Smoothening agricultural food commodities trade in East Africa Community (EAC): Balancing Tariff Barriers (TBs) and Non-tariff Barriers (NTBs)

Abstract

This research work was fully funded by the African Economic Research Consortium (AERC)

Abstract

There is a general belief that removal of barriers to trade would promote increased trade in commodities and particularly food commodities towards improved food security. The East Africa Community (EAC) has made significant headway in eliminating tariff and non-tariff barriers to trade via the Customs Union Protocol. However, information as to whether these policy decisions have contributed to increased availability and access to food commodities is inadequate in literature.  This study, therefore, sought to identify the proportion of tariff and non-tariff barriers on intra-East Africa Community trade in agricultural food commodities from 1999 to 2014. Trade barrier data was gathered from the Trade Analysis and Information Systems database. Data on prices, production and import levels of food commodities was sourced from Food and Agriculture Organization database and national bureaus of statistics of each EAC country. Results show that despite the tariff lines being relatively higher than duty free lines for most commodities, trade of agricultural food commodities with EAC had been liberalized to a large extent, mainly through more duty-free lines, an attribute that contributed to more trade volumes over the 15-year study period. More trade was achieved for products with fewer tariff barriers like coffee. To boost trade the study recommends reducing tariff barriers through increasing the number of duty-free and ad-valorem lines. However, this should be done carefully since it’s a major source of foreign exchange to the countries. Further, there is need to reduce distance and time taken to deliver bulk products by improving infrastructure especially road and modern railway networks to bridge the distance gap between non-neighboring countries. Countries also need to ease their custom procedures. For example, Rwanda had among the least profit after tax of 36 percent compared to an average of 67 percent for all the countries. This was mainly attributed to its higher number of customs procedures which were on average five compared to others which had three custom procedures. Lastly, each country needs to specialize more on products they have comparative advantage in producing and exporting.

Key words: Trade, Agricultural food commodities, Tariff and non-tariff barriers

DOI: 10.7176/JESD/10-20-13

Publication date:October 31^st 2019