EAC Partner States meet the minimum requirements for Category A exchanges under the AfCFTA
The East African Community partner states have adopted the EAC tariff offer for Category A products amounting to 90.2% (5,129 tariff lines out of a total of 5,688 lines) to be liberalized in 10 years after the start of trade under the African Continental Free Trade Area (AfCFTA). ).
The EAC is now among the States Parties that have met the minimum requirements for Category A to begin trading on a provisional basis.
The EAC negotiates the AfCFTA en bloc. An extraordinary meeting of the EAC Sectoral Council on Trade, Industry, Finance and Investment (SCTIFI) held on Friday further requested the EAC Secretariat to submit the tariff offer of the CAE for Category A to the AfCFTA as soon as possible.
The Extraordinary SCTIFI also requested the EAC Secretariat to convene a meeting of experts by April 15, 2022 to review Categories B and C of the EAC tariff offer.
Tariff offers from EAC Partner States will now be subject to verification by the AfCFTA Secretariat, which is based in Accra, Ghana.
The AfCFTA has so far verified 29 tariff offers to ensure they meet the terms and this number will increase to 34 once the offers from the EAC Partner States are verified.
Verification of tariff offers will ensure that AfCFTA member states that meet the minimum requirements begin trading under the Continental Free Trade Area Agreement.
Speaking at a press conference, the Kenya SP for EAC, Dr. Kevit Desai, who also chaired the extraordinary meeting of the SCTIFI, said that the AfCFTA would give Partner States access to a extensive market of more than 900 million people.
Mr. Desai said the Community would also benefit from increased opportunities for trade, job creation, industrialization and economic prosperity.
“Expanded opportunities include manufacturing, value addition, regional value chains, agribusiness, motor vehicle assembly, pharmaceuticals, automotive aftermarket industries and mineral processing, among others,” Dr. Desai said.
Regarding the determination of the maximum rate of the Common External Tariff (CET), SCTIFI requested Partner States to consult on the analysis undertaken by the Secretariat on the proposed maximum rates of the CET and to submit comments on the analysis and the proposed maximum CET rates of 30%, 33% and 35% at the Secretariat by March 15, 2022.
Ministers instructed the Secretariat to convene an extraordinary meeting of SCTIFI on March 18, 2022 to deliberate on the maximum CET rate.
Dr Desai told the media that it was agreed that Partner States consult with key stakeholders on the proposed CET maximum rates and submit their comments to the Secretariat by March 15, 2022.
The EAC Secretariat made a presentation to SCTIFI on the analysis it had undertaken on the proposed rates of 30%, 33% and 35% for products classified in the 4th band.
The Secretariat indicated that the benefit measurement indicators for the products identified to be covered by the maximum tariff band are positive, with the exception of welfare loss, which is transitory.
The different maximum CET rates proposed will have various macroeconomic implications. In terms of revenue implications, the short-term average potential impact on total tax revenue of EAC Partner States increases by 3.9% (scenario 1 – 30%), 4.9% (scenario 2 – 33%) and 5.5% (scenario 3 – 35%). Regarding employment, job creation increases marginally with 0.02% (5,055 people) below the maximum rate of 30%; 0.03% (6,089 people) with a maximum rate of 33% applied; and 0.03% (6,781 people) increase in EAC average formal employment below the maximum rate of 35%.
In terms of trade implications, the potential trade diversion to the EAC (intra-EAC trade) increases by US$13.03 million below the maximum rate of 30%, from US$16.51 million with a maximum rate of 33% and US$18.9 million with the highest rate of 35%.
With respect to industrial development, industrial production increases under each of the proposed CET maximum rates of 30%, 33%, and 35%, with the highest rate of 35% conferring the greatest gains in industrial production.
There is a 0.02% (US$7.7 million) increase in industrial production with a maximum applied rate of 30%; increase in production of 0.03% (10.3 million dollars) with a rate of 33%; and an increase in production of 0.04% (USD 12.1 million), the highest rate being 35%.