Trade between EAC countries at new highs, but numbers still low

Tanzania has edged past Uganda as Kenya’s largest export market in East Africa as a result of the ongoing elimination of non-tariff barriers and increasing local production in Uganda of goods that were previously imported. TEA GRAPHIC |  NATION MEDIA GROUP

By JEFF OTIENO The EastAfrican

In Summary

• EAC countries traded more with each other than with any other trading blocs on the continent between 2000 and 2012.

A push to remove unnecessary trade barriers and develop key infrastructure projects has driven trade between East African countries to new heights.

New data by the United Nations Economic Commission for Africa (UNECA), shows between 2000 and 2012, EAC countries traded more with each other than with any other trading blocs on the continent, boasting an average intra-regional exports, as a percentage by destination, of 19.5 per cent.

Comparatively, Southern African Development Community (SADC) is second with an intra-regional export average of 10.9 per cent, followed by Intergovernmental Authority on Development (9.2 per cent) and Economic Community of West African States (Ecowas) coming fourth with 8.7 per cent.

However, the intra-EAC trade still suffered hiccups arising from several barriers erected by member states.

READ: EAC losing billions in trade to Comesa, SADC

For example, the latest scorecard on EAC trade launched in February shows that Tanzania and Burundi have retained the highest number of restrictions to cross-border trade and flow of foreign direct investment in the East African region.

Since the Common Market Protocol was implemented in July 2010, Rwanda, Tanzania, and Uganda have introduced at least 10 restrictions on the movement of capital.

READ: Tanzania, Burundi have most checks to free trade

In services, several new restrictions have been introduced or carried over from older laws. And for the case of goods, since the enactment of the Customs Union Protocol on January 1, 2005, 51 non-tariff barriers arising from regulatory measures by governments were identified between 2008 and June 2013.

Uneca argues that the average intra-regional export numbers are still low and more needs to be done to help push them up.

While in the recent past there has been a focus on improving infrastructure by EAC’s heads of state, it remains a major hurdle in increasing intra-trade. Both the road and railway networks are still not well established to allow the easy movement of goods and services.

Uneca says intra-regional trade promotes social cohesion and strengthens the bargaining power of African countries, a critical factor when negotiating trade agreements with rich nations.

Uneca says increased intra-regional trade would also help Africa gain more from its resources. Usually, the developed world buys raw materials from African nations to manufacture goods, then later sells to the continent at exorbitant prices.

“Dependence on commodity prices and, in some cases mineral extraction, makes growth vulnerable to external shocks,” says Andrew Mold, a senior economic affairs officer at Uneca’s sub-regional office for Eastern Africa.

Economists believe a diversified economy will help Eastern African countries move from a traditional agriculture based economy to one an industrial one.