By Jaindi Kisero

Very significant changes in the East African Community’s trade relations are expected to occur in the current budget cycle as member states begin to implement a comprehensive new Common External Tariff (CET).

From what I understand, the partner states of the regional economic bloc have agreed to finalize a review and implement a revised CET by July 1 this year.

Regardless of how events develop in the coming months, the business community will be eagerly awaiting the outcome of the CET review.

The implications of the changes likely to accompany the revised CET on the cost of doing business and on competitiveness will be major. Revising a CET in the context of countries with diametrically opposed industrial policies will not be easy.

That’s why when the negotiating parties reached consensus at last month’s meeting in Nairobi on which tariff lines will attract tariffs beyond the 25% maximum, it was celebrated as a breakthrough.

The hardest part will come when the parties begin the process of product mapping and classification. From what I understand, problems persist with textiles, steel products and motor vehicles.

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Sources told me that the Nairobi meeting requested partner states to submit data on national production of textiles, steel products and motor vehicles by February 28 this year.

The deadline for “mapping” – determining which product belongs to which tariff band – has been set for May 15.

Last revised in 2010, the East African Community CET has faced significant policy coordination challenges characterized by constant requests from member states to suspend application, unilateral exemptions and frequent requests for duty remission.

The result of the culture of poor adherence to the CET tariff regime and frequent rule-breaking by trading partners has been an unstable regime that renders the idea of ​​a common external tariff utterly absurd.

On paper, the EAC has a very simple three band structure which should have given us a stable tariff regime. The tariff for finished products under the CET was set at 25%, intermediate products at 10% and raw materials at 0%.

Additionally, there were a limited number of products under the so-called sensitive list which attracted rates above the maximum rate, ranging from 25% to 100%. It has become common for finance ministers to introduce amendments and waivers to the CET each time they travel to Arusha for the annual pre-budget consultations.

Today, the most active part of the Arusha-based bureaucracy is the dispute resolution mechanism section. And the most active department is the entity known as the Trade, Industry and Finance Sector Council which spearheaded the comprehensive review of the TEC.

When the comprehensive review of the existing CET process comes to an end, we will need to look back and audit the pitfalls it has encountered since it came into force in 2005.

I went through a study whose conclusion I found enlightening.

First, it would appear that Uganda has recorded the highest number of unilateral waivers since the entry into force of the CET.

Second, the study reveals that in East Africa, the manufacturing sector receives a disproportionate share of import protection. This trade policy reflects the preferences of economic interest groups and the power and influence of trade associations.

Third, in the agricultural sector, wheat, barley, rice and sugar received the largest share of unilateral waivers.

In the industrial sector, three product categories dominate – paper and paper products, cement and iron and steel products. I also read somewhere that in Africa, negotiations to review CETs and trade agreements have a better chance of success where regional business associations have a strong voice.

There are indeed strong arguments for strengthening and raising the profile of the East African Business Council – the largest regional trade association in the region. It is impossible to plan for the long term if the rates change every year.