Decision on EAC Common External Tariff postponed until April | The new times
On Monday, March 21, senior officials from regional ministries responsible for trade, industry, finance and investment were unable to reach consensus on the maximum rate of the EAC Common External Tariff (CET), according to sources.
The matter has therefore been referred to the Council of Ministers of the six-member bloc which, according to sources, is due to be held in the middle of next month.
Senior officials were meeting to deliberate on the analysis carried out by the EAC Secretariat on the implications of the maximum CET rates of 30%, 33% and 35%.
The countries maintained their divergent positions.
Kenya and Tanzania propose that the regional common external tariff rate be set at 33%, while Rwanda and Burundi want 30% and Uganda 35%. South Sudan – which is not yet integrated into the bloc’s customs union – has not yet been involved in the discussion.
A ministerial discussion could also not take place on Monday as ministers in charge of trade, industry, finance and investment from Uganda and Tanzania failed to show up.
The regional trade body recently urged partner states of the East African Community to adopt the proposed rate of 35% as the maximum rate of the CET and begin its implementation in the fiscal year commencing 1 July.
On Monday, John Bosco Kalisa, CEO of EABC who attended Monday’s virtual meeting, said The new times that: “EABC has also maintained its 35% position with a view to promoting industrialization and the growth of intra-regional trade as the only way to generate prosperity and create meaningful and sustainable jobs for our young generation.”
“The Council of Ministers meeting did not take place because two partner states were not present. We only had senior officials and permanent secretaries.
Earlier this month, Kalisa noted that previous commitments from the private sector and government agencies were “excellent and we believe that by March 21 a consensus will be reached” for implementation to begin the first week. of July.
Last month, the EABC insisted on the position that partner states would adopt a maximum rate of 35% of the Common External Tariff (CET) as this, among other things, will promote industrialization and boost intra-EAC trade by 18 .9 million.
The current maximum TEC is 25%.
According to the EABC, the proposed maximum rate of 35% of the CET will provide an adequate degree of tariff differential necessary to encourage industrial development in the EAC region; safeguarding products sufficiently produced in the region against similar cheap imports.
As noted, the 10% tariff difference is necessary to preserve and support existing investments in the priority regional value chain of textiles, automotive, agribusiness, timber, iron and steel , processing of minerals, energy, fertilizers, pharmaceuticals and attracting new investments to transform the industrial sector of the EAC, in particular by transforming secondary intermediates into finished products.
The latest analysis of proposed CET rates by the EAC Secretariat also shows that with a maximum CET rate of 35%, Partner States stand to benefit the most from an increase in revenue generation of 5.5% and job creation should increase by 0.03% (6,781 people) below the maximum rate of 35%.
The analysis further shows that Burundi will benefit from increased trade creation of $1,363,749 while Rwanda $3,714,495 if the maximum CET rate of 35% is adopted.
As noted, non-metallic minerals, printing, wood products, furniture, paper, crops; horticulture is one of the industrial sectors in Rwanda and Burundi will benefit from a CET of 35% maximum. According to the analysis, the average potential net welfare loss effects under the proposed maximum rates of 35% of the CET are estimated at $25.5 million, a one-time effect.
According to the regional trade body, the proposed maximum rate will strengthen national and regional policies on the development of priority value chains, expand intra-regional trade, enhance product diversification, as well as create employment opportunities from the change in production, will support regional food security and rural development.
The EABC preferential rate, as noted, is key to enhancing the competitiveness of East African manufactured goods on the continent and globally.
The analysis also shows; industrial production is expected to increase by $12.1 million (0.04%) if the highest rate at 35% of the maximum tariff rate is adopted by the EAC Sector Council of Ministers.
The partner states have so far not agreed on the proposed maximum rate of the CET with diverging opinions of 30%, 33% and 35%.
The regional TEC is currently structured in three tranches of 25% for finished products, 10% for intermediate goods and 0% for raw materials and capital goods.
It was last revised in 2010.
MP Fred Mukasa Mbidde, a longtime member of the East African Legislative Assembly and former chairman of its Communications, Trade and Investment (CTI) Committee, recently told The New Times that the maximum CET rate proposed by the EABC is not good for consumers in the region.
Mbidde said: “The decision to increase the CET beyond 30%, to 35%, at a time when interventions have not resulted in an EAC industrialization policy is only meant to benefit the traders who expect a price increase due to commodity scarcity when that scarcity translates into a higher market equilibrium where a convergence between demand and supply must be at a higher equilibrium than ordinary EAC consumers cannot afford”.
“It benefits the businessmen who were members of this meeting under the auspices of the East African Business Council and the tax collectors represented by the ministers, but the consumer was not represented by EALA.”
The legislator noted that when it comes to stocks, “only arbitrageurs intend to profit” from the current buying of stocks in anticipation of price volatility.
An arbitrageur is an investor who attempts to take advantage of market inefficiencies.
“A people-centric EAC needs to focus more on the average consumer by avoiding making decisions where they have no benefit,” Mbidde said.