September 29, 2008

Document of the World Bank

Report N

o. 45708-AFR

N

on-Tariff Measures on G

oods Trade in the East African C

omm

unity

Report No. 45708-AFR

Non-Tariff Measures on Goods Tradein the East African CommunitySynthesis Report

PREM 2AFRCIAfrica Region

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ABBREVIATIONS & ACRONYMS

ACP Africa, Caribbean, Pacific AfDB African Development Bank AFTA Asian Free Trade Area AGOA African Growth and Opportunity Act ASEAN Association of Southeast Asian

Nations ASYCUDA Automated Systems for

Customs Data BIC business investment climate BNPP Bank-Netherlands Partnership

CEPGL Economic Community for Great

CEPT Common Effective Preferential Tariff CET common external tariff CFS Container Freight Station COMESA Common Market for Eastern and

Program

Lakes Countries

DRC DTIS EABC EAC EATTFP

ECCAS

ECJ EEC EPA EPZ EU FDI FTA GATT

GDP GNFS GNI GSP HIPC IDPs IDF

Southern Africa Democratic Republic of Congo diagnostic trade integration studies East Africa Business Council East African Community East Africa Transport and Trade Facilitation Project Economic Community of Central African States European Court of Justice European Economic Community Economic Partnership Agreement Export Processing Zones European Union foreign direct investment free trade area General Agreement on Tariffs and Trade gross domestic product goods and nonfactor services gross national income Generalized System of Preferences Highly Indebted Poor Countries internally displaced persons Institutional Development Fund

IF ISSO

ITWG LDCs MDG MFN MoU MRA MS NBS NMC NPV NTMs OTRI PRSP REC SAD SADC

SEA SEM SIMBA

SITC

SPS SSA TBT TEU TIFA

TRAINS

TPRs

Integrated Framework International Standards Setting Organizations Interim Technical Working Group less developed countries Millennium Development Goals most favored nation memorandum o f understanding Mutual Recognition Arrangements member state National Bureau o f Standards National Monitoring Committee net present value non-tariff measures Overall Trade Restrictiveness Index Poverty Reduction Strategy Paper regional economic community Single Administrative Document Southern African Development Community Single European Act Single European Market Similarity Based Complex Analysis System Standard International Trade Classification sanitary and phyto-sanitary measures Sub-Saharan Africa technical barriers to trade Twenty Foot Equivalent Units Trade and Investment Framework Agreement Trade Analysis Information System (of UNCTAD) Trade Policy Reviews

TTRI Trade Tar& Restrictiveness Index UNCTAD United Nations Conference on Trade

and Development WCO World Customs Organization WDI World Development Indicators WTO World Trade Organization

Vice President : Obiageli Ezekwesili Country Director : Mark Tomlinson

Sector Director : Sudhir Shetty Sector Manager : Kathie Krumm

Task Team Leader : Sumana Dhar

NTMS ON GOODS TRADE IN THE EAC: SYNTHESIS REPORT

TABLE OF CONTENTS

FOREWORD .................................................................................................................................... i

EXECUTIVE SUMMARY ............................................................................................................ 111

Chapter 1 . Introduction .................................................................................................................. 1 I . Continuing Efforts toward Greater Integration in Goods Trade .................................. 1 I1 . EAC’s Working Definition o f NTMs .......................................................................... 5 I11 . Work Already Initiated by EABCEAC and Others .................................................... 6

Chapter 2 . PROFILE OF THE EAC .............................................................................................. 9 I . The EAC’s Economic Features .................................................................................... 9 I1 .. Formal Goods Trade .................................................................................................. 10

Chapter 3 . METHODOLOGY TO ORGANIZE FINDINGS ..................................................... 15 I . A Path o f Open Regionalism ..................................................................................... 15 I1 . A Ranking by the Ease o f Action for ReductionRemoval ........................................ 15 I11 . A Practical Way Forward ........................................................................................... 16

Chapter 4 . NON-TARIFF MEASURES IN THE EAC ............................................................... 20 I . Perspective from the EAC’s Formal Goods Trade ..................................................... 20 I1 . Economic Cost of NTMs ........................................................................................... 22 I11 . NTMs Prevalent in the EAC ...................................................................................... 23 IV . Other Constraints on Goods Trade in EAC ................................................................ 36 V . Factors Likely to Influence Speed of EAC Action on NTMs .................................... 46

Chapter 5 . LEARNING FROM OTHER REGIONAL ECNOMIC COMMUNITIES ............... 49 I . The EU Approach to Non-tariff Measures ................................................................. 49 I1 . The ASEAN Approach to Non-tariff Measures ......................................................... 54

Chapter 6 . LOOKING FORWARD: RECOMMENDATIONS FOR FOLLOW-THROUGH ... 59 I . NTM Decisions .......................................................................................................... 59 I1 . Working within the Current EAC System ................................................................. 62 I11 . Needed EAC Actions Outside the Direct Arena o f NTMs ........................................ 67

APPENDIX GROUP A ................................................................................................................. 69 Appendix A1 . Details of Trade Flows of EAC Members .................................................... 70 Appendix A2 . Trade Routes in East Africa ......................................................................... 73 Appendix A3 . UNCTAD Coding System of Trade Control Measures ................................ 78 Appendix A4 . WTO Inventory o f Non-tariff Measures ...................................................... 82 Appendix A5 . Transport Costs and Prices in East Africa .................................................... 83 Appendix A6.1 Range o f Constraining Infrastructure in EAC ............................................ 86 Appendix A6.2 Infrastructure Improvements That Would Make a Difference ................... 88 Appendix A7 . Sensitive Products under the EAC Customs Union ..................................... 89 Appendix A8.1. Sanitary and Phyto-sanitary Priority Needs for a EAC member: Uganda 90 Appendix A8.2 EAC’s Outstanding Priorities for SPS ....................................................... 92

BIBLIOGRAPHY ......................................................................................................................... 93

WEB SITES ................................................................................................................................... 98

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APPENDIX GROUP B (available electronically on request to sdhar3GiJworldbbank . org) Recent Economic and Trade Profiles B 1 . Burundi B2 . Rwanda B3 . Kenya B4 . Tanzania B5 . Uganda

List o f Boxes

Box 4.1. Burundi: Steps in Customs Formalities for Goods at Bujumbura ................................... 24 Box 4.2. Burundi: Institutions for Administrative and Customs Formalities ............................... 25 Box 4.3. Uganda: Public Agencies to Ensure Food Safety, Agricultural Health, and/or Quality Standards ....................................................................................................................................... 25 Box 4.4. The Dairy War: Kenya versus Uganda and Tanzania .................................................... 32 Box 4.5. Product Definition: The Case of Incompatible Sugar ..................................................... 33 Box 4.6. Kenya-Uganda Standoff in Livestock Trade: ................................................................. 36 Box 4.7. Grains Trade in the EAC: Informal Trade and NTMs .................................................... 38 Box 5.1. Establishing the Principle of Mutual Recognition: The Cassis de Dijon Case ............... 51 Box 5.2. The Copenhagen Criteria for Accession to the EU ......................................................... 53

List of Figures Figure 3.1. Categories of NTMs ................................................................................................... 16

List o f Tables

Table 2.1. An Economic Profile o f the EAC. 2000-6 average ........................................................ 9 Table 2.2. Value of Exports o f All Commodities to EAC ............................................................. 11 Table 2.3. Exports to EAC by Member Countries by SITC 1 Categories (percent o f total) ........ 12

Table 3.1. Summary Measures o f Core NTMs (percentage points) ............................................. 18 Table 4 . lEstimated Unit Transport Costs for Container ............................................................... 21

Table 4.3. Severity o f NTMs on Goods Trade in EAC: ................................................................ 40 Table 5.1 . Most Prevalent NTMs in ASEAN ................................................................................ 55 Table 6.1, Starting ReductionRemoval o f Non-tariff Measures in EAC ...................................... 65

Table 2.4 Top Commodities in Export Value Shares, 2000-6 average ......................................... 13

Table 4.2. Severity o f NTMs on Goods Trade in EAC: ................................................................ 39

FOREWORD

This i s a synthesis o f a five-country study being prepared by the World Bank at the request o f the East African Community (EAC). In establishing i t s free trade area, the EAC has been promoting free movement o f goods among its members since 2005, primarily by dismantling tariffs and customs duties. In the elimination o f non-tariff measures (NTMs) to trade in goods, the EAC intent and legal framework i s already in place. In the EAC Protocol, Article 13( 1) stipulates that member countries must agree to eliminate remaining NTMs and not to impose new ones. Moreover, Article 13(2) provides that member states shall formulate a mechanism to identify and eliminate such NTMs.

EAC Secretariat requested overall synthesis o f findings based on in-depth member country analyses for i t s member states. The work i s expected to feed into the EAC member deliberations and to devise practical actions to make Art 13 o f the EAC Protocol fully operational. It will also provide the anchor for the initial work program o f the National Monitoring Committees for NTMs established in June 2007 in most o f the member countries.

The concept for the phased work was reviewed and endorsed in the Bank over January 24- Februrary 4, and at the EAC in Arusha on February 11, 2008. The assessment i s based primarily on interviews conducted in the EAC from February to June 2008 of private stakeholders, covering a wide array of producers, traders, and transporters, as well as a variety o f trade facilitation agencies and government departments. The draft synthesis report was reviewed in the Bank on September 22,2008. At the conclusion o f the stocktaking, the EAC approval i s expected to start a second stage of work focused on practical steps toward reducing and eliminating NTMs.

The World Bank task team leader (TTL) and primary author i s Sumana Dhar (AFTP2). With the TTL, the task team across the EAC countries was composed o f Josphat Kweka, Tracey Lane, and Rachel Sebudde (AFTP2); Eric Mabushi (AFTP3); Peter Isabirye (consultant, AFMRW), Viju Ipe (consultant, AFTP2)and Valentina Rollo (JPA). Local consultant support was provided by Tharcisse Kadede (Burundi), Simon Ihiga (Kenya), Jean Basco Iyadema (Rwanda), and Milton Ayoki (Uganda). Logistics and mission support was provided by the following Bank s ta f f Aurore Simaneye (Burundi), Mary-Anne Mwakangle (EAC and Tanzania), Carol Kidiavayai (Kenya), Josiane Niyonkuru (Rwanda), Rosemary Mugusha (Uganda), and Marjorie Kingston (Washington, DC) as well as Jackilina Trindade (GEP-CERDI summer intern).

The team thanks the Bank staff who contributed to the concept and decision draft reviews for the resultant improvements. It i s particularly grateful to the insights and detailed comments provided by reviewers, Mona Haddad (PRMTR), Michael Jensen (PRMTR), and Fahrettin Yagci (senior consultant PRM) as well as the EAC Director of Trade, Flora Musonda.

The team thanks Mark Tomlinson (CD-RI), Kathie Krumm (Sector Manager, AFTP2), as well as Colin Bruce (then CD-Kenya, Rwanda); Victoria Kwakwa (CM-Rwanda); John McIntire (CD- Burundi, Tanzania, Uganda); Alassane Sow (then CM-Burundi); and Harriet Nannyonjo (ag. CM- Uganda) for their guidance during preparation. The document benefited from discussion with the Bank teams working on agriculture and rural development, and on transport in AFR. The team recognizes the financial assistance from the Bank AFR operations (AFCRI) and the Government o f the Netherlands (through the BNPP trust funds). The team i s very appreciative o f the openness o f the Governments o f Burundi, Rwanda, Kenya, Tanzania, and Uganda in providing access to information, discussing preliminary concepts and draft report, both through their EAC delegations at Arusha, Tanzania and during the preparatory mission, interviews, and analysis in

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the country capitals. The support from Peter Kiguta, Director General-Trade and Customs, EAC and his staff at the EAC Secretariat i s gratefully acknowledged.

In addition to informing the policy deliberations by the member delegations and Council o f Ministers at the EAC, it i s hoped that the report will be used to determine the national policy actions o f the EAC member countries in the diverse arena o f NTMs on goods trade, both directly and as part o f the EAC. During preparation, the findings informed the World Bank’s assistance strategy for the next three years and country team deliberations for Burundi, Rwanda, Kenya, Tanzania, and Uganda.

September 2008

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EXECUTIVE SUMMARY

The purpose o f this note i s to highlight the key findings o f an assessment o f non-tariff measures (NTMs) on goods trade in the EAC, and identify priorities for a second stage o f work focused on practical steps toward reducing and eliminating these NTMs.

I. Non-tariff Measures as the Next Main Area of Action for Strengthening EAC’s Trade Integration

Common market deliberations in EAC. The E A C wants to consider the elimination o f the NTMs within the context o f i t s evolving common trade policy. This (draft) synthesis report i s prepared in response to EAC’s request for a phased technical assistance from the Wor ld Bank. I t s objectives are to choose NTMs with high impact on inter-member trade out o f the range o f NTMs identified in the region; improve the understanding o f their persistence over time; and, devise practicable implementation plans for their removal.’ In concrete steps towards establishing a FTA, the E A C has already made remarkable progress on reducingleliminating tariffs on traded goods since 2005. The remaining internal tar i f f walls are to be eliminated by 2010. There i s increasing need for the kind o f analysis requested by EAC where the REC-wide internal trade liberalization has allowed considerable reduction/ elimination o f tariffs, but would be offset by NTMs. This, in turn would significantly delay the establishment o f the EAC common market.

