Trust: Missing item in EAC

A small story on Page 32 of Daily Monitor of October 24 captured the reality of Uganda’s engagement in the East African Community (EAC) trade regime.

Titled, ‘EAC to decide on sanctions for blocking trade,’ it quoted Ms Rebecca Kadaga, the Minister for East African Affairs, thus: “We discovered that Ugandan goods are trading more outside EAC. In July we agreed to take special measures to identify non-tariff barriers preventing Ugandan goods from trading and make sanctions against responsible countries.”

The story says Uganda earns from the EAC market less than a quarter of the total amount we earn from exports. Apparently, the bulk of our export receipts come from Asia, Europe and other states in the Common Market for Eastern and Southern Africa trading blocs, such as Malawi and Zambia.

Why then is Uganda in EAC? When the EAC was revived on November 30, 1999, functional cooperation was meant to widen and deepen economic, political, social and cultural integration. I remember this well because in July 1999 I joined The New Vision as the ranking business writer. The business editor, Mr Mulinde Musoke, his deputy, Mr Stephen Asiimwe and I tried to keep our readers well informed about the EAC.

I interacted with many technocrats. I learnt that lack of trust among the three members – Uganda, Kenya and Tanzania – was behind many difficulties that led to the collapse of EAC in 1977. In particular, unfairness and insincerity in the distribution of common customs duties collected, and trade balances being in favour of Kenya with no compensatory mechanism in place for Uganda and Tanzania, were cited.

Thus, a major issue in the hastily negotiated new customs union was that Uganda and Tanzania feared being swamped by Kenyan goods.

That’s why they insisted on a 10 percent surcharge on Kenyan goods. Since the elimination of internal tariffs would reduce tax revenues on imports, Uganda and Tanzania stood to lose more because of Kenya’s prominence as an export origin for both countries.

Worries over tax revenues were – and still are – some of the operational problems EAC faces. Many non-tariff barriers (NTBs) in one form or another now also negatively affect the larger EAC of seven members. NTBs refer to restrictions that result from prohibitions, conditions, or specific market requirements that make importation or exportation of products difficult.

That’s why, for instance, we have to look far afield for markets for some of our products such as processed milk. EAC needs to urgently invest considerably on capacity building for reporting, monitoring and eliminating NTBs. Indeed, Kadaga is right; special measures should be deployed to identify not only NTBs but also those affecting these nasty things.

In addition, political will must address common issues of concern. For instance, issues of poor physical infrastructure should be rapidly sorted out to reduce transport costs and facilitate free and fast intra-regional flow of trade. In that sense, we need more extensive investment in the road, railway and energy sectors within the framework of an Initiative for the Integration of Regional Infrastructure (IIRI) arrangement.

With no functioning IIRI structure, Uganda is not linked by rail to DR Congo, Rwanda, Burundi, and South Sudan. (The link to Kenya is a disaster.) Kenya is not linked by rail to Tanzania and South Sudan. This keeps the cost of production in landlocked countries such as Uganda high.

There’s also disregard of the law of comparative advantages. EAC states export similar goods to one another. Every state should have a comparative advantage in something.

Customs clearance and transit traffic regulations should also be decisively streamlined. Uganda must particularly protest against lengthy delays of cargo movement to and from sea ports.

Mr Okodan Akwap (PhD) is an associate consultant at Uganda Management Institute.