EAC States in dilemma over tariffs
East Africa’s private sector players are concerned by the slow pace of resolving a common external tariff (CET) regime which is expected to usher in a free trade zone.
A free trade zone will increase intra East African Community (EAC) trade, as there will be no duty on goods and services imposed amongst them.
The regime will also agree on a common CET, where imports from countries outside the bloc will be subjected to the same tariff across partner states.
Though Nicholas Nesbitt, the chair of East African Business Council, did not directly refer to the frustrations, it is an inference taken out of his statement when he said the issue was creating a “dilemma.”
Nesbitt said finalising the review on CET was part of an item on the council’s agenda, to be presented to the EAC council of ministers for delivery of quick wins for the region.
“There are ongoing discussions whether to adopt a three-band or four-band structure with the highest rate of 35 per cent CET. The challenge is if you are a manufacturing country, you will want a high CET while trading countries will want a low CET to import finished goods for your citizens. Therein, lies the dilemma,” said Nesbitt.
The implementation of CET is behind schedule, as it was to take effect on July 1, this year. The bloc’s member states had agreed there be a CET of zero per cent on raw materials and capital goods, 10 per cent on intermediate goods and 25 per cent on finished goods.
Kenya wants the current CET regime comprising a triple band reviewed to make it a four-band structure, arguing the three-band structure does not encourage backward and forward linkages in value addition to products and restricts the growth of the manufacturing sector.
However,Uganda is opposed to the proposal.