Elimination of NTMs in the EAC Protocol. The Protocol for the Establishment o f the E A C Customs Union provides the legal structure for NTB elimination in Article 13, which stipulates that t o establish a full FTA,

“1. Except as may be provided for or permitted by this Protocol, each o f the Partner States agrees to remove, with immediate effect, a l l the existing non-tariff barriers to the importation into their respective territories o f goods originating in the other Partner States and, thereafter, not t o impose any new non-tariff barriers. 2. The Partner States shall formulate a mechanism for identifying and monitoring the removal o f non-tariff barriers.”2

The National Monitoring Committees for NTMs in the EAC members were instituted in 2007 - except in Burundi. T o develop and embark o f their work programs, the N M C s wil l need prioritization o f the NTMs and guidance at the EAC level and strengthening o f polit ical commitments at the national level. Strong, targeted financial and technical support for improvement o f institutional capacity to monitor implementation o f the program at the regional and national levels wil l also be critical.

0 Building on earlier analysis o f NTMs in EAC. EAC’s working definit ion o f NTMs i s ‘quantitative restrictions and specific limitations that act as obstacles to trade,’ other than tariffs, that may be embedded in government laws, regulations, practices and requirements at the national and local level, often for various legitimate reasons l ike safeguarding health, environment, etc. Identifying and classifying NTMs i s not easy anywhere. This assessment

’ The phased work program concept has been endorsed by both EAC and Bank reviews. Phase 1 was financed by the Bank and the BNPP. Phase 2 i s expected to be financed by the Bank and a MDTF for trade in Africa.

EAC Protocol, 2004, pp. 16. The Protocol was signed in March 2004 and came into effect in January 2005 for the founders: Kenya, Tanzania and Uganda. Burundi and Rwanda accepted it from July 2007.

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has drawn on prior analysis o f NTMs by the private sector entities in the three founding members, within the context o f surveys towards improving overall private sector business environment, as well as country specific trade diagnostic studies. The earlier analysis focused less on the understanding the political economy for persistence o f NTMs over time or measuring specific and/or quantitative impact o f NTMs for comparative purposes in assessing priorities. The analysis presented in this report complements the earlier work, based on a combination o f desk reviews and consultations with member governments and private sector f i r m s in all the five member countries.

11. Main Characteristics of intra-EAC Trade

The following aspects o f intra-EAC trade are particularly relevant for assessing priorities for NTM removal.

Current intra-EAC goods trade in official statistics. Food and live animals as a group continue to dominate the formal intra-EAC trade o f almost all EAC members, except the exports o f Kenya, suggesting the importance o f assessing NTM impact for those sub-sectors. The two other important groups - especially for the new EAC members - are beverages and tobacco, and inedible crude materials. The intra-EAC exports by Kenya shows increasing diversification into more specialized manufactured goods and articles, and gradually so by Tanzania and Uganda also. Chemicals, fuels and lubricants, as well as machinery and transport equipment are the other significant groups in Kenya’s exports to the rest o f EAC. Most members sel l their top five commodities (by the value share in regional trade) in the Kenyan market. Burundi and Rwanda export the same top commodities to the rest o f EAC as they do to the rest o f the world. This latter observation - combined with relatively small internal market size relative to other RECs - suggests that the EAC may be able to draw heavily on WTO-consistency as a means for NTM elimination.

Informality. A significant part o f the trade within the region in food and live animals tends to be seasonal, largely localized, and often informal. The transit routes are often along traditional cross-border paths, away from the major transport corridors. Hence, such trade remains inadequately captured in the official national statistics. It will be important to understand the implications o f NTMs (and their elimination) on these trade flows, especially to the extent that NTMs have been encouraging informality and hence hampering market development.

Transport corridors for formal goods trade. The backbone o f formal intra-EAC trade are two overland road and rai l routes, the Northern and Central corridors - starting from the ports o f Mombasa and Dar es Salam respectively and reaching the border o f DRC on the region’s western edge - along with a north-south road link through Namanga on the Kenya-Tanzania border. These corridors are also critical for transit o f EAC’s imports from outside, and i t s goods exports beyond the region. This suggests a focus on NTMs related to the functioning o f these corridors in particular.

An acute constraint for the producers, traders and transporters o f goods in EAC i s the poor physical condition o f the state-run transport and communications infrastructure. The potential for rail transport i s recognized, even though the current state o f disrepair o f railroads along both corridors and inadequacy o f rai l equipment for use will need to be alleviated before it i s a viable alternative again. In addition, constraints include the poor state and maintenance o f roads and weighbridges; the small capacity and disrepair o f the ports on the Indian Ocean and the lakes; and, the underdeveloped water transportation across Lake Victoria and Tanganyika. Whi le this report does not focus on the state o f the physical transport infrastructure in EAC, it clearly i s a complementary priority.

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111. NTMs in EAC Today: Synthesis of Findings based on member country interviews

0 Cost of NTMs. The impact o f NTMs in EAC measured by the largest direct and indirect cost to the private sector i s the lost man-days during goods transit and clearance at the internal borders and along the transport corridors before reaching the destined market. For example, two days are needed for a 950 km journey between Mombasa and Malaba due to convoys and road blocs; an average o f two weeks i s needed to clear goods in Mombasa; and, all goods entering through any border post in Burundi needs to be cleared at the Bujumbura port. Next in rank are various nonofficial cost enhancements, arising from scope for fraudulent behavior created through the flexible implementation o f national policies. For example, the current flexible application o f axle-load restrictions on trucks in Kenya and Uganda; the continued operation o f five compulsory weighbridges along the Central corridor between Rusumo and Dar es Salam, as well as seven in Kenya and four in Uganda along the Northern corridor to reach Kigal i from Mombasa (at latest count). The other important costs added by NTMs are the range o f official payments necessary for goods trade, and the lost business opportunities, the latter most difficult to quantify.

0 Type of existing NTMs. EAC members harbor a range o f generic NTMs that apply to most goods traded across the region’s internal borders. These often apply to goods trade beyond the EAC also. A shorter l i s t o f NTMs has begun affecting product specific trade in the region in the recent years. They are based on technical quality and SPS standards specified for the goods, and mostly anchored in health and safety concerns stated by the member governments.

The current NTMs that apply to intra-EAC trade - as per the broad categories o f the WTO inventory - are ranked below in a decreasing order o f importance based on numbers o f private sector complaints.

A. Generic NTMs

0 Customs and administrative entry and passage procedures. Prolonged formalities, multiplicity o f institutions, duplication o f clearance processes, limited capacity at the border posts and travel restrictions through convoy and time o f day, continue to add monetary costs and transit time for goods traded in the EAC. In addition, some rules o f origin cases have escalated to the need for verification mission to determine adherence; or emerged related to specific rig in.^ In pre-shipment inspection, the efficiency o f certain private/ parastatal agencies in charge i s questioned by the traders. There i s very limited, if any, flexibility in the use o f customs agents and bonds. The private f i r m s ’ complaints identify this group o f NTMs as the most important in the region.

The revenue incentives remain important for each member, with a range o f specific charges adding to the private cost o f trade in EAC. Actual instances o f unequal treatment according to the country o f origin o f the goods and/or truck and i t s driver remain frequent, as are the vociferous allegations by private f i r m s o f such “unfair” treatment arising due to perceived national protectionism and corruption. The opportunities for fraudulent behavior are reported to arise due to the gaps between the respective national revenue authority decisions and their actual application at the border, as well as due to the early stages o f acceptable coding and

’ Repeated allegations of counterfeit goods fiom the Far East entering the EAC through Dar es Salam, with the Tanzanian stamp of manufacture questioned by the other EAC members.

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synchronization within the EAC (a responsibility o f the EAC Directorate o f Customs and Trade).

The EAC Council o f Ministers expects that i t s region-wide decisions will simplify and synchronize customs documentation, formalities and procedures at the border posts. To date there i s considerable lag between the time the relevant rules are harmonized by the EAC Council o f Ministers, and the time national customs officers at the border posts develop capacity to apply the EAC regulations and stop applying the national or COMESA taxedduties and procedures. Many member states are undertaking donor-funded customs systems reform and modernization and border post upgrading. But, the focus and content o f such national efforts have been largely bilateral, slow, and uncoordinated across the EAC. Where attempted, the concept o f ‘one-stop-center’ for clearance has not really started working.

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0 Government participation in trade and restrictive practices tolerated by it. The operation o f ports (sea ports o f Mombasa and Dar es Salam; lake ports o f Bujumbura and Kigoma), inland container freight stations (like MAGERWA and Isaka) and the plethora o f manned weighbridges by the national governments, parastatals or monopolies authorized by the governments, are identified by the private sector stakeholder responses as the NTMs second i s importance in EAC serving as a bottleneck for economic activity in the region. Their response i s mindful o f the possibility o f such NTMs being alleviated as constraint imposed by the physical infrastructure i tse l f i s tackled gradually. Transparency and efficiency in clearance and release o f goods at the sea ports i s hampered by administrative complexity o f formalities, especially in Mombasa; limited ski l ls and ineffectiveness o f s taf f and agents prevail, especially in Dar es Salam. Short, inadequate grace periods are provided for the imports prior to the application o f demurrage charges. All add lengthy delays, congestion, and high cost o f offloading and clearing cargo (already limited by the useable physical infrastructure at these locations) and create considerable scope for discriminatory/fraudulent behavior. Shipment clearance delays also enhance risk o f deteriorating product quality, especially for perishable products.

National infrastructure remedies being instituted are addressing brick and mortar issues, but often not the associated operational practices that have the direct impact on intra-EAC traden4 In recent years, the governments have opted for private or joint management some o f the facilities, or allowed in the f i rs t private alternatives, or are looking into such options. However, following such decisions, scarcity o f investment funds o f the private management company and the lack o f co-ordination with other government decisions are often emerging, as are sub-optimal operational business decisions taken by the private monopoly after the replacement o f a state monopoly.

0 Distribution constraints. NTMs originating in national regulations and their application on the transit o f goods in the member states constitute the third broad category in importance. The way in which the transit licenses for goods, the truck entrance fees and grace period, the permits for refueling, and the prohibition on transportation o f locally produced goods and backloads are applied vary considerably within EAC and can be discriminatory. Multiple police road blocks and mobile control along the transit routes remain a much-discussed but persistent NTM, with ample scope to ‘toa kitu k id~go. ’~ In particular cases, for example in Tanzania, the difference in transit time along the same route and in ease o f procedures - hence

Improvements are reported along the Northern corridor. The customary request in Kiswahili, ‘Give something small.’ 5

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cost - are so significant that producers and traders make very specific choices on the use o f trucks registered in certain member countries and drivers who have the particular national citizenship.

At present, a major issue with traders and transporters i s that o f axle load specifications and Gross Vehicle Mass. The EAC has passed a specific 3 axle-7 tonne per axle load requirement for trucks. All member governments agree that the new restriction i s good for protecting the road surface in the region. In addition, the private sector agrees that it will eventually be beneficial for truck maintenance and reduced workshop time. Tanzania has been strictly applying such axle load limits, as a member o f SADC, for a while. However, the other four E A C members have traditionally allowed 4-axle trucks with much larger loads. These larger capacity trucks have become an important lifeline for the EAC, as the railways became less and less an alternative for bulk commodity transportation. In the interim - whi le the rule i s being disputed by the Kenyan transporters in the Kenyan courts - the rule i s starting to be sporadically applied by Kenya, Uganda, and Rwanda, with decisions at the border not agreeing on application o f axle load limits. In extreme cases, entry i s temporarily denied, limiting market access.

Specific limitations. Certain restrictions not directly in the arena goods trade and transit are being applied as NTMs within E A C and affecting the intra-region trade. Widespread use i s made o f the procedures and fees for entry o f EAC citizens for business purposes into other member states, and the registration o f their businesses there. The restrictions also include the official charges for translation o f documents to/from French, since Burundi maintains it as the national language whi le the of f ic ia l language o f communication in EAC i s English.

B. Product specific NTMs

Technical quality standards and norms and sanitary and phyto-sanitary measures. The E A C members are starting to apply ‘testing, certification and other conformity assessment’ for technical quality standards and norms in intra-EAC goods trade. The clearances can be periodic, but are mostly by consignment. Most time lost i s due to the fact that in national product standard definition and certification, the bureaus o f standards operate at very different levels o f capacity and ability (with virtually none yet in Burundi) at i t s laboratories; and in testing and conformity assessment at the border. The E A C harmonized standards are developing very slowly, product by product, and are not necessarily recognized by member agents at the internal borders even when they are in place. The prolonged follow-up often needed - with the shipment stranded at the border - has been ‘allegedly’ used to discourage scope o f developing cross-border trade in certain perishable products f rom t ime to time.

