Why Tanzania’s elevated income status is good for EA integration
Economic experts have welcomed the World Bank’s elevation of Tanzania to a lower-middle-income country, saying the status will strengthen the ability of the East African Community (EAC) States to negotiate trade agreements as a block.
They reckon the elevation from the low income to lower-middle-income category will end Tanzania’s eligibility for preferential access to various trading blocs, and hasten Kenya’s South Western neighbour into signing a trade deals with the European Union of which it has been hesitant.
Gerrishon Ikiara, an economics lecturer at the University of Nairobi said the difference between least developed countries (LDCs) and developing countries is the rules of trade.
“As a Least Developed Country, Tanzania has been receiving full duty-free and quota-free access to the EU for all their exports with the exception of arms,” said Ikiara.
This, Ikiara said, put Tanzania at an advantage as it was able to slice Kenya’s market share, especially of its flower and horticulture products in the EU market.
He said now that Tanzania is in the same boat, they will have a greater incentive to join Kenya to negotiate the economic partnership agreements (EPA’s).
Only two regional countries: Kenya and Rwanda, have signed the EPAs with the EU, with Tanzania stalling on the trade pact which it says has serious repercussions on its revenues and growth of industries.
The EU-EAC EPA covers trade in goods and fisheries as well as developed corporations that aim to reinforce co-operation on the sustainable use of resources.
Further negotiations are ongoing to include services and trade-related rules in the future.
The deal is fully in line with the EAC Common External Tariff, and bans unjustified or discriminatory restrictions on imports and exports, which contributes to the EAC’s efforts to eradicate non-tariff barriers in intra-EAC trade.
It supports the EAC’s regional integration agenda and has what it takes to foster development.
Negotiations between EU and the six-nation EAC bloc on the agreement were concluded in 2014. Kenya ratified it in September 2016.
The trade deal seeks to increase market access for firms on both sides, but has remained in limbo ever since because Tanzania, Burundi and Uganda have refused to sign it into law.
“The elevation means Tanzania will face Kenya’s problems as it won’t enjoy everything but arms and so will want to support the EPA as a guarantee to market access in Europe,” said Ikiara.
With a long-running impasse, the EU executive had been prepared to allow Kenya and Rwanda to sign bilateral accords.
In February last year, the EAC summit in Arusha appeared to pass the final death sentence to the EPA, with leaders agreeing that after failing to reach a common position, each country should be able to negotiate with the EU after a four-month grace period.
However, Uganda opposed the decision, saying it would compromise the region’s unity.
Experts also had reservations, saying individual negotiations will weaken rules of origin, resulting in partner states operating on different trading regimes, consequently compromising regional integration efforts.
The leap for Tanzania, East Africa’s second-largest economy after Kenya, comes five years ahead of projection underlining the country’s rapid growth in recent years.
Last year, Tanzania recorded an economic growth of seven per cent, making it one of the fastest growing economies in Africa.
Kenya is the only other East African Community member country that achieved the lower middle income economy status in 2014.
Responding to the World Bank’s announcement, Tanzania President John Magufuli in a tweet, commended citizens for the achievement.