•Partner states have not agreed on the proposed maximum Common External Tariff (CET) rate with divergent views of 30 per cent, 33 per cent and 35 per cent.
CET is imposed on products imported from non-member countries, aimed at safeguarding local products and boosting industrial growth.
Kenya stands to greatly benefit from the proposed increase on the East African Community’s Common External Tariff, as the region moves to protect local industries.
An analysis by the East African Community Secretariat and the East African Business Council (EABC) shows that the proposed fourth tariff band of 35 per cent will cut Kenya’s import bill by at least Sh4.4 billion.
The region is pushing for a fourth Common External Tariff (CET) on products imported from non-member countries, to safeguard local products and boosting industrial growth.
Currently, the EAC-CET is structured in 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.
Partner states have not agreed on the proposed maximum CET rate with divergent views of 30 per cent, 33 per cent and 35 per cent.
Kenya is pro 35 per cent with industry players seeking to have the fourth band implemented from July 1.
According to the analysis, the new tariff, if implemented, will create an intra-EAC market value of Sh2.13 trillion.
Uganda, Kenya’s biggest trading partner in the region is set to have the largest increase in market share valued at Sh967.9million with Kenya coming in second with an additional regional trade value of Sh583.7 million.
Rwanda will have the potential to increase the value of its exports in the region by at least Sh425.1 million, Burundi (Sh156.1 million) and Tanzania (Sh33.3 million), the study indicates.
Last year Kenya grew its exports to Tanzania and Rwanda from Sh29.9 billion and Sh21.4 billion, to Sh Sh36.8 billion and Sh22.9 billion, respectively, according to Kenya National Bureau of Statistics data.
Locally produced goods and sectors protected by the CET include textiles, iron, and steel, automotive, agro-processing, wood, mineral processing, energy, fertilisers, and pharmaceuticals.
The move is also expected to attract new investments into the region’s industrial sector by having firms set base within the EAC, particularly on processing secondary intermediates into finished products.
“The 35 per cent CET rate will offer the necessary effective protection the region requires to drive regional value chains and drive industrialisation through these products,” EABC executive director John Bosco Kalisa notes.
According to the council, some of the products have a long value chain and face unfair competition from cheap imports from Asian countries, hence needing higher rates to safeguard their production.
“Based on the agreed criteria for classifying and categorisation of goods, the products identified and assigned in the 4th band are only those manufactured in sufficient quantities in the EAC region,”Kalisa said.
EAC partner states have submitted 1,448 tariff lines to be assigned a rate above 25 per cent.
Out of this, it was agreed that 571 tariff lines should be retained at their current rates.
So far only 462 tariff lines have been assigned to the 4th tariff band, a mere 5.5 per cent of the total tariff lines.
Delays in the conclusion of the CET, whose review started in 2016, has been blamed for exposing local industries to continued cheap imports.
China and India remain the biggest sources, as intra-East Africa Community trade remains at a low of 13 per cent, compared to common markets such as the EU which is at 67 per cent.
The EAC-CET was last reviewed in 2010. However, each year, partner states through EAC pre-budget consultations of the ministers of finance undertake annual reviews on specific products.
This has resulted to frequent Stay of Applications on final products, especially those falling under the sensitive list, and non-uniform application of EAC CET, due to numerous applications of country-specific duty remissions.
Consequently, tariffs on several products such as paper, sugar, edible oil, iron and steel, cement, motor vehicles, transport and telecommunication equipment and agricultural commodities have been unstable.
Furthermore, the final products with inputs granted country-specific duty remission do not access the EAC market at preferential tariff rates.
According to trade experts, the country-specific duty remissions and Stay of Applications distorts intra-EAC trade and creates an unlevelled playing field due to unilateral application of different tariff rates.