Moreover, the EAC-wide guidelines on import requirements as wel l as procedures for introducing import restrictions and bans remain to be finalized. Specific cases that have been in the forefront in the recent years cover trade in milk, poultry, beef, maize, etc. Though the recorded cases are few for now, this area o f NTMs must be o f particular concern since food and animal products are by far the largest group o f goods trade within EAC. \

Where health and safety issues are involved under SPS measures - “including chemical residue limits, disease freedom, specified product treatment” - the certification authority, with variations in the center for testing and other conformity assessment, moves to the respective ministries for agriculture and livestock development as wel l as veterinary services increasing the number o f steps and complication. For both TBT and SPS measures, there i s largely no mutual recognition o f inspection reports and certificates among members.

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Another technical standard impedes intra-EAC trade for the new EAC members for now. The issue o f driving on the left side o f the road in the rest o f EAC i s mentioned by Burundian and Rwandan drivers as a NTM, as changing sides as per the national driving rules and retrofitting the imported second-hand trucks makes transit susceptible to accidents. The Ministries o f Transport in Rwanda and Burundi are also seeking to apply strict right-hand side vehicle importation rules incompatible with the rest o f EAC.

IV. What the Other RECs are Doing

Learning from other RECs. Generally RECs have been more successful in eliminating NTMs by using a mix o f outlawing certain measures and following the mutual recognition principle for others. The EAC’s preparation o f a realistic plan can derive critical lessons from the actual experience o f other RECs, in the identification, classification and measurement o f NTMs as well as their choice for reduction and removal. The EU and the ASEAN show that this process i s very long drawn and resource intensive, requires steadfast commitment throughout to deal with complex political decisions, and tends to be integrally related to overall plans to establish a single internal market in the REC. There are hardly any successful examples o f RECs in SSA attempting NTM reduction.

From the EU. Albeit at a very different level o f development, with far stronger REC administration and much larger availability o f resources to execute REC-wide decisions, the EAC could learn from the EU experience in development and application o f the principle o f mutual recognition in standards that facilitates free intra-EU trade in goods. For example, the intra-EAC trade in beer could learn from the EU recognition that alcoholic beverages can be introduced into any other EU member state when they have been lawfully produced and marketed in one o f the member states. This streamlined approach to intra-REC trade relies only on “essential requirements” o f alcoholic beverages and provides greater freedom to manufacturers to fulfil those requirements. At present, due to the difficulty in trade, beer and beverage producers in EAC mostly opt for separate production facilities in the larger members.

Second, EAC could learn from impacts o f the EU enlargement and the foreign competition from outside that REC on the pace and process o f elimination o f NTMs and the solutions found. New EU members brought challenges to the integration process and functioning o f the internal market, due to their lower level o f economic development and new constraining measures on internal trade that stretched the EU monitoring capacities. EU recognized that a failure to establish the internal market quickly and effectively would only exacerbate difficulties encountered by European f i rms from external competition (by Japanese f i r m s entering European markets in cars, etc).

From ASEAN. The ongoing process in the ASEAN illustrates to the EAC the possibilities for developing countries, with limited financial flexibility and weaker administrative capacity. First, like the ASEAN, the EAC has large trading interests outside the REC. Hence, EAC should study how ASEAN’s implementation o f the principles o f open regionalism - encouraging REC members to adopt and adhere to WTO rules - helps in eliminating NTMs. ASEAN’s sector based approach to NTMs i s an excellent example o f the possibilities, when the implementation o f REC-wide decisions i s limited largely to national governments actions and the political complexity posed by sovereign members i s large. Second, ASEAN benefited from a product-specific approach for a select number o f goods deemed to have strong regional market potential (e.g., tourism, wood-based products). In the case o f EAC,

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generic NTMs are currently more important than in the ASEAN case, but as noted, there are select products (like milk, day old chicken, beef, etc among food and live animals) where the ASEAN implementation could be relevant.

V. The W a y Forward: Some Suggestions

0 Prevention o f new N T M s . With respect to the monitoring for new NTMs that may be imposed by member states, the EAC could learn from the EU’s adoption o f preventive measures which oblige member states to notify all draft regulations and standards related to technical specifications to be introduced on national territories. In this way, the Commission i s able to monitor and prevent the emergence o f new national barriers to intra-EU trade. The Commission also maintains a score card on adherence to REC-wide rules including those on NTMs on trade, which can be used to name and shame members into compliance.

A two-pronged approach for existing NTMs. The prevailing NTMs in EAC are clearly divided into two groups and are likely to need two distinct approaches in developing implementation plans for monitoring, reduction and removal.

0 F o r generic N T M s . All EAC members are WTO signatories also who are taking significant unilateral steps towards enhanced participation in that institution. The team recommends that the Council o f Ministers consider and agree on the principle that NTMs that are not WTO- consistent in EAC-whether or not they restrict intra-EAC trade in certain products, and irrespective o f the political economy-are to be eliminated with immediate effect. WTO consistency requires NTMs to be “transparent,” “non-discriminatory” among the domestic goods flow and intra-EAChnternational trade, “scientifically based,” and “with no better alternative.” The preliminary l i s t o f NTMs should be investigated for these characteristics. We have seen above that several o f the prevailing NTMs can be nontransparent and are mostly discriminatory against other EAC members. This could include interalia the operation o f the weighbridges for intra-EAC goods transit, the use o f only national clearing agents, the exclusive use o f trucks registered and drivers who are citizens in the member state, the imposition o f entrance fees on traders from other member states entering with their products, the French translation fee for customs documents, etc.

The generic NTMs in line with the WTO rules s t i l l need to be removed, but could be considered on a preferential basis. For ease o f follow-through, the E A C members could prioritize those NTM areas for implementation where the Council o f Ministers has already taken the EAC-wide policy decision. For those where such a decision from the Council i s yet to be reached, the team recommends that the priority for EAC action be determined on the basis o f criteria like the overall regulatory objective and/or the intra-EAC trade impact. This would include interalia the application o f the axle-load law, the use o f EAC-wide bonds and carrier licenses instead o f national ones, etc.

F o r product specific NTMs. In a few goods, like milk, beef, poultry (including day-old chicks), the EAC may want to develop specific region-wide technical and/or SPS standards after detailed investigations. In choosing the specific product it would be important to consider the regulatory objective and /or intra-EAC trade impact o f the NTM. Here the guidance from the ongoing process o f deliberations and decisions in the ASEAN countries will be useful. This could be based on harmonization with performance requirements, involving a single set o f fully harmonized and detailed provisions. This approach i s used for products that could put consumers’ safety at risk and for which performance-oriented

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legislation i s fe l t needed. Any capacity building initiatives in the overall area o f the technical and/or SPS standards for goods should be assessed vis-&vis clear articulated demand from end-users in the publidprivate sector, rather than from the national bureaus o f standards.

Given the fiscal and human capacity constraints that exist in the EAC for now and dependence on implementation o f region-wide decisions only by national institutions, it i s by no means being suggested that the EAC choose the above course o f action for all major goods traded among the five members. For most goods, the “new approach” o f the EU could apply to products with similar characteristics and where there i s widespread divergence o f technical regulations in E A C countries. This streamlined approach would rely only on the “essential requirements” and allow greater freedom for manufacturers on the way to satisfy those requirements. This would significantly reduce the red-tape originating from various standards agencies that mires goods trade in the region in particular and in developing countries in general. Gradually, this approach could provide private f i r m s with a number o f choices for attestation methods: self-certification against the essential requirements; generic standards; or using notified bodies for type approval and testing o f conformity o f type. On the TBT and SPS measures, the WTO guidelines tend to be most relevant for the OECD countries and the EAC i s advised to be cautious as not to constrain the potential for growth in the region.

0 Capacity to monitor and prioritize. Monitoring i s a difficult and resource-intensive exercise, based on regular notification, regular reporting, proper classification, appropriate mutual prioritization for removal o f non-transparent, discriminatory NTMs, and prior/ subsequent monitoring. For the new NTMs that may arise as well as the existing generic and product specific NTMs, are the areas where the Secretariat as well as the member states would need to develop sufficient institutional capacity in the EAC. In the member states, such capacity needs to be developed not only in the NMCs, but also in the individual line ministries like the ministry o f transport, ministry o f agriculture and livestock, etc. The EU’s internal market scoreboard may prove to be a useful instrument for the E A C Secretariat to emulate. For the EAC, such a scoreboard could report the status o f the NTMs action plans and the number o f infringement proceedings due to new NTMs initiated against member states. These proceedings could be initiated as a consequence o f continuing or new application o f a NTM by a member state. In this case, the member state i s encouraged to quickly remedy the situation, and if it fails to do so it i s referred to the E A C court, which can impose a sanction.

0 Other factors. It i s recognized that in certain cases o f locations (like Burundi with Tanzania; Uganda with Kenya) effective bilateral decisions among two members could largely ease the total impact o f NTMs for particular members. These could be tried while a five-member consensus being worked on. Second, as the trade links o f the EAC members with their external markets are very strong and a significant source o f growth for the region, the EAC common market could aim to adopt an open regionalism model l ike the ASEAN, based on the principle o f adherence to WTO rules. Through feasible processes, the EAC could urge i t s members to adopt the WTO agreements on TBT, SPS, and import licensing procedures as well as develop the related implementation guidelines. Third, large physical investments would go a long way in upgrading the state o f EAC’s trade facilitation infrastructure and hence alleviate NTMs associated with these facilities.

0 Concrete progress in select areas to build confidence. Among the factors that may slow down the process o f actions on NTMs i s the capacity o f national institutions -the regulatory institutions, the customs administration, the bureaus o f standards. In addition, the flow o f information from the EAC and the national governments to private sector f i r m s and the civi l

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society in EAC needs to be faster, automatic and smooth. Efforts need to be made to address the widespread perception in the private sector that implementing agents in each member state continue to think and act on behalf o f the individual countries and not in terms o f the EAC. A focus on some key NTMs (both generic and product specific) will be critical to prioritize EAC and national governments efforts in light o f scarce institutional capacity and to build confidence in the seriousness o f the NTM elimination program notably with the private sector.

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CHAPTER 1. INTRODUCTION

1.1 The treaty for the establishment o f the East African Community (EAC) o f 1999 set out a vision for the eventual unification o f Kenya, Tanzania, and Uganda. The sequence o f events laid out comprised the establishment o f a customs union, followed by a common market, a monetary union, and eventually a polit ical federation.6

1.2 The f i rst step in this sequence i s underway, with the “Protocol for the Establishment o f the East African Community (EAC) Customs Union” signed in March 2004 and coming into effect in January 2005 for the three founding members, envisaged to be complete by mid-2009.’ The newest members, Burundi and Rwanda, adopted it in July 2007. In a relatively short time, EAC has moved quickly to eliminate a large proportion o f tariffs o n intra-EAC trade’ as an integral component to establish a free trade area (FTA) among the founding member^.^ The schedule o f accession allows commensurate action on tariffs by Burundi and Rwanda to be undertaken until 20 10.

I. CONTINUING EFFORTS TOWARD GREATER INTEGRATION IN GOODS TRADE

1.3 Notwithstanding EAC-wide tar i f f removal, in a l l member countries several non-tariff measures (NTMs) are s t i l l reported to impede the free trade in goods. The private sector in the region also perceives that such NTMs may be becoming more prevalent in the larger members as tar i f f protection i s reduced.

1.4 Within the E A C Protocol, the legal structure for elimination o f NTMs in the regional economic community (REC) i s provided by Article 13, which stipulates that t o establish a full FTA,

“Except as may be provided for or permitted by this Protocol, each o f the Partner States agrees to remove, with immediate effect, a l l the existing non-tariff barriers to the importation into their respective territories o f goods originating in the other Partner States and, thereafter, not t o impose any new non-tariff barriers.

The Partner States shall formulate a mechanism for identifying and monitoring the removal o f non-tariff barriers.”

The five EAC members are currently negotiating the second step, a hrther Common Market Protocol, for f iee movement o f persons, labor, and services and to ensure the right to establishment and residence of EAC citizens within the Community. This protocol i s being negotiated jointly alongside those regarding the establishment o f an East African Common Market. Under existing plans, the Protocol i s expected to be ratified by June 2009 and implementation wi l l begin in January 2010. The third stepmonetary unification-will not be completed for some time, as the introduction o f a single currency i s not expected until 201 1-5, while the establishment o f a political federation i s envisaged by 201 5.

Source: East Afiican Community Secretariat, 2004. With the exception o f selected lists o f sensitive products exported fkom Kenya to Uganda (443 items), and

to Tanzania (880 items). For these a gradual reduction over five years from a 10 percent to 0 percent tariff would allow for the maturity o f the f m s producing these products in Uganda and Tanzania, respectively.

