Leveraging Trade & Regional Integration for Increased Growth Punit Pruthi Managing Director Amos Dairies ltd

Outline Introduction & Definitions Regional integration (the case of EAC) Determinants of trade performance in Uganda The Common External Tariff and its impact on Uganda’s competitiveness Successful cases of export-led growth and recommendations for Uganda Role of certification and standards in promotion of exports

Regional Integration An economic and/ political arrangement between different regions, marked by the reduction or elimination of trade barriers and the coordination of monetary and fiscal policies. The theory of economic integration can be regarded as the commercial policy of discriminatively reducing or eliminating trade barriers (technical and non-technical barriers) only between the states joining together (Salvatore, 2004). Regional economic groups eliminate or reduce trade tariffs (and other trade barriers) among the Partner States while maintaining tariffs or barriers for the rest of the world (non-member countries). An important feature of the higher levels of economic integration is free trade among members and this free trade is expected to lead to a rapid increase of trade which in turn is likely to lead to rapid economic growth.

Regional Integration (the case of EAC) The EAC is the regional intergovernmental organization of the Republics of Kenya, Uganda, Tanzania, Rwanda, South Sudan and Burundi, with its headquarters located in Arusha, Tanzania. The people of EAC share a common history, language, culture and infrastructure. These advantages provide the Partner States with a unique framework for regional co-operation and integration. The regional co-operation and integration envisaged in the EAC is broad based, covering trade, investments and industrial development; monetary and fiscal affairs; infrastructure and services; human resources, science and technology; agriculture and food security; environment and natural resources management; tourism and wildlife management; and health, social and cultural activities (EAC Establishment Treaty, 2002).

Determinants of Recent trade performance in Uganda Motivation for the Private sector: Cheaper and long term credit should be made accessible to locally based companies involved in Agricultural processing (value addition) usually is a long term investment therefore sustainability and growth of this sector can only be guaranteed if cheap and long term credit facilities are available to the players in the sector. Security stability and conflict resolution: Regional integration reduces the risk of conflict. Economic integration may pave the way for political integration, substantially reducing the risk of internal conflict. Regular political contact among members can build trust and facilitate cooperation, including on security. Collective Employment: EAC member states have agreed to a harmonized classification for issuance of entry/work permits aiming at addressing problems of unemployment and poverty in the region. Mitigating Unforeseen Circumstances: in recent years Uganda has had challenges with border conflicts that have affected export trade. Internally Uganda has also faced challenges with regard to the agriculture sector due to prolonged droughts for example. Tax Incentives: Government of Uganda should focus on enabling priority sectors such as Agriculture with incentives or Special Economic Zones to both enable growth as well as attract investment. Availability of raw materials: Uganda is blessed with good climate and weather and has an abundance of livestock hence plenty of agricultural products at very competitive prices. Companies have taken advantage of such conditions to establish themselves .

The Common External Tariff and its impact on Uganda’s competitiveness for export What is the CET? CET refers to an agreed set of duties levied on imported goods entering any EAC partner state from outside the regional bloc What was the CET supposed to do? Reduce the tariff rate for imports from Uganda, Kenya, Tanzania, Rwanda and Burundi Set a common tariff for goods from outside the EAC. Specifically, replace a 0 -5 -15-30 tariff structure (0% tariff for raw materials, 5% for goods with economic importance, 15% for semi finished goods, and 30% for finished products) with a 0-10-25 normal tariff structure (0% for raw materials, 10% for semi finished products, and 25% on finished products) The CET includes Schedule 1 with duty rates under the three-band tax structure, i.e. rates applied for raw materials (0%), intermediate products (10%) and finished goods (25%) and Schedule 2 with duty rates of sensitive items(the so- called ‘SI list’) in the range of [35%;100%].

Successful cases of export-led growth Export-Led Growth is a trade and economic policy aiming to speed up the industrialization process of a country by exporting goods for which the nation has a comparative advantage. This strategy seeks to find a niche in the world economy for a certain type of export. Industries producing this export may receive governmental subsidies and better access to the local markets. By implementing this strategy, countries hope to gain enough hard currency to import commodities manufactured more cheaply somewhere else. The Asian Tigers (Hong Kong Special Administrative Region, The Republic of Korea, Taiwan Province of China, and Singapore), Bangladesh, and India all thrived on export-led growth.

Role of certification and standards in promotion of exports Certification and standards are mandatory or voluntary, usually third party assessed, norms and standards relating to quality, social, environmental, ethical and food safety issues adopted by companies. They are also usually incorporated in the laws of a country. Certification is a guarantee of quality and this increases a country’s competitiveness in terms of quality on the global markets. Certification standardises goods and makes competition fair and healthy, largely based on competitive prices. Certification eliminates any potential health hazards. Agricultural products which are largely perishable have to adhere to the strict standards set globally to avoid circumstances like product bans/ embargos on a country. Certification also boosts end user confidence in a country’s products hence building a customer loyalty and hence promoting the country’s exports.

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