ANALYSIS Otieno Kennedy Abuya 02 April 2021
The East African Community (EAC) is one of the many Regional Economic Communities (RECs) in Africa. The bloc is made up of six States that have long-standing historical ties as trade partners. EAC citizens similarly share ancestral origins, cultural and social linkages as well as doing business with each other from time immemorial. Eventually, strengthening these areas of co-operation became one of the aspirations for establishment of the community (EAC Treaty Preamble). However, meeting the aspirations requires a supportive regulatory framework.
For instance, in the area of intra-regional trade, creation of effective laws for trade facilitation and removal of trade barriers are sine qua non. The end result should be a smooth flow of trade within the region. Accordingly, one may expect this to be the case for EAC considering the stage of integration, and having put in place a number of regional laws to that effect. Despite this fact, analysis of the existing EAC laws and intra-regional trade within the last five years reveal a different state of affairs.
Legal Framework for Intra-Regional Trade in EAC
The Treaty (1999) for the establishment of EAC requires Partner States to co-operate in trade liberalization and development (EAC Treaty Art. 74-78). Article 76 of the EAC Treaty provides for free movement of labour, goods, services and capital, which are primary framework for intra-regional trade facilitation. The Custom Union Protocol (2004) and its regulations, embodying the first stage of integration made by the community, provide for a regional Free trade Area (EAC Custom Union Protocol Art. 4). The Custom Union instruments require Partner States to eliminate or reduce taxes for the goods originating from within the EAC as well as a common tariff for imported goods from outside countries.
The ambition for seamless intra region trade is similarly supported by the Common Market Protocol (2009) and constituent regulations, which formed the second stage of integration. They provide modalities for achieving free movement of goods and services within the community. Among others, the aforementioned legal framework is envisaged to eliminate various bottlenecks and to facilitate intra-regional trade within EAC. However, trade barriers still exist within the region.
First, on issues like rules of origin, custom duties, harmonization of practices, and products quality ttrade within the region.[1] They have persistently created disputes and hampered EAC intra-regional trade. An example is the recent letter written on 5th March 2021 by Kenyan authority stopping maize imports from Uganda and Tanzania. The decision ignited an uproar among the business community as well as from the governments of Uganda and Tanzania.
Secondly, Partner States still have a habit of imposing non-tariff barriers; administrative bureaucracies, procedural holdups, and related charges of similar effects on trade.[2] According to the EAC trade and Investment Report 2018, non-restriction on movement of cargo is merely on paper. Most Partner States have limited free trade to essential goods only. As a result, the value of intra-EAC trade has not been as robust as subsequently discussed under trends.
Analysis of Intra-Regional Trade Within EAC
EAC continues to experience a comparatively low trade volume. Analysis of EAC intra-regional trade in the past five years validate this assertion. The visited empirical literature and data reveal a rather slow pace of improvement. Kugonza and Nsubuga reported that in 2016 EAC intra-regional trade accounted for only 11.47 percent of the total trade in EAC.
EAC recorded improvement in 2017. The intra-regional trade was at an average of 17.3 percent.[3] The following year, 2018, EAC intra-regional trade saw a further moderate growth of 5.6 percent.[4] However, the surge was attributed to Partner States’ increased preference to trading with each other in order to offset the then falling demand for the region’s products in US and European markets.[5] The remark implies that EAC intra-regional trade is less impacted by the existing legal framework, but rather by a choice of a Partner State or a necessity occasioned by other factors.
There was a tremendous reduction in EAC intra-regional trade from late 2019 towards mid-2020. The disruptions brought about by Covid-19 made it worse for the region. For a long time, there was lack of a region-wise coordinated approach for cushioning impacts of pandemic on intra-regional trade. Without a common policy stance, each Partner States individually responded to the pandemic in a manner that nearly rendered efforts for co-operation meaningless. Partner States’ divergent Covid-19 prevention policies resulted in immense difficulties on movement of goods within the region.[6]
Traders had to undertake multiple tests in each Partner State leading to very high costs of doing business. The pandemic seemed to have suspended the essence of all regional laws for trade facilitation. Other applicable provisions of the EAC Treaty such as co-operation in matters of health (EAC Treaty Art. 18), like in a case of a pandemic response, were equally in abeyance. It is another indication of vulnerabilities in the legal framework intended to aid intra-regional trade.
Conclusion and Recommendation
As noted in the section on legal framework and trends, the regional laws seem not to be as effective as they ought to be. They not only fail to facilitate the intra-regional trade but also cannot wither the adversities. Correspondingly, the Partner States are not bound enough to rise to the occasion. Despite the fact that EAC citizens and the private sector are desirous of a thriving intra-regional trade, the facilitation aspect and regulatory environment remain an impediment. This has led to numerous challenges including low volume of intra-regional trade.
In order to remedy this, there is a need to review EAC laws and confer mandatory obligations. A binding force of any law is a pre-requisite for its effectiveness. This will deny Partner States that latitude of choosing to comply or not. Secondly, the EAC laws should provide for trade-wise sanctioning mechanisms in case of breach. Suspension of certain benefits for the transgressing Partner States or retaliatory trade measures can be considered in some circumstances. Finally, efforts should be made so as to promote EAC intra-regional trade in all sectors.
Otieno Kennedy Abuya is a Lawyer (LL.M) specialized in Regional Integration and EAC Law. He studied at the University of Dar es Salaam and is an alumni from the Tanzanian-German Centre for Eastern African Legal Studies.
[1] Okute, A.M., “Non-Tariff Barriers to Trade in East Africa Community: A Case of Exporters in Kenya.” PhD diss., United States International University-Africa, 2017, pp. 10,12 & 57.
[2] Geda, A. and Seid, E.H.,”The potential for internal Trade and regional integration in Africa,” 2(1-2), Journal of African Trade, 2015, pp.19-50.
[3] Africa Development Bank, East Africa Economic Outlook Report: Macroeconomic Developments and Prospects Political economy of regional integration, 2019, p.23.
[4] East African Business Council (EABC), Report, 2018.
[5] Trade Mark East Africa, Drivers for boosting intra-African Investment Rows Towards Africa’s Transformation, 2020.
[6] Intra-EAC Trade thins as Covid-19 lockdowns restrict movement. The East African, 29th June 2020, available at< https://www.theeastafrican.co.ke/tea/business/intra-eac-Trade-thins-as-covid-19-lockdowns-restrict-movement-1444056> (accessed on 3rd March 2021).
2 replies on “Appraisal of Legal Challenges and Intra-Regional Trade Within EAC”
great Article on intra-regional trade
This is such a great read. It will tremendously assist me in conducting my research.