The simple average MFN tariff on overall imports - the unweighted mean o f all tariff lines, including import surcharges and other ‘para-tariffs’ i.e. duties and charges - in 1997 and 2007 were, respectively, 41.0 and 12.6 for Burundi; 19.0 and 16.7 for Kenya; 35.0 and 22.7 for Rwanda; 21.8 and 14.1 for Tanzania and 13.2 and 12.9 for Uganda. Source: IMF

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1.5 Recently, some preliminary analyses have been undertaken to explore general monitoring options for Kenya, Tanzania and Uganda, the founding members only, with help from private sector lobbies like the East Africa Business Council (EABC), in the context o f the overall business environment for private f i rms in the REC.

1.6 In mid-2007, National Monitoring Committees (NMCs) were inaugurated in all member countries-except Burundi -to adopt a monitoring mechanism when adopted. The NMCs have quarterly reporting responsibilities to the ministries o f EAC or trade o f the respective nations, and to the EAC’s Sectoral Committee on Trade, Industry, and Investment. To date, however, the determination o f a work program for the NMCs has been slow to develop. Significant among the reasons are: scarcity o f specific information generated by EAC-wide stocktaking; the EAC requirement for consensus on monitoring mechanisms to be adopted (on a case-by-case/mutual recognition basis); the EAC requirement for consensus on member actions on reduction/removal o f NTMs; and dearth o f budget resources in member governments to locate and support N M C activities.

1.7 In September 2007, the EAC stated that removal of NTMs i s now a priority in i t s policy program toward deeper trade integration and establishment o f the common market in goods. The EAC made a request to the World Bank for analytical and technical assistance on this issue. Subsequent discussions with the Secretariat by the end o f 2007 determined that an overall investigation o f NTMs in the REC would be most useful for the EAC’s work program, if it led to:

An improved understanding o f the political economy for continued persistence o f NTMs over time among the member nations

An informed selection o f the most important NTMs, which if removed could significantly increase intra-region trade, from the l i s t o f all NTMs identified

A practicable implementation plan for the removal o f these NTMs by the members.

1.8 There i s increasing need for this kind o f analysis where REC-wide internal trade liberalization may be allowing considerable reduction/ elimination o f tari f fs, but such progress i s being counterbalanced by use o f NTMs in promoting national interests. The EAC’s courage must be appreciated for taking up an extremely difficult issue to tackle on i t s way forward in the policy reform program for i t s common market.

1.9 In general, NTMs within each nation and across members o f a REC span remarkably different, technically difficult fields. The areas covered, especially in less developed countries (LDCs)- a criterion fulfil led by al l but one EAC member-usually have l i t t le formal documentation and/or only very unreliable data. Compared to tariff reduction, the analysis and REC-wide policy implications o f NTM removal are neither clear nor precise, even for developed countries. This analysis o f the NTMs, through which the World Bank i s starting to assist the EAC, should be viewed as a useful beginning o f a prolonged and arduous process. Much will need to be done if the actionable plans that emerge at the end o f this process are to be implemented and have real impact on goods trade among EAC members (see chapter 2 and appendix A 1 for a summary o f trade flows o f EAC members; appendix A 2 describes i t s trade routes).

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Concept o f the current NTM work and guidance received

1.10 Review o f the concept note for the overall NTM in EAC study, both in the Bank and in the EAC," over January-February 2008 endorsed a plan to divide the proposed work into two phases:

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Phase 1." Identification and choice leading to important NTMs that have high impact on intra-region trade among all NTMs identified in the member country stocktaking.

Phase 2. Choice and implementation, to follow, to finalize choice o f the important NTMs and prepare a practicable implementation plan for the removal o f these NTMs by the members.

It was clearly recognized that identification, understanding and region-wide discussion o f the political economy for the continued persistence o f various NTMs in EAC will not be easy, and wil l closely influence the decisions taken in each phase. The political/economic environment will be clearly identified in the phase 1 stocktaking and continue to be critical through the implementation plan preparations in phase 2. EAC expects the work in both phases to be critical for member country NTM deliberations, and for practical actions to make Art. 13 o f the EAC Protocol fully operational. This would also anchor the initial work program o f the established NMCs.

1.12 Phase 1 aims to clarify what NTM classification methods are available and which inventory o f NTM instruments would be more appropriate for EAC; assess existinglongoing work in EAC and identify i ts limitations; learn from the experience o f other RECs, such as the EU and ASEAN; providehpdate the l i s t o f NTMs for all five members using both local know- how and international sources; and initiate, to the extent possible, the selection o f important NTMs that constrain intra-EAC trade and analyze the reasons for their existence.

1.13 Focus and coverage. The task team was cautioned that NTMs tend to be very broad and hence the key challenge would be to focus the issues and the coverage in consultation with the EAC Secretariat. The Secretariat agreed that barriers in a member's domestic market can be extensive and most often covered by reform programs on the domestic business environment, capacity building, and overall trade facilitation. It i s best to get a sense o f the national and EAC- wide background o f the environment for private investment f iom such programs, and then focus on NTM identification and analysis for trade in goods across the internal borders in EAC.12 Trade in services and factor (including labor) mobility i s to be considered separately, at a later date.

1.14 Free movement o f goods and i t s potential growth within EAC i s considered critical to develop a fully functioning FTA. The investigation was guided to provide an in-depth view o f the actual operation, key players, and impact o f specific NTMs identified. Insight on political-

'' By the EAC Secretariat and member country delegations in Arusha Tanzania. Participants included the Director General-Customs and Trade, Director-Trade, and other staff of EAC Secretariat, as well as member delegations from Burundi, Kenya, and Tanzania under the invited chairmanship-as per EAC protocol4f Dep. Permanent Secretary, Ministry o f Industries, Trade and Marketing, Government o f Tanzania. Feedback and endorsement fiom the delegations o f Uganda and Rwanda were obtained later, in the respective country capitals: Uganda in February 18-19 and Rwanda in March 2-5,2008.

Phase 1 preparations from October 2007 -to June 2008 were undertaken with assistance from the World Bank and Government o f the Netherlands (under the Bank-Netherlands Partnership Program, BNPP). '' The general business environment for the private sector in member countries and domestic goods in each will be considered only to the extent that they provide more information on NTMs on traded goods.

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economic reasons for persistence o f specific NTMs i s more useful for the EAC, rather than a presentation o f broad aggregates. Hence, the choice o f methodology i s to emphasize practicality and usefulness toward EAC deliberations and future actions, in preference to theoretical rigor. The strict categorization o f the NTMs into predefined groups, according to definitions by the United Nations Conference on Trade and Development (UNCTAD) or the World Trade Organization (WTO), i s o f limited use. It may also be necessary for the analysis, in phase 2, to take stock o f each member country’s goods trade bilaterally, since specific factors such as the historical market links, the location o f industry, and the use o f specific ports are important. The analysis i s particularly important for Burundi and Rwanda, whose steps to integrate into the EAC common market are less analyzed and defined.

1.15 Hence, to give a realistic overall picture o f the binding constraints on exports and imports in the EAC, the phase 1 stocktaking has been kept somewhat broader than the suggested focus o f “only the export market” and “only specific products within EAC.”13 Init ial investigations across export markets revealed that, on the whole, current NTMs in EAC are more generic in their coverage across exports, imports, and goods transited through specific member countries. Moreover, the NTMs apply across most product groups, minus a few products.

1.16 The reviews recommended that the priority areas start to be identified in member government discussions o f this (draft) stocktaking study, and be subsequently endorsed by the EAC. The choice and use o f methodology i s expected to evolve as the actual cases are documented, rather than a priori. Where possible, the impact measurement should include estimates o f additional cost o f producthime delays due to the constraint. In phase 1, however, it i s most important for the analysis to be very pragmatic. Most f i r m s in EAC are small in size with limited capacity to explore the full EAC market, let alone markets beyond the REC. In addition, the actual period o f operation o f intra-EAC zero/low tariffs has been short. For f i r m s engaged in expanding their markets beyond national borders, most o f the impact o f NTM could be detrimental. Hence, the absence o f formal trade in the face o f potential scope o f EAC-wide internal market may be an important indicator o f impact.

1.17 Structured member country work program. The current (draft) stocktaking report prepared in phase l o n the operation o f NTMs on goods trade in the EAC i s expected to be presented to the EAC Secretariat in September 2008. The (draft) report brings together learning from all five partner countries and emphasizes local know-how, involving the member governments, private sector, local consultants, and Bank country economists/trade specialists. The EAC member governments provided in-country support and guidance to anchor the findings within the national policy reform agenda. To the extent applicable for EAC, the (draft) report also brings in the experience o f other RECs on monitoring, reducing, and removing NTMs.

1.18 In the light o f the above guidance, discussions on the draft stocktaking study will facilitate consensus building in EAC Secretariat and among member countries on the concepts, the objective, and the priorities in EAC’s NTM reduction and removal. The EAC Secretariat expects to present the draft study to the member delegations for consideration in Arusha, as was done at concept development. Most member governments have requested in-country discussions o f the preliminary findings. Feedback and guidance i s expected, through the Secretariat and direct member-country deliberations, on the choice and way forward in targeting specific NTMs in phase 2 for preparation o f implementation plans for monitoring, reducing, and eliminating those NTMs.

l3 The task team i s not reporting (yet, as o f September 2008) on the NTM discussion in the EAC Trade Committee Report (February 2008), which it expects to receive from the EAC Secretariat.

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1.19 Phase 2 i s expected to proceed in three steps. First, a deeper analysis will be undertaken o f a few complex NTMs and their supporting political economy. The following methodology could be taken on board (after EAC priorities are identified). Exporter firm surveys in each member country could be used to add to limited available data on NTMs and assess the main constraints. If EAC so choose, these surveys could be product area-based, focusing on the narrow products groups where EAC wants to concentrate first. In addition, member governments could be asked to report to the Secretariat the national regulations that might have an impact on trade (a WTO requirement, more implementable within a REC), with the specific justifications for existing NTMs (such as those related to public health and safety). Based on these two datasets, the NTMs could be categorized-by the Secretariat’s decision-n whether they are transparent, scientifically justified, and have “no better alternatives,” and subsequently identified for reductionhemoval. The Bank-donor task team would provide analysis and capacity building assistance as needed. Second, an action plan will be developed to eliminate the critical NTMs in all five member nations as part o f EAC’s common trade policy. Third, an institutional mechanism will be developed for dissemination at the member nation and regional levels, to build consensus on action among the key stakeholders. l4

11. EAC’s WORKING DEFINITION OF NTMs

1.20 The EAC has adopted i t s own definition o f NTMs, aimed at identifying them and monitoring their elimination. The definition uses the UNCTAD and WTO guidelines related to identification o f obstacles that have a negative impact on trade (see appendixes A3 and A4, respectively), since there i s no single internationally accepted definition encompassing the diverse measures covered.

1.2 1 The EAC recognizes NTMs as “quantitative restrictions and specific limitations that act as obstacles to trade,” that may be embedded in laws, regulations, practices, and requirements other than tariffs. These include non-tariff charges, government participation in trade, restrictive trade practices, and policies; customs and administrative procedures, and practices; technical barriers to trade (TBT); sanitary and phyto-sanitary measures (SPS); distribution constraints, and other specific measures. The definition recognizes that government regulations and measures for various legitimate reasons can end up adding unnecessary costs or inhibiting intra-EAC trade. These may include regulations applied at the national and local level to:

Safeguard the environment and Safeguard national security.

Protect domestic industries and consumers Safeguard against fiscal revenue loss Safeguard health, safety, and security o f human beings, animals, and plants

l4 It i s expected that phase 2 wi l l start in late 2008, following deliberations in EAC on the (draft) stocktaking report. Use o f Bank staff and international subject authorities i s expected, as along with the continued involvement o f local consultants.

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111. WORK ALREADY INITIATED BY EABC/EAC AND OTHERS

1.22 A discussion by the EAC Council o f Ministers on the EAC-wide NTMs and course o f action to be pursued in analyzing and reducing /removing them i s summarized in the EAC Trade Committee Report (February 2008).15 [Add summary here, when available; September 20081

1.23 At the national level and/or for intra-region comparison, stocktaking o f the prevailing NTMs within EAC has been far from comprehensive. In addition, other measures-identified as NTMs in the member nation--can significantly raise costs; these include national shortfalls in physical infrastructure and/or behind-the-border supply constraints that affect the overall business environment for private enterprises and are not specific to regional or international trade. These may be critical for overall private sector led growth, but need to be (and often are) addressed in an EAC forum beyond that for the flow o f goods trade.

1.24 Two surveys commissioned by the East Africa Business Council (EABC) since 2004 prepare some ground for elimination o f the NTMs through preparation o f a l i s t o f NTMs in the three founding members o f EAC. The surveys were conducted largely on f i r m s active in cross border business transactions in Kenya, Tanzania, and Uganda. These business investment climate (BIC) survey results indicate that barriers are largely located in customs administration and procedures, immigration, business registration, and the inspection o f imports and goods distribution (including police road blocks, operation o f weighbridges, and quality standards certification). In 2005 the EABC, together with the EAC Secretariat, proposed an institutional mechanism to monitor the elimination o f the identified NTMs.

1.25 how to address these.

