastructure in the
region (roads, railways, airways, communication)
 Education
on traders/businessmen on how to
manage and improve their businesses
 Informal trade: hence the region can see ways on
how to harmonize domestic laws and regulation, tax
systems so as to reduce this form of trade