Decline in trade levels was partly attributed to drop in aggregate demand levels

Countries making up the East African Community (EAC) have raised the red flag following the release of Trade and Investment Performance Report.

The report indicates that total trade declined by 19.5 per cent from $55.4 billion (Sh5.56 trillion) in 2015 to $44.6 billion (Sh4.46 trillion) in 2016.

Total EAC exports also declined by 6.8 per cent to $14.9 billion (Sh1.5 trillion) from $16 billion (Sh1.61 trillion) in 2015. Extra-ordinary Council on Trade, Industry, Finance and Investment sitting in Arusha observed that the Trade and Investment Report 2016 indicates EAC Intra-trade has been declining since 2014 due to various factors which needed to be addressed.

The decline in the trade levels was partly attributed to drop in aggregate demand levels associated with widespread drought in the region coupled with falling international prices for the main EAC exports.

Total EAC imports fell by 24.6 per cent to $29.7 billion (Sh3 trillion) in 2016 from $39.4 billion (Sh4 trillion) in 2015. The fall in imports was mainly attributed to the fall in crude oil prices that could have reduced the import bill for petroleum products.

As a result, the EAC Secretariat has been directed to among other measures undertake an in-depth analysis to identify the specific factors affecting trade flows in the EAC and determine the impact of the identified factors on the EAC terms of trade, investment and the competitiveness.

“The secretariat will propose appropriate recommendations to revamp the EAC intra-trade and investment flows; assess the impact of non-tariff barriers (NTB) on EAC trade flows in quantitative terms and compile the Partner States’ comments to the EAC Elimination of NTB Act 2017 and expedite the amendment process of the Act,” noted the council.

DOMESTIC TAXES

Others are meant to convene a meeting of ministers and permanent secretaries to discuss the findings, challenges and provide strategic interventions to bolster the EAC intra-trade, investment and the competitiveness.

It will identify areas distorting trade in EAC emanating from national policy actions including local content requirements and domestic taxes.

This should take cognizance of the interest of the Partner States’ national measures. Among the highlights of the Investment Report, EAC trade deficit declined by 36.8 per cent to $14.8 billion in 2016 from $23.4 billion in 2015. This is partly due to a fall in the imports into the region.

The decline was also registered in Intra-regional exports. Total Intra- EAC exports which accounted for 16.5 per cent of total EAC Exports declined by 17.4 per cent to $2.6 billion (Sh260 billion in 2016 from $3.2 billion (Sh320 billion) in 2015.

Kenya which dominates Intra-regional trade accounted for over 45.6 percent of total intra-regional exports.

The main exports from EAC in 2016 included tea, coffee, cocoa and horticultural products. Mineral ores, especially gold and diamond, constituted a sizeable percentage of the exports as well. East Africa is heavily dependent on imports, especially from China, India, Japan and the Far East and Europe.