The main weaknesses o f the existing work are listed below, along with a discussion o f

A very broad definition i s used to identify the NTMs, resulting in an extremely long l i s t o f NTMs in three founding members only. This would result in a very complex program to eliminate those NTMs. Priorities must be set. A large number o f the identified NTMs are administrative barriers to private business and investment, but not core NTMs. Moreover, the analysis i s confined to the three founding members. The current (draft) stocktaking report includes the two new members in the exercise as integral part o f the EAC. It defines the critical areas o f NTMs in the context o f the EAC based on international experience. At variance with the expectations at the concept review, prioritization to date has not been based on the impact o f the particular NTM on specific goods traded within the EAC, but rather on what i s considered to be the most binding constraints to trade, as per the private sector interviews, and the ease o f dismantling it. Overall, EAC-wide NTMs do not seem to have a product- specific focus within formal trade.

The BIC survey -based inventory o f the NTMs in EAC uses only interviews with private companies, and does not appear to have engagement/approval o f the member governments or the EAC. Since the barrier perceived by an exporting firm in one member i s in most cases the regulation imposed by the government o f another member or non-member, such a method for collection o f information on NTMs-by reverse not$cation16 by firms-may not be the most effective in building up ownership o f subsequent actions. Similar information can also be

l5 The EAC member delegations instructed that the Secretariat (Directorate o f Trade), at the February 2008 concept review, to make the internal Trade Committee Report available to the task team following due clearances, for the phase 1 stocktaking. This i s awaited. l6 With a built-in bias to overstate restrictiveness.

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provided by governments on potentially trade-hindering laws and regulations imposed by them-that is, through notification.'' In the absence o f a strong supranational body in the EAC, the main implementers o f policy and policy reform will remain the member governments. Commitment o f the member governments to eliminate the NTMs cannot be built up and secured unless there i s recognition, clear prioritization, and consistency o f reasons. The current (draft) report involves and explains the reasons to the key stakeholders, in particular: the governments, the private sector, and the EAC Secretariat."

Generally RECs can and have been more ambitious and more successful in eliminating NTMs, using a mix o f outlawing certain measures and following the mutual recognition principle for others. It must be noted that those successful have done so over an extended time span and have been at significantly higher levels o f economic prosperity than the EAC. As a customs union, the EAC has rightly targeted elimination o f the NTMs in the context o f i t s evolving common trade policy. This means the main decisions initiating elimination o f NTMs need to be made by consensus at the EAC Council o f Ministers, requiring prior consensus building among sovereign member nations on the l i s t o f NTMs to be eliminated, the timetable, and other key considerations. International experience shows that a way forward through imposition o f detailed obligations regarding elimination o f NTMs i s difficult, due to the diverse objectives o f sovereign states. Less intrusive ways to reduce the cost impact o f NTMs have been found through movement toward WTO principles o f transparency and nondiscrimination in application o f national regulatory measures. The existing work in EAC did not take account o f this important dimension o f elimination o f the NTMs. The current (draft) report makes the distinction.

The monitoring mechanism suggested by the existing work i s a complex recording and reporting system rather than an implementation plan. The current program will prepare a time-bound implementation plan in phase 2.

1.26 In recent years, EAC members have analyzed their trade policy and prospects, and prepared a framework for trade facilitation and mainstreaming in their development agenda, through the diagnostic trade integration studies (DTIS) under the multi-donor Integrated Framework (IF) for Trade. Since most o f the policy reform in the EAC members to date has focused on explicit trade taxes, and significant traditional export markets remain beyond the EAC common external borders, the DTIS have focused on these two topics.

1.27 Nonetheless, a few members have considered the prevailing NTMs in varying degree o f depth and rigor. The DTIS for Tanzania (2005) and Uganda (2006) have taken a deeper look at prevailing customs systems and procedure^.'^ In the agriculture/fishery sector, they have also examined the operation o f taxes (especially local), the role o f crop boards (in Tanzania), and the application o f quality and safety standards. They have traced EAC-wide developments on these. The two DTIS also ascertain whether in recent years these measures have enhanced competitiveness, or added associated costs to trade. The Kenya DTIS (2007) (and follow-up

With a built-in bias to understate potentially contentious laws and regulations. In customs administration and procedures, there i s already wide recognition within EAC and i t s members

of the need for improvement and related capacity development. The EAC received assistance for i t s founding members in 2003 for three years and similar support i s expected in 2008 for Rwanda and Burundi through the Bank Institutional Development Funds (IDF). Also projects on trade facilitation from the Bank and African Development Bank (ADB) are already implementing plans adopted for customs improvement in various member nations. l9 Some general behind-the-border issues constraining trade prospects are the transport infrastructure and the availability and mix o f labor skills.

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Bank report in 2007) (World Bank 2007c) has a somewhat similar overall structure, but i s less informative on NTMs due to i t s focus on potential export diversification. The two reports, however, do point to the potential importance o f textiles, clothing, and footwear in Kenya's regional exports, demarcating another area for investigation on NTMs. The DTIS for Burundi (2003) considers the legal status o f NTMs but does not focus on the actual operation on the ground, if any. The current study brings on board the DTIS learning for the members to the extent that they shed light on existence and operation o f NTMs. The DTIS for Rwanda (2005) does not consider prevailing NTMs, although it analyzes the overall business environment and the steps toward application o f quality standards.

1.28 For NTMs recognized at the national level by EAC members, notifications and reverse notifications to the international trade institutions are another source o f information. The UNCTAD's Trade Analysis Information System (TRAINS) database reports operation o f the NTMs.~' As part o f their membership, the WTO Secretariat and the respective governments o f EAC members have undertaken Trade Policy Reviews (TPRs) to assess the country's process o f liberalizing trade (within the overall strategic framework o f enhancing private sector-led economic growth and structural transformation) based on a conducive environment for trade and investment provided by the government. These TPRs provide information on NTMs recognized at the national level in broader categories (see classification in appendix A4). These two sources provide a foundation for embarking on the stocktaking. However, they are not current or comprehensive in coverage o f al l EAC members. In general, the international databases suffer from a lag in reporting prevalent national measures. More importantly, arbitrary and/or ad hoc national measures and local practices that may constitute NTMs are underreported, if at all. Most do not give indications o f the restrictiveness o f a particular NTM.

1.29 Few, if any, o f the above sources report on the reasons and/or the environment in EAC member nations that sustains the operation o f specific NTMs. Here local knowledge i s critical in informing the current (draft) stocktaking report.

2o These are available, up to June 2001, only for Kenya and Tanzania (see www.unctad.org/trains).

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CHAPTER 2. PROFILE OF THE EAC

I. THE EAC’s ECONOMIC FEATURES

A. Small economic entity

2.1 The EAC i s a small, relatively impoverished economic entity compared to other regional economic communities (RECs) that have attempted the identification and elimination o f NTMs, such as the European Union (EU) and Association o f Southeast Asian Nations (ASEAN). It has a total land size o f 1,702,000 sq. km In 2006 it had a combined GDP o f USD38,960 mill ion at current prices and market size represented by a population o f 123 million. All EAC members, except Kenya, are categorized as LDCs according to the low income, human resource weakness, and economic vulnerability criteria o f the Economic and Social Council o f the United Nations. For further details, see the profiles o f each member nation in appendix group B.

B. Variation across members

2.2 The gross national income (GNI) per capita (Atlas method) in 2007 varied in the range o f USD680 for Kenya to USDl 10 for Burundi, with an average for the EAC at USD370. With around 19 percent o f the national GDP composed o f industrial production for each member, the poorer members have economies anchored in agriculture and the others in services. A summary economic profile o f the EAC member nations and the salient features o f their trade are presented in the table 2.1.2‘ The difference in the size o f the EAC member economies i s illustrated by the respective average GDP since 2000. The difference in the scale o f their intra-EAC trade i s illustrated by value o f the respective exports to the region, shown in table 2.2.

Nonetheless, there i s considerable variation within the region.

Table 2.1. An Economic Profile o f the EAC, 2000-6 average

Economy and Trade Kenya Tanzania Uganda Rwanda Burundi TotaVavg.

GDP ($ current million) GDP growth (?A) GNI per capita ($)

Composition o f GDP (%) Agriculture Industry Services

15,998 10,754 6,954 1,913 708 36,327 3.5 6.2 5.6 5.5 2.2 4.6 460 306 256 223 97 268

29 45 33 41 39 38 18 16 20 21 19 19 53 38 46 38 42 43

Domestic savings/GDP (%) 11 11 7 1 -12 4 Gross fixed capital formatiodGDP (%) 17 18 20 19 10 17

Revenue/GDP (exc. grants, %) 19 11 12 13 20 15 Expenditure/GDP (“A) 19 18 20 24 34 23 Fiscal balance/GDP (%) 1 -7 -8 -1 1 -14 -8

*’ The data available for analysis extend only to end-2006, covering only including first two years of EAC’s existence.

9

Economy and Trade Kenya Tanzania Uganda Rwanda Burundi TotaYavg.

Exports GNFS/GDP (%) 25 20 13 9 9 15

Current account balance/GDP (YO) -1 -4 -5 -5 -5 -4 Imports GNFS/GDP (%) 32 27 26 27 31 29

Population (million) Population growth (%) Land size (000 sq km)

33 37 27 9 7 114 2.6 2.6 3.2 3.1 3.2 2.8 569 886 197 25 26 1,702

Source: World Development Indicators database.

Note: GNFS-goods and nonfactor services; Uganda has recently revised i t s National Accounts to adopt a changed structure o f the economy and new base o f 2002/03 -not reflected here.

11. FORMAL GOODS TRADE

A. Outward-looking REC

2.3 Overall, the EAC members have a similar trade pattern, with commodity exports focused on extra-EAC markets, especially the EU. In recent years an average of 3 to 10 percent of the exports o f the EAC members have gone to Sub-Saharan Africa (SSA) markets outside the REC, and 31 to 82 percent to markets outside SSA. An average of 9 to 14 percent of the imports of members has been received from SSA outside EAC, while imports from the rest of the world ranged from 54 to 89 percent. Except Rwanda, on average more than 85 percent of the top five export products (by value) from the members have been sold outside the EAC. For re-exports, however, the flows from Kenya focus on EAC (see appendix A1 for details).

B. Trade within EAC. 22

2.4 Though the members are quite similar in their trade outside the region, the last 15 years show that there i s a potential for steady-though perhaps not dramatic- increase o f trade within the EAC. See appendix A1 for more details comparing the regional exports to overall exports o f the EAC members. Table 2.2 below on the average recent flow as well as the actual value for the latest available year o f intra-EAC exports of good underscores that exports of the members within the region are increasing, and for the founding members remarkably so. A medium-term positive impact on intra-EAC trade of the notable success already achieved in EAC-wide tariff removal/reduction and harmonization among members since 2005 can be expected.23

22 On the edge of the current EAC, the Democratic Republic o f Congo (DRC) i s by far the largest potential market o f goods from EAC and those transiting through the region for which the landlocked EAC members and Lake Tanganyika provide a gateway. Similarly, in the south, Zambia and Mozambique, and in the north, southern Sudan and Ethiopia, are markets for EAC products and for goods landing in Dar es Salam and Mombasa. 23 Comprehensive bilateral trade data are available only for the period 2005-6 for most EAC members.

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Table 2.2. Value of Exports of All Commodities to EAC (USD thousands)

Average 2000-6 Actual 2007’ Burundi 7,052.8 9,524.0 Rwanda 29,603.3 32,4 15.4 Tanzania 84,353.2 126,604.3 Uganda 97,123.4 242,196.8 Kenya 501,618.3 952,788.1

I Source: COMTRADE database.

2.5 The detailed dynamics o f intra-EAC trade are interesting, as illustrated in table 2.3. The formal trade in agricultural products has been large in the official statistics and persists for the poorer EAC members. In 2000 most o f intra-EAC commodity exports for Rwanda and Burundi, and more than half for Tanzania and Uganda, were in food and live animals. Kenya has maintained a share o f less than 10 percent in this category o f exports. Hence, any barrier to the trade in food and live animals would impact the entire EAC, but especially the two new members.

2.6 Trade within the region for this group o f commodities i s seasonal and largely localized, and often informal. The transit routes are often away from the major transport corridors. Hence, it remains inadequately captured in the official national statistics. The East Africa Grains Council estimates that about 60 percent o f the trade in grain among EAC’s founding members may be informal. Informal intra-regional grain exports among the founding members has accounted for 10-15 percent o f grain production in Uganda and Tanzania, and in the form o f imports for about 10 percent o f Kenya’s grain consumption. Not all EAC members are undertaking the background surveys and analytical work needed to trace current statistics and locations o f this informal goods trade. A recent survey by the Uganda Bureau o f Statistics shows that informal exports o f Uganda were o f more significance than i t s informal imports. In 2005, UBOS estimated that U S $200 mill ion were informal exports, compared to a total o f U S $ 81 1 mill ion formal exports. Whereas the bulk o f this informal trade i s through Uganda’s eastern border with Kenya, more flows have opened up with the other countries: south Burundi, Rwanda, Tanzania (among the EAC), Sudan and DRC, which are not part o f the EAC.

