Kenneth Bagamuhunda Director Customs

 Theory and Scope of Regional Integration and CU  Background and objectives of EAC CU  Legal and institutional Framework  Implementation Mechanism  Achievements  Challenges

 CU is stage of Regional Integration process  CU is conceptualised as a key pillar of Regional Economic Integration  RI is a phenomenon that eludes specific definition and this state of ambiguity is echoed by various scholars of RI  Some define RI as ◦ “a form of collective action among countries to attain a certain goal” (Feng and Genna, 2003) ◦ ‘any policy designed to reduce trade barriers between a subset of countries, regardless of whether those countries are actually contiguous or even close to each other’ Winters 2003

◦ portrayed in the context of geographical proximity and this may explain the usage of the terms ‘trading blocs’ ◦ a series of voluntary decisions by previously sovereign states to remove barriers to the mutual exchange of goods, services, capital, or persons’ (Smith, 1993).  Regional integration have been explained under the economic and political disciplines

What is a Customs Union? A legally binding voluntary commitment/ agreement of cooperation by neighboring countries to dismantle trade barriers amongst themselves and adopt harmonized trade regimes amongst themselves and apply common trade regimes to third parties

 There has been a surge of Regional Integration Agreements since 1990s.  as of 15 May 2011, some 489 RTAs, had been notified to the GATT/WTO. ◦ 358 RTAs were notified under Article XXIV of the GATT 1947 or GATT 1994; ◦ 36 under the Enabling Clause; and ◦ 95 under Article V of the GATS. ◦ At that same date, 297 agreements were in force

 History of EAC integration stretches back to 1900 when a single customs collection point at Mombasa for Kenya and Uganda  A CU was established in 1917 which was later joined by the then Tanganyika in 1919

 EAC integration is among the oldest initiatives in Africa dating back to the beginning of the 20 th Century  Collapsed in 1977 due some factors  Cooperation was rekindled in mid 1990s through a cooperation agreement  The Agreement was upgraded into a Treaty that came into force in 2000  Scope of cooperation covers economic, social, cultural and political areas  Degree of integration is progressive with Customs Union (CU) as the entry point followed by Common Market (CM), Monetary Union (EAMU) and Political Federation (PF)

 Provided in the Treaty that EAC will establish a Customs union as the first stage of integration followed by a Common Market, subsequently a Monetary Union and ultimately a Political federation  A Protocol establishing the Customs Union is part of the Treaty and was negotiated in 4 years  commenced on 1 st January 2005

 liberalization and promotion of Intra EAC trade for mutual benefit of all  Enhance production efficiency  Promote domestic, cross-border and foreign investment  Industrial diversification – import substitution leading to Economic development

 Create more trade (trade creation)  Promote production and consumption of locally manufactured goods (Import substitution)  welfare gains – price reduction and stability  greater opportunity to exploit economies of scale  lock-in effects of economic reforms  thrust for economic growth  promoting competition and economic efficiency, and  promoting regional integration into the global economy

The customs Union is administered under the customs law of the Community comprised of:  Relevant provisions of the Treaty  Regulations and directives made by the Council  Acts of the Community enacted by the Assembly  Decisions made by the EAC Court of Justice  Relevant provisions of the international law

Specifically the administration of the CU is provided for in the:  EAC Customs Management Act  EAC Customs Regulations  Decisions and directives of the Council

Decentralized framework with the centre at Arusha in the transitional period of 5 years Structures 1.The Council 2.The committee on Customs 3.Directorate of Customs 4.The Customs/Revenue Authorities

 Adoption of the Common External Tariff with three tariff bands of 0%, 10% and 25%  Sensitive rates on specific products  Internal Tariff elimination  Common Rules of Origin  Common Customs law- EAC CMA  Common Competition policy  Common SQMT Law and Protocol

 Adopted a mechanism for elimination of NTBs  In process of operationalization a trade dispute settlement system  Established a regional legislative body which enacts necessary laws  Have in place an active regional court that deals with matters relating to implementation of the Treaty  Development of private sector linkages, organisation and participation at the regional level  In process of establishing a Single Customs Territory as a strategic initiative to consolidate the CU  Project to interconnect customs systems is on-going  Building supranational institutions to drive the integration process  Extra EAC trade cooperation under the COMESA-EAC and SADC Tripartite FTA, EPA with EU, TIFA with US and trade cooperation with China

Trade performance  Total intra- trade grew from $1.6 billion in 2005 to $3.8 billion in 2010 which is more than 100% increase.  Percentage of intra trade to total trade has increased from 7.8% in 2006 to 11.4% in 2010  Total EAC exports grew from $6.4 billion in 2006 to 11.1 billion in 2010 hence 73% increase  Intra EAC exports to total exports was 20.2% in 2010 compared to 14% in 2006  Intra EAC imports to total imports averages to 5%  Cross border investment and FDI

Revenue and Investment  Average total revenue growth in the 5 partner states was 11% in 2010 compared to 2009  The overall growth in revenue since 2006 for the first three states of the EAC has grown by 42%  Rwanda and Burundi's revenue has grown by 20% between 2008 and 2010  The Revenue/ GDP ratio has stagnated over the period in all the partner States between Kenya at 22%, Tanzania 18%, Uganda and Rwanda at 12.5%

 In 2009, EAC attracted total FDI of US$ 3,732 million which was 2% of Africa’s total FDI inflows  Uganda, Tanzania and Rwanda have been registering growth in FDI inflows over the last 5 years  FDIs accounted for 61%, local investment 36% and portfolio investment at 3% in 2009  investment has been in capital intensive sectors such as oil exploration, mining and telecommunication  Banking and Insurance has also attracted both Foreign and cross border investment.

 Attainment of free circulation of goods is hampered by retention of internal borders  Some key tax and trade related regimes and policies are not yet harmonised  Multiple membership which may create grounds for trade deflection  Limited awareness  NTBS  Dependency on Customs taxes as source of revenue

 Inter governmentalism approach vs supra nationalism  Interconnectedness between the centre and the executing level is weak  Weak regional institutional mandate to drive the regional programmes