By Jean d’Amour Mbonyinshuti
The East African Business Council (EABC) Management on Sunday held a meeting in Arusha, Tanzania and urged the EAC Partner States to adopt a 35per percent as maximum CET rate- the majority position for manufacturer associations in the EAC bloc.
Adopting the 35percent maximum tariff rate is set to incentivize industrial development; protect nascent industries exposed to unfair competition and safeguard industries against cheap and subsidized imports and jobs, according to experts.
The the 35 percent maximum tariff rate will attract investments in industrial value chains and transform the bloc into an export-led, industrialized economy, they said.
The proposed 35 percent tariff rate provides an adequate tariff differential required to incentivize industrial development in the EAC region.
The proposal of 30 percent will create just a 5per percent tariff differential with the 3rd tariff band of 25per percent while the 35 percent will create a tariff differential of 10 percent which will safeguard products that are sufficiently produced in the region against similar cheap imports.
A 10 percent tariff differential is needed to safeguard and retain existing investments which operate the regional value chain as well as attract new investments to transform the EAC industrial sector by transforming secondary intermediates into finished products.
According to EABC analysis, the Products to be assigned Maximum CET Rate (4th tariff band) by the Regional Task Force are sufficiently available or produced in EAC.
Based on the agreed criteria for classifying and categorization of goods, the products identified and assigned in the 4th band are only those manufactured in sufficient quantities in the EAC region.
It should be noted that the EAC Partner States submitted 1,448 tariff lines to be assigned a rate above 25 percent. Out of this submission, it was agreed that 571 tariff lines should be retained at their current rates. As of 23rd October 2021, when the RTF held its last meeting only 459 tariff lines have been assigned to the 4th tariff band which represents 8.06 percent out of the existing 5,688 EAC total tariff lines.
The remaining products which are under consideration of being assigned maximum CET rate are 325 tariff lines which the Partner States have failed to reach consensus. These tariff lines consist of 5.71per cent of the EAC total tariff line.
Even if all remaining tariffs are agreed to be assigned the 4th tariff band which is very unlikely, the 4th band will consist of just 784 tariff lines which are just 13.78per cent of EAC total tariff lines.
This will consist of a very small percentage of EAC tariff lines which can have negative consumer welfare.
In addition, it should not be noted that products to be assigned maximum CET rate are sufficiently available/produced in the region and hence will be traded across the Partner States at 0 per cent import duty.
EABC is proposing a 35per percent tariff rate to promote the consumption of locally manufactured goods and strengthen the regional value chain.
Most of the products which have been considered to be assigned a maximum CET rate (4th Band) are under the EAC priority value chains as provided for in the EAC Industrialization Policy (2012-2032).
Some of these products include textiles, iron & steel and motor vehicles.
The 35per percent CET rate will offer the necessary effective protection the region requires to drive regional value chains and drive industrialization through these products. Some of the products have a long value chain and face unfair competition from cheap imports from Asian countries hence need higher rates to safeguard their production in the region.