As Kenya seeks to maximise on its global trade partnerships, as evidenced by talks between Kenya and the United States purposed toward the conclusion of a Free Trade Agreement, it is imperative that we maintain our sights on promoting our trade relationships with our regional partners, and in particular within the East African Community (EAC) block.
Following strenuous trade relationships between EAC partner states, evidenced by the introduction of increasingly protectionist trade policies by governments within the region, signs of positive movement toward a more cohesive trade block are welcome.
Specifically, provisional trade data with respect to the region, from a Kenyan perspective, indicates a significant increase in trade within the region, with Kenya recording the highest exports to the region in the 2019 calendar year since the 2015 calendar year, with exports totalling to Sh120.43 billion. This indicates that trade talks between Kenya and her regional partners, purposed and smoothing out differences in domestic trade policies and objectives, carried out through the second half of the year 2018 to 2019, have had positive impacts.
As discussed previously on this column, a number of challenges have through the years presented themselves as curtailing EAC from achieving her trade potentials. These include misguided protectionist domestic trade policies that seek to protect domestic industries from perceived competitive threats, tariff and non-tariff barriers and increased threats of double taxation.
The above considered, a raft of policy measures have been considered and implemented with a view to revitalise intra-EAC trade. These include a focus on the improvement and modernisation of infrastructure linkages, the removal of non-tariff barriers and the prevention of double taxation.
While progress is being made on the infrastructure front, with Kenya leading the charge through its commitment to the Standard Gauge Railway and Lapsset projects, the same can not be said with regard to the removal of non-tariff barriers and the prevention of double taxation.
On the non-tariff barrier front, it is unfortunate that some partner states, in the misguided attempt to protect local industries from increasing regional competitive market forces, have opted to introduce protectionist policies. These effectively skew the domestic playing field in favour of domestic industries at the expense of regional growth and development, thereby working against the EAC’s commitment to regional integration.
Similarly, with regards to double taxation, it is telling that there does not exist any form of double taxation agreement between the partner states. Consequently, businesses operating within the region have to consider the cost of double taxation as an additional cost of business. This serves to further prevent regional harmony on the business front.
While the removal of these two critical bottlenecks may not solve all that ails the EAC, it may serve to incentivise EAC trade, therefore providing the wind beneath the EAC’s wings and the path to an integrated EAC.
Karen Kandie – MD IDB Capital
