Posted April 2, 2021 9:18 am by

The establishment of an effective Common External Tariff in the East Africa region will lead to the exponential growth of the manufacturing sector.

A Common External Tariff (CET) refers to an import tariff or rate adopted and applied by countries within a common market. This tariff is ideally imposed on products imported from non-member countries, with the intention of promoting industrialization in the common region, enhancing the economic development of member states, and liberalizing regional trade.

The East African Community (EAC) is in the process of reviewing its CET that if adopted, will steer the manufacturing sector into an upward spiral, which is needed as we grapple with the effects of COVID-19 Pandemic.

It is important to highlight the progress made through trade agreements with the EAC Partner States. First is the establishment of the EAC Single Customs Territory to facilitate faster clearance and movement of cargo from the port of entry to destination. Second is the implementation of One-Stop Border Posts (OSBPs) aimed at facilitating cross-border movements through reduction of the time taken in clearance procedures. The third is the removal of several Non-Tariff Barriers (NTBs) that had previously frustrated trade between the Partner States.

But even with this progress, the laxity to agree upon and implement the EAC CET by the Partner States is straining the competitiveness of the sector and the economic growth of the region.

In essence, the current tariff undermines industrialization efforts by favouring imports or subsidizing importation costs, in turn, resulting in reduced competitiveness of local manufacturers. This leads to few job opportunities and decreased development and ultimately, increased cost of living.

The Current EAC CET Tariff stipulates that the EAC Partner States may import products at different levels with the following duty rates:  raw materials – 0%, intermediate – 10%, and finished products – 25%.

In short, imports from other countries, outside of the EAC, are enjoying lower rates (25%) for products that are or may be produced within the EAC. This is not only derogatory to the objectives of the EAC, which include building the prosperity, competitiveness, and stability of the region but it also undermines industrial growth and its benefits.

For the region to reap the benefits of industrialization, it is necessary that we impose a higher duty rate on the importation of finished products from countries outside the EAC region. This will result in strengthened backward and forward linkages between the EAC Partner States, advanced value chains, and increased competitiveness and sustainability of the region.

A 35% tariff rate on the importation of finished products could not come at a better time. The competitiveness of the sector is currently being deterred by transport and logistics issues, excessive governmental levies, increased Read More…