2.7 Beverages and tobacco are now very important for the exports o f Burundi and Uganda. Inedible crude material exports (other than fuel) are important for Burundi, Rwanda, and Tanzania. For the new members o f EAC, intra-EAC exports remains largely confined to these three major categories, as shown in table 2.3.

2.8 The manufacturing sector products o f the more developed EAC members are increasingly seeking markets within the region and in SSA. Intra-EAC exports shows increasing diversification into more specialized manufactured goods and articles by Kenya, and gradually so by Tanzania and Uganda. Chemicals remain important in Kenya’s exports and have increased dramatically for Tanzania. Fuels and lubricants, and machinery and transport equipment, are significant in range o f goods that Kenya exports to the rest o f EAC.

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Table 2.3. Exports to EAC by Member Countries by SITC 1 Categories (percent o f total)

SITC-Standard International Trade Classification a. Rwanda, Burundi, Tanzania, 2006. b. Rwanda, 2001.

2.9 Moving away from the broad categories above, table 2.4 illustrates the to five commodities (by value share at SITC 3 level) exported within EAC by each member4 On average, these commodities are largely sold in Kenya. The commodities marked with a superscript are also among the top export earners overall for the respective countries. The new members of EAC export the same top commodities to the rest o f EAC as to the rest of the world.

24Compare this l i s t with the top national export earners in appendix table A1.3 where the selection was based on the overall share in the country’s total exports to the whole world.

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I

C. Trr

Table 2.4 Top Commodities in Export Value Shares, 20006 average (selection based on share of country's total exports to EAC)

Burundi to Kenya Rwanda Tanzania Uganda Gold nonmonetarya 100.00 0 0 0 Tea and matea 8 1.62 0.12 18.25 0.02 Sugar/molasses/honeya 0.00 97.08 2.49 0.42 Coffee and coffee substitutes' 10.19 8.37 57.52 23.92

Kenya to Burundi Rwanda Tanzania Uganda Petroleum product? 5.66 12.43 16.68 65.23 Articles o f apparel not elsewhere

Limekement /construction materials 0.18 1.39 5.93 92.50 Rolled plated manufactured steel 15.08 2.83 28.25 53.83 Soaps/cleansers/polishes 0.74 5.62 40.92 52.72 Rwanda to Burundi Kenya Tanzania Uganda Tea and matea 0.00 94.1 1 0.00 5.89 Coffee and coffee substitutesa 0.00 66.47 21.26 12.27 Ores and concentrates o f base metal not elsewhere specified 0.11 39.00 10.72 50.16 Hideshkins (except fur) rawa 0.62 86.62 0.47 12.28 Petroleum products' 9.55 77.80 0.00 12.65 Tanzania to Burundi Kenya Rwanda Uganda Fish (live/fiesh or chilledfiozen)a 0.50 97.81 0.07 1.63 Tea and mate 0.02 99.96 0.00 0.02 Cotton 2.28 93.93 2.27 1.52 Elements/oxides/halogen salt 70.50 0.00 12.79 16.72 Maize except sweet corn 35.01 55.96 6.5 1 2.52 Made-up textile articles 3.22 86.09 3.18 7.51 Uganda to Burundi Kenya Rwanda Tanzania Tea and matea 0.00 99.98 0.02 0.00 Electric currentb 0.00 78.08 1.15 20.77 Maize except sweet corn 21.08 59.51 4.71 14.71 Tobacco, raw and wastes' 0.92 79.43 7.75 11.90 Rolled plated manufactured steel 33.23 0.06 56.52 10.19 Vegetables (fiesh or chi l led fiozen) 17.55 65.90 10.44 6.10 Source: COMTRADE database. a. Also one o f the top five export earners for the country overall. b. Electric current i s an unusual commodity exported

Hideshkins (except fir) raw 98.16 0.72 0.00 1.12

specified 1.77 5.12 38.31 54.79

e routes

2.10 Overland trade corridors are a critical consideration in a discussion o f NTMs o n E A C formal goods trade, since trade facilitation procedures in the region often pertain to their specific location and characteristics. In recent years, most o f the goods transit between the EAC members and across these countries has been by road using trucks. At present, the railways are largely non- functional along both main corridors noted below.

2.11 Many constraints on such trade emanates f rom specific features o f the physical infrastructure along these road routes. The barriers to export (and re-export) flows o f Kenya and, to some extent Tanzania and Uganda, to the rest o f E A C may have a greater impact on the growth

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potential o f intra-EAC trade because o f their in-country location o f great lengths o f the transportation corridors, as well as evolving composition o f their formal trade. The 'same considerations apply to goods transiting across EAC members to various destinations in EAC and beyond. For this trade, the location and the characteristics o f the port operations at Mombasa and Dar es Salam i s also critical.

There are three main routes:

2.12 The Northern Corridor for trade, starting from the port o f Mombasa to the landlocked EAC members Uganda, Rwanda, and Burundi, and northeastern Tanzania. This includes the link between Mbarard Kabale in Uganda, onward through Kigal i and Butare in Rwanda, to Bujumbura in Burundi that runs north-south. This corridor traverses several countries, even though the longest distances are within Kenya, and consists o f roads and rai l networks, a petroleum pipeline, and lake transport through Lake Victoria to the extent it i s currently operating.

2.13 The Central Corridor for trade, starting from the port o f Dar es Salam to the landlocked EAC members Burundi, Rwanda, and southern Uganda. This corridor through Tanzania consists o f roads and rail network, and lake transport through Lake Tanganyika to the extent that it i s currently operating.

2.14 A north-south link between the Northern and Central Corridor for trade through the Nairobi-Namanga-Arusha road route, especially important for central Tanzania and the countries bordering the EAC to the north and the south.

2.15 The routes are illustrated in map A and the physical details are described in appendix A2. While this report does not focus on the state o f the physical transport infrastructure in EAC, it clearly i s a complementary priority.

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CHAPTER 3. METHODOLOGY TO ORGANIZE FINDINGS

I. A PATH OF OPEN REGIONALISM

3.1 All EAC members have significant shares o f their overall goods trade destined fodoriginating from countries beyond the region. As members o f the World Trade Organization (WTO), they are bound to make progress toward their multilateral obligations in international trade, including intia-EAC trade. Hence, the most appropriate methodology for organizing findings on the prevailing NTMs that impede the current goods trade i s the WTO consistency o f these measures. To date, very few NTMs in EAC have been formally notified and verified by the members. In addition, a notification or knowledge o f existence usually does not include the NTM administration itself, making the transparency incomplete. If any NTM persists in the EAC member countries, WTO consistency requires that these NTMs be “transparent,” “non- discriminatory” among the domestic goods flow and intra-regional/international trade, “scientifically based,” and “with no better a l te rna t i~e . ”~~

11. A RANKING BY THE EASE OF ACTION FOR REDUCTION/REMOVAL

3.2 Figure 3.1 illustrates one way to organize the NTMs that exist in the EAC. NTMs identified in quadrant A and B o f the figure may well be relatively noncontroversial for EAC- wide consensus building for removal. Given capacity constraints in the regional economic community (REC) and i t s member governments, EAC may want to target action on these f i rst quadrants. In contrast, far greater trade enhancement may be expected out o f targeting one or two NTMs identified in quadrant C, even though significant time and effort would be needed to devise, build consensus around, and implement a plan for their removal.

3.3 The EAC may also leverage the EAC-wide decisions already taken in this area. The NTMs for which the EAC has already taken the political decisions for removal or harmonization are likely to be located in quadrants A or B in terms o f pending implementation. The intra-EAC trade would benefit more from EAC’s prioritizing those NTMs located in quadrant B during the preparation o f action plans for implementation o f reductiodremoval.

25Article XXIV o f GATT on non-discriminatory trade practices; Art icle I11 o f GATT on transparency of trade practices. WTO: http://www.wto.org.

15

Figure 3.1. Categories of NTMs

C

Intra-EAC trade constraining

3.4 In addition to the static considerations, recent experience in the Southern African Development Community (SADC) illustrates a time dimension. As trade liberalization and tariff reform are implemented, intra-region trade i s likely to grow steadily and the NTMs are likely to become considerably less identifiable and more embedded within the regional economic community.26

111. A PRACTICAL WAY FORWARD

3.5 Under phase 1, in preparing this (draft) paper, the task team started with a desk review and then conducted country-by-country consultations with member governments and private sector f i r m s (producers/exporters/importers/transporters) for confirmation. The entities interviewed ranged across government departments such as the relevant sections o f the revenue authorities, public entities like the national bureau o f standards, parastatals such as export promotion agencies, and private sector foundations. Although effort was made to focus specifically on NTMs that constrain “onlyyy the intra-region trade o f EAC members, the discussions with f i r m s often had to include their sale in other parts o f the country and beyond the region (in Sub-Saharan Africa, especially the Democratic Republic o f Congo). The f i r m s clearly consider these markets on a continuum, subject to their scale o f production.

3.6 The interviews pragmatically maintained the needed flexibility. They recognized explicitly that NTMs in low-income countries such as the EAC members-which are characterized by very poor infrastructure and weak administrative and monitoring systems-are likely to be more arbitrary, qualitative, and nontransparent. Application o f any a priori framework for organizing the NTMs -in this case, consistency with WTO instruments- was member nation-based, rather than EAC-wide. As illustrated in the next chapter, perspectives in specific member countries varied depending on the country’s economic development and location.

26 Phase 2 expects to help the EAC Secretariat and member nations minimize/avoid such developments in the NTMs.

16

3.7 Because o f the wide range o f mechanisms through which N T M s affect economic outcomes and the data-intensive computations required, it i s very diff icult t o quantify the economic impact o f NTMs o n such measures as tariff equivalent impact. Unl ike the current overall needs o f EAC, the standard approaches for such empirical measurements o f NTMs were refined in the 1980s and early 1990s in the context o f entry o f processed agro-products, textiles, and other light manufactures into markets in developed countries. The approaches range from frequency type measures based o n counts o f observed NTMs in particular countries, sectors, and types o f trade, to the price-comparison measures (tariff equivalents), to the quantity-impact measures based on estimation o f trade flows. Each standard approach to assess the economic impact o f NTMs has i t s o w n drawback.

3.8 The difference between domestic and world prices i s one indication o f the prevalence o f NTMs. However, the application o f available sophisticated empirical methodology to calculate the ad valorem tar i f f equivalent for the specific NTMs, and the resultant trade restrictiveness to ascertain the economic impact in EAC, i s not possible because o f the extensive, detailed empirical data requirements for each identified NTM category and inadequacy o f background information. More importantly, it i s unlikely to be useful in fulfilling EAC’s objectives for the current investigation. In 2006, Kee, Nic i ta and Olarreaga provided the empirical methodology and estimated the impact o f core NTB o n imports at the tar i f f l ine level for 72 countries, including a l l EAC members, except Burundi. They provide an empirical methodology for estimating the impact o f NTB o n imports at the tar i f f l ine level (Harmonized System six-digit) based on Learner (1990), and use it to measure the impact o f NTMs.~’ They present the ad valorem equivalents o f NTMs for 72 developing and developed countries, including al l in the E A C except Burundi. They use only four categories o f NTMs in their measure, Le. quantity control measures, price control restrictions, monopolistic measures, and technical regulations.28 In table 3.2, the f i rst two columns are the average ad valorem equivalent o f core NTMs over the whole tar i f f universe in their sample.29 The third and the fourth columns provide the average effect o f core NTMs, but only over the sample o f tar i f f lines for which each country has core NTMs.

” They estimate the impact o f NTMs for a particular country at the two-digit level o f the harmonized system. They transform the quantity impact into price equivalents using import demand elasticity. The exact formula for the ad valorem equivalent depends on whether the NTB i s a continuous (domestic support to agriculture, for example) or a binary (core NTMs and kchnical regulation, for example) variable. These are calculated at the product level in each country and an overall ad valorem equivalent for the three types o f NTMs considered i s obtained by adding NTB components. The trade restrictiveness index methodology follows Anderson and Neary (2003). ’* UNCTAD Trains: Quantity control measures (code 6100,6200 and 6300); Price control restrictions (code 3 100, 3200 and 3300); Monopolistic measures (code 7000); Technical regulations (code 8100).

or absence. A l l NTMs considered for the EAC members covered are accounted as O h , depending on their presence 29

17

Country

Kenya Rwanda Tanzania Uganda

3.9 As noted earlier, the quantification may highlight the magnitude o f the constraint but does not address the EAC’s objective o f targeting specific NTMs and developing a work program for their removal. . As shown in chapter 4, the team made the choice in phase 1 to provide a more qualitative analysis o f the NTMs, reserving later complementary quantification in specific cases for phase 2 if needed and if the data are plentiful.30

Ad valorem Ad valorem Ad valorem Ad valorem Frequency Frequency equivalents equivalents equivalents equivalents ratio ratio (import (simple (import (simple (simple (import weighted) average) weighted) if average) if average) weighted)

NTB exists NTB exists 0.2 0.3 5.4 27.9 0.8 4.4 4.0 1.4 68.5 54.4 0.7 5.2 0.0 0.0 31.6 19.2 0.3 0.0 0.0 0.1 46.8 73.4 0.1 0.1

3.10 Among the various possible NTM categories, the task team found that no export restraints or production subsidies emerged to be significant in EAC. As direct trade control was not obvious in most cases, the task team sought focus to guide the discussions to see whether the NTMs operate largely o n imports (and not domestic goods), such that discrimination against imports i s inherent in the NTM. Most often, the discussions revealed that strong national behind- the-border supply constraints in physical infrastructure and human capacity are affecting the overall environment for EAC oods meant for trade as wel l as domestic consumption. In the selection o f NTMs by impact! the method that emerged to be most useful in E A C was the numberheverity o f private sector complaints by NTM instrument. Some information emerged on NTMs by productleconomic sector.32 T o maximize usefulness, the task team sorted the NTMs on goods trade in E A C according to the broad WTO definitions in a hierarchy o f current constraints indicated by the private sector complaints.

