Non-tariff barriers and ‘complaints’ in the East African Community’s reporting process
Since the establishment of the East African Community (EAC), comprising Burundi, Kenya, Rwanda, Tanzania and Uganda, the region has seen a steady strengthening of economic and political ties among the community’s Partner States.
The EAC Customs Union came into force in 2005, facilitating the establishment of a common external tariff and paving the way for the removal of all intra-regional tariffs by 2010. Despite this, available trade statistics paint a mixed picture about the impact of the EAC on intra-regional trade. Although the establishment of the EAC coincided with an important expansion in intra-regional trade in absolute terms, overall intra-EAC exports did not grow as a share of the region’s total exports. In addition, the persistence of non-tariff barriers (NTBs) still affects trade flows, and reduces the benefits to be gained from the regional integration process.
The third briefing from a project examining the magnitude of NTBs affecting trade in the EAC and assessing the impact of their removal, this paper explores the difference between NTBs and ‘complaints’ identified and reported to the EAC, and suggests a way to streamline the process so that NTBs can be more quickly and easily resolved and intra-regional trade enhanced.
In 2000, the East African Community (EAC) partner states came together to form a regional trading bloc in order to ‘widen and deepen economic, political, social and cultural integration … to improve the quality of life of the people of East Africa through increased competitiveness, value added production, trade and investment’ (EAC, 2016). To this end, the EAC has since recorded a number of milestones, including the creation of a customs union and a common market. The common market came into force in 2010 on the signing of the East African Common Market Protocol, in which the partner states agreed to maintain a liberal position on free movement of factors of production, goods and services.
Despite these high-level commitments, trade barriers continue to affect the free flow of goods and services amongst EAC states. Although tariffs have been eliminated in trade among members, non-tariff barriers (NTBs) are common and constitute a major hurdle to the establishment of the common market. The UN Conference on Trade and Development (UNCTAD) (2013) defines NTBs as restrictions, unrelated to tariffs, that result from quotas, import licensing systems, prohibitions, regulations, conditions or specific market requirements that make the importation or exportation of products difficult and/ or costly. Additionally, the EAC defines NTBs as laws, regulations and administrative and technical requirements (other than tariffs) imposed by a partner state, whose effect is to impede trade. In response to the persistence of NTBs in the region, the EAC Secretariat in partnership with the East African Business Council (EABC) established a monitoring mechanism to deal with NTBs as they arise.
The EAC’s NTBs reporting mechanism
In 2009, the EAC launched the Time-Bound Programme for the Elimination of Identified/Reported NTBs to improve trade in the region. Under this programme, monitoring and reporting of NTBs is facilitated at national and regional levels and is conducted at various stages by relevant trade officials. The monitoring and reporting of NTBs begins with companies that identify and report their experiences of trading in the EAC to their business associations, or even directly through online or SMS-based tools. The business associations, which act as watchdogs for the process of elimination of NTBs, then forward the reports to National Monitoring Committees (NMCs). These NMCs meet regularly to discuss reported cases and actions taken, and report the information gathered to their line ministries or the agency responsible for taking further action.
NMCs also participate in regional fora where they are able to share experiences of NTBs and of the elimination process. NMCs escalate reported NTBs to the EAC Secretariat through the EAC Directorate of Trade. The EAC Secretariat then forwards these reports to the EAC Coordination Committees and the EAC Trade, Industry and Investment Committee for discussion and decisionmaking. The EABC is then responsible for disseminating the information on NTBs’ elimination progress to members. The EABC also has the duty of producing the annual business climate index, which gives information on the progress of the NTBs’ elimination.
NTBs and ‘complaints’ reported to the EAC Secretariat
Since 2012, the EAC Secretariat has published quarterly reports on the status of NTB elimination in the region. These reports detail information on the nature of reported NTBs, their sources and the affected countries. Based on an analysis of reported and unreported NTBs, some of them seem to reflect complaints on the application of agreed rules or regulations rather than actual NTBs. This is reflected in the short time required for the NTBs to be resolved. Almost one third of the NTBs reported were resolved in less than three months, which constitutes a very short period of time. Complaints, in this sense, can be defined as instances where there is an incorrect implementation of the agreed commitments in terms of NTBs.
Although the time taken for resolution of NTBs varies depending on the degree of political will in the imposing countries, in the main, NTBs take some considerable time to resolve. The various stages involved in the resolution of specific barriers require bilateral and internal negotiations in the affected and imposing countries.
Many reported NTBs require only simple administrative acts to be resolved. For example, in the June 2016 meeting of the EAC Committee, the Tanzanian Government confirmed that its Rail Development levy would no longer be applied. However, in the months that followed, customs officers were not properly informed about the change. This suggests that the reported NTB, in reality, was simply a complaint about the existing procedure or the result of a lack of information. Examination of other NTBs that were resolved relatively quickly also reveals the presence of multiple cases of complaints that affected a single firm in a particular country.
At the June 2016 EAC Committee meeting, of the 26 NTBs reported, six were found to be complaints. In one example, Kenya complained that Rwanda, Tanzania and Uganda did not provide adequate information on changes to their export procedures. This led to an increase in the cost of doing business in Kenya. The accused countries agreed to investigate the evidence provided by Kenya and report back at the next meeting. In another example, Tanzania complained that Rwanda and Uganda did not give preferential treatment to rice originating from Tanzania as per the EAC rules of origin, thereby denying them market entry.
The presence of complaints within the NTB reporting mechanism diverts resources and time away from the resolution of real NTBs that have remained unresolved for years – for example, that affecting beef exporters to Uganda. These complaints should be handled through a different mechanism that allows for a faster and more direct approach. In fact, there are existing bilateral and informal mechanisms in place that could be used for this purpose.
When complaints are excluded, the number of reported NTBs is quite small. To date, there have been very few reported NTBs associated with services provision, despite the high level of regulations of services in EAC countries. This suggests the existing NTB reporting mechanism is not adequately reflecting and addressing the multiple barriers affecting trade in the EAC.
To tackle this, the NTB forum should seek to gather experts in trade and regulation from EAC countries, in addition to other relevant stakeholders and government officials. These actors will be in a position to identify additional issues that can contribute to improving trade and the integration of partner states’ markets. They could also bring attention to related overlooked issues that would help to build the common market.
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This publication is an output of the Resolving the unresolved non-tariff barriers in the East African Community project, written by Rosebela Oiro, Boniface Owino and Max Mendez-Parra.
The aim of the project is to measure the magnitude of NTBs affecting trade facilitation and transport among the EAC partner states and assess the impact of their removal on regional trade and production. A key objective is to identify the effects of specific NTBs on income, employment and prices; this will help to assess the likely effect of the removal of NTBs on efforts to alleviate the high levels of poverty that currently affect countries in the region.