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Tuesday, November 15, 2016 

Editorial: EAC Scorecard shows competition stifled

The highlights of the East African Community Common Market Scorecard were revealed last week and though member states are fulfilling the provisions of the Protocol the pace is slow and grudging.

Basically the fear of competition is holding back faster implementation as EAC members continue to hold onto their non-tariff barriers (NTBs) in critical areas that prevent free movement of goods, labour, capital and services.

NTBs refer to restrictions that result from prohibitions, conditions, or specific market requirements that make importation or exportation of products difficult and/or costly. NTBs also include unjustified and/or improper application of Non-Tariff Measures (NTMs) such as sanitary and phytosanitary (SPS) measures and other technical barriers to Trade (TBT).

NTBs arise from different measures taken by governments and authorities in the form of government laws, regulations, policies, conditions, restrictions or specific requirements, and private sector business practices, or prohibitions that protect the domestic industries from foreign competition.

According to Jesca Eriyo, the EAC Deputy Secretary General, non-confroming measures are down from 63 in 2014 to 59 in 2016. She said although this shows progress, it should be noted that all EAC Partner States remain largely non-compliant in their services trade liberalization commitments. 

A Common Market encourages economies of scale, accelerates competitiveness, and can bring the region closer to achieving its dream of a single investment destination. The Common Market can expand opportunities for the private sector and uplift the living standards of its citizens in a way that no partner state can do on its own.

However protectionism still lingers in seveal areas of Est African business. The East African Business Council (EABC) says NTBs impact unfavourably on business, increasing the cost doing business through official and unofficial payments to clear goods at the borders; general expenses incurred by businesses at border points; lost business opportunities; value and quantity of wasted products during inspection and cost of time lost in understanding and complying with un-transparent and cumbersome procedures. This has a direct bearing on the region’s competitiveness.

The main disadvantage of NTMs is that they hinder free trade and the benefits that accompany the latter. The protectionist aspect of NTBs discourages competition from bigger industries and also from foreign countries. While this might help domestic firms and industries to grow at first, in the long run, it in fact dampens future growth. This is because, due to the lack of competition, domestic firms can then afford to provide a narrow choice of goods to customers, to lower the goods’ quality, and to raise their prices. Due to this inefficient production, there is also no more incentive for the firms to strive for innovation and excellence.

NTBs can be thought of as a just another way of protection instead of using tariffs. There is another way in which NTBs drive up the prices of goods in the domestic economy. By restricting access to foreign countries where goods could be made more cheaply, more resources have to be employed domestically itself to make the same goods at a higher price. This works against consumers.

NTBs allow these countries to help weak industries or provide compensation to those industries that have been adversely impacted by the WTO laws on reduction of tariffs. The use of NTBs can also result in trade wars. By raising trade barriers against a foreign country, the latter can decide to do the same in retaliation. The imports and exports of both countries are thus restricted, and this greatly reduces the markets open to them, lowering their scope for growth and efficiency.

In the end, the whole point of the Common Market becomes meaningless and few of us want that to happen.

By EABW Editor, Tuesday, November 15th, 2016