EAC 

Sunday, April 27, 2014 

Ugandan best interests lie in EAC

BORDERS: The ultimate allocation of the benefits of trade within a liberal EAC market will be determined by the competitiveness of individual member countries.

Regional economic integration is currently a pervasive phenomenon not only in Africa, but also in other parts of the world. 

Some of Africa’s key regional economic communities (RECs) include - the East African Community (EAC), the Economic Commission for West African States (ECOWAS), the Southern African Development Community (SADC) and many others. Africa’s regional integration efforts come in the wake of the realization that there is considerable unexploited potential for intra-regional trade in the continent with significant prospects for positive economic transformation and poverty reduction. One of the key challenges in the process of integration however is the balancing of national interests against regional integration imperatives. In this article, I reflect on some of the options for addressing this trade-off looking at the case of the EAC.

Intra-Africa trade has until now been grossly limited due to its legacy of fragmentation from colonialism and the associated infrastructure designed strictly for mercantilist trade with the colonial powers rather than with regional markets within the continent. To date, Africa has about eight, often overlapping regional economic groupings (REGs) at various stages of integration all of them pillars of an envisaged African Economic Community (AEC). The REGs represent trade liberalization within the respective groupings for enhanced trade within the groups but also an eventual continental AEC.

The East African Community (EAC) with the five member states of Kenya, Uganda, Tanzania, Rwanda and Burundi is one of the advanced regional economic groupings in Africa. Revived in 2000, the EAC launched a Customs Union in 2005 and Common Market in 2010. On 30th November 2013 the Heads of State of the member countries ratified the EAC Monetary Union (EAC-MU) Protocol expected to come into force in 10 years.

 In addition, considerable mileage has been realized in terms of trade facilitation in the region particularly in form of the harmonization and reform of customs procedures. The positive impact of these wide range of trade reforms is already evident in terms of trade efficiency and volumes.

A key objective of the EAC integration as spelled out in the Treaty is to bring about “accelerated, harmonious and balanced development” and the equitable sharing of the benefits of growth. In fact, to address the initial conditions of disparity among the EAC member states particularly the dominance of Kenya in the REG, the Customs Union protocol incorporated the principle of asymmetry which allowed Uganda and Tanzania to implement a phased reduction of tariffs on categories of Kenyan goods to allow firms in Uganda and Tanzania to attain some parity in competitiveness with those in Kenya. The phasing out of all internal tariffs which was duly realized by 2010 now means that member states can only appropriate the benefits of trade in the framework of a free and competitive EAC market. 

It is important to note however that while there are vast areas of cooperation, there are also areas of competing interests among the member states especially in view of similarities in the economic structures and the limited specializations along differentiated comparative advantages. The ultimate allocation of the benefits of trade within a liberal EAC market will be determined by the competitiveness of individual member countries. This is where national governments have a critical role to play especially in the development of national competitiveness along respective national comparative advantages. 

Contrary to the sceptics of South-South trade, there is considerable scope for a classical division of labor and specialization even in the EAC context. For example, Uganda’s current and clear comparative advantages in the EAC include: 1) its central location or “land-linked” status which can be developed into a logistics hub for Central Africa and the Great Lakes region  

2) its vast agricultural potential which can transform the country into the region’s food basket,

 3) its edge in educational service provision which can be used to set the pace and standards for education service provision throughout the region, 

4) its growing agro-processing sector which can be nurtured into the region’s source of processed goods, but also 5) its opportunity to use the facilities of the EAC to overcome its land-locked status and ensure easy access to the sea for cheaper transportation.  

Uganda’s national interests in the East African Community (EAC) need to be addressed systematically through a comprehensive policy framework that will guide the implementation of the EAC protocols in Uganda; direct the development of the country’s comparative advantages in the EAC; support the mitigation of the country’s disadvantages such as that of access to the sea; and help shape an EAC that delivers on the social contract of improved welfare for East Africans. The National Policy on EAC Integration drafted by the Ministry for East African Community Affairs (MEACA) can be instrumental in realizing this vision and in bringing on board a large section of Ugandans.   

Thus, there is need to address Uganda’s interests in the EAC more systematically through a comprehensive policy framework. The National Policy on EAC Integration drafted by MEACA goes some way to address this need. It has to be emphasized however that along with the policy, there is a critical role for our national government to ensure Ugandans are not ushered into the EAC at a disadvantage vis-à-vis their counterparts in the other member states in relation to available opportunities. This in fact is an aspect of the equity objective enshrined in the Treaty. Underscoring the role of our national government is not a call for nationalism but of the need for prudent oversight on legitimate national interests in the EAC integration process. In a fully liberalized and functional common market for example, there is supposed to be free movement of labor and so parity in labor quality and employability is necessary for the equitable distribution of employment opportunities otherwise we are likely to continue hearing complaints abou’ nationals of other member states example, ‘Kenyans’ taking up ‘Ugandan” jobs or vice-versa. 

In the common market we are all ‘East Africans’ and free to seek employment in any part of the community within a free and competitive labor market framework.

Dr. Ijjo is a Senior Research Fellow, Trade and Regional Integration Unit Economic Policy Research Center – Kampala, Uganda

By Dr. Alex Thomas Ijjo, Sunday, April 27th, 2014