TRADE

EAC urged to adopt common tariff to protect local trade

The maximum rate to encourage industrial development

In Summary

•According to EABC analysis, the products to be assigned maximum rate by the Regional Task Force (RTF) are sufficiently produced in EAC.

•The products to be assigned maximum rate are sufficiently produced in the region and hence will be traded across the Partner States at zero per cent import duty.

Entry POINT: A billboard gives direction to the Kenya Revenue Authority office at the Namanga border.
Entry POINT: A billboard gives direction to the Kenya Revenue Authority office at the Namanga border.

East Africa countries have been urged to adopt the 35 per cent maximum tariff rate to drive the regions industrial development.

According to East African Business Council, this will attract investments in industrial value chains and transform the bloc into an export-led economy.

“The proposal of 30 per cent will create a five per cent tariff differential with the third band of 25 per cent while 35 per cent will create a variable of 10 per cent that will safeguard products that are sufficiently produced in the region against the similar cheap import,” EABC said.

EABC argues that the 10 per cent differential is needed to safeguard and retain existing investments that operate the regional value chain as well as attract new investments to transform EAC industrial sector by turning secondary intermediates into finished products.

In an analysis,  EABC says the products to be assigned the maximum tariff rate by the Regional Task Force (RTF) are sufficiently produced in EAC. 

It says that based on the agreed criteria for classifying and categorisation of goods, the products identified and assigned in the fourth band are only those manufactured in sufficient quantities in the region.

The EAC Partner States submitted 1,448 tariff lines to be assigned a rate above 25 per cent.

Out of this submission, it was agreed that 571 lines should be retained at their current rates. When the RTF held its last meeting on October 23 this year, only 459 lines were assigned to the fourth band out of the existing 5,688 EAC total tariff lines.

The remaining products, which are under consideration of being assigned the maximum rate, are 325 lines on which the Partner States have failed to reach consensus. They consist of 5.71 per cent of the total tariff lines.

Even if all remaining tariffs are assigned the fourth band, which is unlikely, this band will consist of 784 tariff lines that are 13.78 per cent of total tariff lines. It will consist of a small percentage of the region’s tariff lines, which can have negative consumer welfare. 

In addition, the products to be assigned maximum rate are sufficiently produced in the region and hence will be traded across the Partner States at zero per cent import duty.

The proposed rate will promote the consumption of locally manufactured goods and strengthen the regional value chain. 

Most of the products that have been considered to be assigned a maximum rate are under the EAC priority value chains as provided for in the EAC Industrialisation Policy 2012 to 2032. Some of these products include textiles, iron and steel and motor vehicles.

The rate will offer the necessary effective protection the region requires to drive regional value chains and drive industrialisation through these products.

Some of the products have a long value chain and face the unfair competition of cheap imports from Asian countries hence need higher rates to safeguard their production in the region.