Industries call for conclusion of EAC Common External Tariff

Partner states started the review process in 2016.

In Summary

•The delay is allowing products from other parts of the world to flood the EAC Common Market at the region’s expense.

•This, even as Non-Tariff Barriers (NTBs) continue to hurt movement of goods in the regional markets.

A signpost at the Kenya-Tanzania border/
A signpost at the Kenya-Tanzania border/

Delays in conclusion of the East African Community' s Common External Tariff (CET) fourth band is exposing local industries' market to continued cheap imports, sector players say.

EAC partner states are yet to conclude the review of the CET which started in 2016, a move allowing products from other parts of the world to flood the EAC Common Market at the region’s expense.

Cheaper imports are mainly coming from China and India, trade experts say, as intra-EAC trade remain at a low of 13 per cent, compared to common markets such as the EU which is at 67 per cent.

This, even as Non-Tariff Barriers (NTBs) continue to hurt movement of goods in the regional markets.

The EAC CET is currently structured under three bands of 25 per cent for finished goods, 10 per cent for intermediate goods and zero per cent for raw materials and capital goods.

While the regional states have agreed on the three, they are stuck on the adoption of a fourth band with some countries pushing for a 35 per cent, as opposed to another proposal of 30 per cent.

The CET is imposed on products imported from non-member countries, aimed at safeguarding local products and boosting industrial growth.

Kenya is pro 35 per cent with local manufacturers arguing that 30 per cent will only provide a five per cent margin which will not have much impact.

“Our view as industry is to give enough room for value addition. If you have 25 per cent as the third band, 30 would be too close because you will only have five per cent room for value addition, which will not incentivise an investor because it will be cheaper to bring in a finished product,” Kenya Association of Manufacturers CEO, Phyllis Wakiaga, said.

The Common External Tariffs is reviewed every five years.

“We are running behind, we need to conclude the process. While the three band tariff has helped growth of industries, there is need for a four-bad tariff,” KAM says.

According to Wakiaga, most of the local value chains are at four levels.

“For example a textile value chain you will have cotton which is the raw material, the intermediate product which is the threads, the fabric and finally the apparel,” she explains.

However, the two intermediate products (thread and fabric) are being merged under the current CET, which KAM says is leaving no room for enough value addition.

The East African Business Council also supports a 35 per cent tariff noting that it will incentivise industrial development and protect local industries including start-ups which are exposed to unfair competition, with a further benefits being job creation.

It will also safeguard industries against cheap and subsidised imports.

EAC partner states are Kenya, Burundi, Rwanda, Tanzania, Uganda and DR Congo which was admitted last month.

In November last year, Kenya’s Industrilizatuion and Trade Cabinet Secretary Betty Maina called on the EAC to expedite the comprehensive review of the CET, saying its conclusion would enable the region to trade more with itself, in addition to promoting the growth of domestic industries in East Africa.

We need to prioritize the regional trade and industrialization agenda by working together to conclude the comprehensive review of the CET. At the moment we have a punctured wall that allows products from outside the region to penetrate our market,” she said.

Maina who is also the current Chairperson of the EAC Sectoral Council on Trade, Industry, Finance and Investment (SCTIFI) spoke during the opening of the Ministerial Session of the 39th SCTIFI at the EAC Headquarters in Arusha, Tanzania.

On the persistence of Non-tariff Barriers (NTBs), she urged partner states to strive to address NTBs with finality, while warning that the continued emergence of NTBs across the region was discouraging investors, who put in their capital with the hope that they would access the entire EAC market.

She urged Partner States to desist from imposing trade barriers on one other if they hoped to attract more investment into the region.

She said the region has the capacity to inspire the continent in as far as regional integration was concerned, adding that EAC needs to finalize its tariff offers and schedules under the African Continental Free Trade Area Agreement (AfCFTA).