3.1 1 Trade within East Afr ica has traditionally been small-scale, localized, and informal. In agro/fishery-based sectors, there are strong indications that a significant proportion o f total intra- EAC trade remains informal. N o f i r m s interviewed clearly stated that the output they produced or transported was involved in informal cross-border trade, for obvious reasons. The preliminary information about the NTMs o n such trade emerged in the discussions with the revenue authorities, private sector foundations, and others and would need further follow-up. The lack o f official statistics on such trade and the various trade facilitation authorities’ dearth o f information on the NTMs make their study arduous. Work on specific products by entities l ike the E A G C and

As Deardorff and Stern (1997, p.45) note: “There i s no substitute for NTB specific expertise. The reliability o f any measure o f NTMs that may be constructed for particular sectors i s limited by the knowledge o f the intricacies o f these sectors that bear upon the measures.” The recent (January 2008) World Bank N T M survey o f ASEAN countries- which have much better data availability-notes this point and had to adopt such a flexible approach (World Bank 2008a).

In creating an ASEAN-wide database, researchers found that a wide range o f NTMs i s being applied. Some countries have focused on a few instruments, while others use a very broad menu. Non-automatic licensing was found to be the most common NTB in ASEAN, followed by technical regulations and ’’ This i s in contrast to the task teams’ initial expectations that product-based NTM categorization would be most important. I t was not possible to use feasibility o f potential for intra-EAC trade, current trade value, and tariff equivalent impact as an organization method.

30

31

rohibitions.

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recent surveys by the UBOS are being undertaken slowly. However, it was not possible during this stocktaking to assess the quantitative control measures, sub-national fees, and other measures prevalent in informal trade. Hence, the subsequent selection process o f NTMs for action in the EAC needs to be devised very carefully. It may not be representative to focus only on the official trade statistics.

3.12 The private sector entrepreneurs interviewed made it clear that they develop a fairly clear idea o f the additional costs imposed by NTMs along the different transport routes, and make a business choice over time o f the particular corridor to use for particular trade and transit purposes. Thus, in chapter 4, the location o f NTMs i s often associated with a particular transport corridor in EAC. Whenever possible, the cost incurred i s indicated in terms o f time or monetary loss, or decisions to undertakehot to undertake the trade. The stocktaking findings, reported in chapter 4, are organized according to the EAC-wide impact and coverage o f the particular NTM group, based on WTO definitions o f the broad categories. However, there i s some variation in the impact assessment depending on the country location o f the interviewee, although no distinct pattern emerges by country. Perception o f the severity o f the problem also varies somewhat depending on the location, economic development, and quality o f national amenities and trade facilitation mechanisms available. The summary tables on the Burundi and the Kenya perspectives (tables 4.2 and 4.3) illustrate this.

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CHAPTER 4. NON-TARIFF MEASURES IN THE EAC

I. PERSPECTIVE FROM THE EAC’S FORMAL GOODS TRADE

4.1 Characteristics o f the EAC members and their formal goods trade provide the context in which the current NTMs operate in the region, as the sections that follow in this chapter emphasize. Two EAC members-Kenya and Tanzania-have the natural advantage o f the Indian Ocean coastline for access to the sea routes via the ports o f Mombasa and Dar es Salam, respectively. This may not seem directly critical for intra-EAC exports or imports, but has significant importance indirectly for three main reasons. First, EAC agro-processing and manufacturing are very dependent on imported intermediate and capital goods entering EAC through these ports. Agro-processing and manufacturing products are most traded within the region, according to formal trade statistics. Second, the intra-region trade routes are also used for the imports/exports from outside the region: namely, the Northern and the Central Corridors, starting from Mombasa and Dar es Salam and covering long distances within the geographic boundaries o f Kenya and Tanzania, respectively. Third, the two countries play a pivotal role in the intra-regional goods trade.33

4.2 For the landlocked members, Burundi, Rwanda, and Uganda, the locational distance, number o f border crossings, and, in some cases, the specific goods traded may favor a certain route o f transit. For north and central Uganda, the distance and the single border crossing with Kenya means predominant usage o f the Northern Corridor. For most o f Burundi, the same reasons dictate the usage o f the Central Corridor through Tanzania. Such countries might choose to opt for (unilateral action and) simple bilateral agreements, while waiting for a five-member EAC consensus to be reached in goods trade facilitation, including lowering the impact o f NTMs. Except for Tanzania, all EAC members are dependant on the Mombasa-Nairobi-Eldoret petroleum pipeline.

4.3 Traditionally, the cheapest transport for bulk goods with high volume are by railways all across the world. This would be important for bulk commodities including food grains, animal products, other agricultural outputs and inedible crude materials that are integral to the intra-EAC goods trade. Unfortunately, in the recent years the official/formal goods traffic in EAC via railways along both corridors has declined substantially, as the reliability and quality o f i t s service has deteriorated. Much as we stress on about 1400 km of railway network in the region, only about 20 percent i s currently active. The lack o f complementary development o f roads and railways in the region has been costly for EAC members, particularly inland countries like Uganda, Rwanda and Burundi. Road transport has picked up the slack, even though it remains high-price (see appendix A5 on road transport cost and price in East Africa). Notwithstanding the recent privatization o f the railway operations, this trend persists. The two relevant private concessionings, in Tanzania and in Kenya-Uganda effective from 2007, have yet to embark on improvements laid down the concession agreements. Furthermore, since the Kenya and Uganda rail network has a different concessionaire from the Tanzania railways, adopting a regional approach towards use o f the rail network o f intra-EAC goods trade over the medium term may be

33 Kenya’s role i s pivotal as the highest income market for goods, as the historic base o f manufacturing in the region, as a key member of COMESA, and for access to the markets in Ethiopia, Somalia, and southern Sudan and. Tanzania’s role i s pivotal as a fast transforming economy, as the sole member of SADC in the region, and for access to markets in the south: notably, Mozambique and Zambia.

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difficult. The overall usage data for EAC also show that the landlocked members have been gradually moving their goods transit away from the Central Corridor, except in emergencies like the December 2007-February 2008 political crisis in Kenya.

4.4 It would be inevitable to highlight the acute need for investment in physical infrastructure in the EAC, but this (draft) report focuses on the barriers to goods trade that emanate from non- tariff policies, regulations, ad hoc procedures, and their implementation on the ground: that i s on the NTMs. This i s not to detract from the concern o f the producers, traders, and transporters in EAC who perceive the poor state o f i t s physical infrastructure and the related high transport price34 as the overwhelming constraint on the trade and transit o f goods across the region (For the range o f i t s inadequacy and poor quality, see appendix A6.1). The constraints imposed by the physical infrastructure emanate from:

the traditional government monopolies operating them, with l i t t le private sector participation

the limited capacity o f the existing facilities to handle the burgeoning goods traffic within and across EAC, and

the inability o f the cash-strapped national governments to keep up the required rehabilitation and maintenance, much less make the large investments necessary for expansion.

0

0

4.5 The growing intra-EAC trade s t i l l remains a small proportion o f the total trade o f the member states, as noted in chapter 2. Government authorities, capitalizing o f the potential o f the regional trade, would need to pay more attention to trade monitoring and facilitation. In the face o f the high price o f transportation (see table 4.1), smaller individual f i r m s that produce and trade within EAC have been primarily interested in reaching relatively high-income markets within the region, like Kenya, and/or those in the other member states contiguous to the location o f production. Appendix 5, which summarizes recent analyses undertaken in East Africa and other parts o f Sub-Saharan Africa on the characteristics o f the transport price and i t s underlying reasons, basically shows that the decisions for improving transport infrastructure may lower the total cost o f transportation, but the transport prices in East Africa - as in other parts o f SSA - may not come done for the final user due to the oligopolistic transport industry. However, it also illustrates that the transport pricing structure in East Africa i s somewhat better than along other corridors in SSA.

Table 4.1Estimated Unit Transport Costs for Container

Route Distance in km Cost per km (USD) Dar es Salam-Kigali 1,650 3.0 Dar es Salam-Bujumbura 1,750 3.0 Doala-D ’ Jamena 1,900 4.2 Lome-Ouagadougou 1,000 2.6 Lome-Niamey 1,234 2.6 Mombasa-Kam pala 1,440 2.3 Maputo-Johannesburg 561 1.4

Source: Pearson (2006), based on United Nations Economic Commission for Africa (UNECA) data.

34 As seen in appendix A5, transport cost i s based on the state o f the physical infrastructure, but the price at which transport facilities are made available in SSA depends on the profit margin maintained by the transport companies.

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4.6 Last but not least, noticeable improvement toward facilitation o f cargo transit has been made (in the opinion o f the corridor users) in recent years within the framework o f the North Corridor Authority and related investments in physical infrastructure along this route. Hence, recent stakeholder interviews convey that the predominant barriers to goods trade along the Central Corridor remain associated with infrastructure, and those along the Northern Corridor are now primarily administrative and customs procedures and operation.35

11. ECONOMIC COST OF NTMs

4.7 The actual cost o f the NTMs on goods trade i s difficult to assess in a preliminary stocktaking such as this report. In light o f the information gathered on NTMs prevailing along each Corridor, their political-economic context, and their severity, this study groups the principal NTMs according to their negative weight on intra-EAC trade and the complexity o f reasons for their per~ is tence.~~ These estimates/proxies o f costs are based on the extensive private sector interviews in EAC member countries. In the EAC, it i s seldom possible for stakeholders in goods trade to separate such costs from the additions due the deteriorated physical infrastructure, i t s inadequacy vis-a-vis needs, and the resultant congestion.

4.8 by the amount o f business expenditure incurred in:

The impact o f the NTMs~~ on intra- EAC export/import and transit trade can be measured

Official payments, in the process o f complying with official export and import requirements

General expenses (staff costs, storage costs, and the 1ike)accrued while awaiting verification or clearance o f cargo at border crossings due to delayed clearance o f goods

Nonofficial expenses at border entry and exit points, police roadblocks, and weighbridges intended to unofficially speed up clearance o f goods. Such bribes may be paid to officials from the customs, port, quality inspection agencies, police at road blocks/ border crossings, immigration office, business licensing/ registration office, and at weighbridge stations.

Lost business opportunities, in value or quantity o f a business opportunity due to introductiordapplication o f discriminatory tax rates and other import procedures, such as import licenses, quotas, bans, and wasted products (especially perishable ones) during the process o f a full inspection, or o f weighing axle load or Gross Vehicle Mass specifications.

Lost time, in the process o f complying with nontransparent or difficult procedures.

In 1985 Kenya, Uganda, Rwanda, Burundi and the Democratic Republic of Congo signed the Northern Corridor Transit Agreement (NCTA) to simplify and harmonize procedures to expedite movement of goods in transit across each country. The agreement provided for establishment of Transit Transportation Coordination Authority (TTCA), for implementation of matters related to transit traffic. 36 This will help assess the time requirements and resources needs for the future action plan to eliminate NTMs. 37 The NTB impact measures are elaborated in the Proposed Mechanism for the Elimination of NTBs in

35

EAC, EAC-EABC (2006).

22

4.9 The largest direct and indirect cost o f NTMs in the EAC, as determined by the task team, stem from lost man-days during transit and clearance before reaching the market, and nonoflcial expenses related largely to the scope for corruption in the implementation of policies, followed by oflcial payments and lost business opportunities.

111. NTMS PREVALENT IN THE EAC

4.10 The discussion that follows presents the NTMs that apply to intra-EAC trade, with the broad categories organized as per the WTO inventory categorization (see appendix A4). The broad categories are ranked in a decreasing order o f importance based on numbers o f private sector complaints. The presentation synthesizes findings from interviews in the five EAC economies. The presentation moves away from the state o f physical infrastructure in the region, though the task team remains mindful o f the EAC stakeholder responses conveying that NTMs related to the “government monopolies and i t s tolerance o f monopoly practices” (that i s WTO I, in the inventory provided in appendix A4) have a possibility o f being alleviated as constraints imposed by the physical infrastructure are gradually tackled.

4.11 As an illustration o f specific national perceptions o f indicative costs and the political- economic operation o f NTMs, tables 4.2 and 4.3 present the perspectives o f producers, traders, and transporters o f Burundi and Kenya, respectively. As seen in chapter 2, o f the five EAC member countries, these two counties differ the most in their economic and trade profiles.

A. Customs and administrative entry and passage procedures (WTO 11)

4.12 The EAC Council o f Ministers decisions are expected simplify and synchronize customs documentation, formalities and procedures at the border posts. Many member states are undertaking donor-funded customs modernization programs, but the focus and content o f such national efforts remain largely uncoordinated across the EAC. Planned improvements in administering border posts have been slow, mostly bilateral, and with somewhat varying results to date.38 Duplication o f processes continues to add to monetary costs and loss o f time. Unequal treatment according to the country o f origin o f the goods andor truck and opportunities for fraudulent behavior i s frequent, as are the allegations o f such “unfair” treatment and corruption.

Documentation and procedures 4.13 The task team witnessed varying systems o f import declaration, payment o f applicable duty rates, and (technical and sanitary and phyto-sanitary requirement) standards applied, as well as limitedvarying working hours at the customs posts. Lengthy procedures and inadequate information to enable customs officials make pertinent decisions at the border posts seem to plague the EAC-wide system.39 Frequent use o f COMESA certificates o f origin by businesses o f four EAC members illustrate that the standardization o f EAC certificates o f origin i s not functional. To implement customs procedures for entry processing, cargo control, transit, warehouse control, and accounting, four member countries have opted to use (various versions of) ASYCUDA,40 while Kenya has chosen to use SIMBA.41 To date, the linkage between these

38 Kenya and Uganda have a bilateral legal fi-amework for joint control at their common border posts, creating a one-stop post at each border crossing, starting with Malaba. They also have an agreement to introduce 24-hour services at their common border posts. 39 I t takes about one week for process at Kenya Revenue Authority to be completed. 40 Automated Systems for Customs Data i s a computerized customs management system developed by UNCTAD to help reform the cu ton is clearance process. It a ims at speeding up customs.

23

two systems has not been smooth. Delays in processing export papers are widespread. Before transporters leave their departure point, they must fi le export papers with the revenue authority (at the capital) to be sent t o the border post. These papers often reach the border two to three days after the arrival o f the goods, for example in Uganda.

I Box 4.1. Burundi: Steps in Customs Formalities for Goods at Bujumbura I Numerous steps must be followed:

0

0

Presentation o f PAC (summary statement o f goods completed at the office o f entry) at the customs clearance office Presentation o f freight manifest (number o f packages, quantities, and weights) by the hauler Intake and entry o f manifest data by customs Unloading o f cargo in Exploitation du Port de Bujumbura (Bujumbura Port Authority) warehouses Customs declaration by a customs clearance agency Documentary/physical verification o f quantities and value o f goods by the customs office Verification o f the customs declaration by customs: acceptance/rectification o f the declaration Payment o f customs duties and taxes by the importer Issuance o f the removal order by the office chief Removal o f goods by the importer

Use of clearing agents 4.14 In some member nations traders are restricted from using clearing agents f rom their own country o f origin and must hire (expensive) agents f rom the country o f the port location. For example, Ugandan traders cannot use Uganda-registered clearing agents to clear goods in Kenya. The integrity o f clearing agents i s called into question in some locations.42 Lack o f capacity o f clearing agents impedes Burundi and Rwanda’s goods trade, since the declaration process i s slow because they are not conversant in use o f the Automated System for Customs Data (ASYCUDA) and have only l imited familiarity with customs procedures and regulations.

Institutions exercising administrative and customs controls 4.15 Even the EAC member governments accept that there are too many agencies involved in overall impodexport inspection and certification in the region, stretching the administrative capacity and resource needs. The process i s no different for goods traded i r ~ t r a - E A C . ~ ~ For example, numerous agencies participate in the clearance process in Burundi (see box 4.2), even though the Customs Service i s the primary public agency responsible for administration, control, and collection o f taxes o n imported and exported goods. It i s also the only country in the E A C that does not have a full-fledged revenue authority in place.

41 The Similarity Based Complex Analysis System (SIMBA) i s an electronic real time trading system for international markets developed by SIMBA Technologies Inc. 42 There are fi-equent complaints o f dealing wi th forged invoices, especially fi-om the United Arab Emirates and Dubai. 43 Along the Central Corridor starting at the Dar es Salam port in Tanzania, public agencies playing a role are the Tanzania Revenue Authority (TRA), Tanzania Ports Authority (TPA), Tanzania Railways Corporation (TRC), Surface and Marine Transport Regulatory Authority (SUMATRA), Tanzania International Container Terminal Services (TICTS), and Tanzania National Roads Agency (TANROADS). The Tanzania Freight Forwarders Association (TAFFA) and Tanzania National Business Council (TNBC) are the associated private entities that facilitate trade.

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Box 4.2. Burundi: Institutions for Administrative and Customs Formalities

The following institutions play various roles: 0

0

0

0

0

0

0

0

Customs Administration: administration, control, and taxation o f imported and exported goods Commercial banks: financing o f external trade (documentary credit) SociCtC GCnCrale de Surveillance: pre-shipment inspection o f goods Burundi Bureau o f Standards: quality control Ministry o f Commerce and Industry: issuance o f certificate o f origin Ministry o f Finance: authorizations for special customs clearance arrangements, e.g. for unloading goods at a registered address or for authorized removals Ministry o f Agriculture and Livestock: SPS controls Ministry o f Health: food and drug safety controls Border police (PAFE): police controls SociCtC d’Exploitation du Port de Bujumbura (EPB): Bujumbura port management authority Forwarding agentihauler: takes charge o f goods during transport Customs agency: facilitation o f customs clearance operations.

4.16 Even in member countries with a fully functional revenue authority, with i t s o w n customs department, and a developed bureau o f standards, the inspection and verification i s the responsibility o f multiple agencies. Consider the public agencies in Uganda that manage food safety and quality standards (see box 4.3). In the end, the multiple agencies result in customs processing taking up to one week on average in Uganda, with “simplified proceduresn for single- item cargo taking one day, and multiple item cargo taking three days.

Box 4.3. Uganda: Public Agencies to Ensure Food Safety, Agricultural Health, and/or Quality Standards

Various public agencies have authority: 0

0

0

Uganda National Bureau o f Standards (UNBS) Ministry o f Tourism, Trade and Industry (MTTI) Ministry o f Agriculture, Animal Industry and Fisheries (MAAIF), especially Department o f Livestock and Entomology, Department o f Animal Production, Department o f Crop Protection (DCP), Department o f Fisheries Resources Ministry o f Health (MOH), Environmental Health Division 0

National Drugs Authority (NDA) 0 Uganda police

4.17 In addition, the effectiveness o f some agencies such as to which a member government may have delegated monopoly power in certain functions are being called to question widely by private sector f i rms. An example i s the SociCtB GBnerale de Surveillance in Burundi, which receives cargo under the Import Verification Program. Pre-shipment inspection i s usually designed to improve customs valuations by combating overcharging o f imports and undercharging o f exports, but this may become another barrier in the member nation.

Customs bonds remain country specific 4.18 At present, the compulsory customs bonds required o f traders expire at national borders within EAC. Hence, the number o f border crossings impact on the cost o f EAC trade and often the choice o f the route o f transit.

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Arbitrary use of rules of origin 4.19 Countries under the WTO are required to ensure that the rules o f origin, which define where a product was made, are transparent and do not restrict, distort, or disrupt trade. They also must be based on a positive standard and administered in a consistent, uniform, impartial, and reasonable manner. WTO allows members setting up a free trade area like the EAC to use different rules o f origin for products traded under their free trade agreement. The agreement establishes a harmonization work program, based upon a set o f principles, including making rules o f origin objective, understandable, and predictable.

4.20 At present, differences in interpretation o f the rules o f origin complicate customs procedures in EAC. The five EAC members have yet to develop a clear consensus in this matter and standardize their certificates o f origin. In addition, bureaucratic delays in issuing the certificate o f origin affect exporters, especially those with perishable products. For example, the compulsory Uganda Exports Promotion Board certificate may take more than one week to issue for one consignment, and may not be accepted by other EAC members. The EAC rules o f origin only apply when an import i s “wholly produced” in that country. If there has been any transformation in the product, the tendency i s to largely use the rules o f origin o f the Common Market for Eastern and Southern Africa (COMESA), subject to interpretation. For example, Uganda upholds that “content o f local raw material should exceed 35 percent o f the ex-factory cost and the product should be classified in a separate tariff heading (other than the non- originating raw materials used in production).” Other EAC members disagree.

Escorts of goods in transit 4.21 All sensitive and hazardous products are escorted through the territory o f each EAC transit country.44 In addition, to ensure that transit goods actually cross the borders o f a member country and are not smuggled for sale within, all products in transit are escorted in convoys through Burundi. In all other EAC members the importer o f the good i s issued a transit bond by a clearing agent who monitors that the goods reach the designated point o f exit, where the bond i s cancelled. In most countries more than the required transit days are authorized in the bond, e.g. 3 days in Rwanda compared to the needed one day. In Burundi, the traders and transporters are concerned about the nontransparent escort fees. In general, the transporters are concerned about the time lost in the assembly o f convoys by police escorts, which may not be daily and can range between two and three hours at each stop. Truckers report the journey “taking two days+om Mombasa to Malaba” (a distance o f 950 km) due to such convoys.

Verification of transit cargo 4.22 A lot o f transit cargo i s scanned and verified by the revenues authorities, like the Kenya Revenue Authority and the Rwanda Revenue Authority, though it i s not for use in the member country concerned. The goods destined for the member country in many cases are subject to 100 percent physical inspection, particularly where they involve refund or drawback claims, regardless o f the compliance record o f the exporter/importer.

Working hours at the border posts 4.23 There i s lack o f harmonization in te rms o f the agreed working hours at the intra-EAC borders. At present, no border post in EAC i s open for 24 hours a day-7 days a week. In addition, Burundi continues to maintain a ban on vehicular traffic on i t s roads during the 6:OO P M to 6:OO

44 See appendix A7 for the EAC’s sensitive product list.

26

AM period for safety reasons. Gates are opened/closed at different times on each side o f the border, causing unnecessary queues and commotion. For example, at Malaba gates at the Ugandan border post are open 8:00 AM to 1O:OO PM, while gates at the Kenyan border post are open 8:OO AM to 6:OO PM. At Gatuna, gates at the Rwandan border post are open 7:OO AM to 9:OO PM, while gates at the Ugandan border post are open 8:OO AM to 1O:OO PM. The Rwanda Revenue Authority has announced that the border customs offices will start 24-hour operations from September 1, 2008 to ease the flow o f goods and services in the EAC and neighboring Democratic Republic o f Congo. Uganda, a crucial partner in the 24-hour operation, i s not yet ready to follow suit due to manpower and budget constraints.

B. Government participation in trade and restrictive practices tolerated by it

Port and internal CFS operations

4.24 The operations o f the ports and inland CFS operations in the EAC serve as a bottleneck for economic activity in the region. Whi le operations o f the sea ports o f Mombasa and Dar es Salam are especially important for EAC's goods trade with the rest o f the the lake ports o f Bujumbura, Kigoma, and internal freight stations like MAGERWA and Isaka are particularly important for the intra-EAC trade. This i s more so in member countries that have minimal capacity, if any, available at their border posts and all goods clearance activities are concentrated at these locations. Examples include Bujumbura in Burundi and MAGERWA in Rwanda, until recently. The transparency and efficiency in clearance and release o f goods at the two sea ports i s hampered by the administrative complexity o f formalities, especially in Kenya- including varied documentary requirements; numerous/excessive service fees; and offloading, inspection, and warehousing processes, with short grace periods provided for imports prior to the application o f demurrage charges. Limited skills and ineffectiveness o f the various staff and agents prevail, especially in Dar es Salam. Local regulations that do not allow the creation o f a container freight station (CFS) and other activities beyond a short radius o f the port impede expansion. All these add to the lengthy delays, congestion, and high costs in offloading and clearing cargo (already limited by the useable physical infrastructure at these locations) and create considerable scope for discriminatory and fraudulent behavior. Shipment clearance delays also add to the risk o f deteriorating product quality, especially for perishable products.

(WTO 1)

4.25 Mombasa port operations are unanimously agreed by the private f i r m s and public agencies in Uganda and Rwanda to be at the top o f constraining measures for total goods trade along the Northern Corridor. The private stakeholders in Kenya convey a similar assessment. The Kenya Port Authority procedures are recorded to take over 60 hours-that is, two weeks- for clearance o f a container. On average, cargo spends 17.9 days at the Mombasa port. For a subset o f containers destined for Uganda and beyond, the time spent was 37.5 days; while that for containers destined within Kenya was 12.4 days.46 Regulations that do not allow a CFS to be located outside a 10 km radius from the port are hampering efforts to establish such a facility for Rwandan goods. Each 10-day delay in releasing the goods implies a cost equivalent to about 0.5 percent o f the value o f goods.47 Costs also result from goods not being available for use, at around 0.8 percent o f the value o f goods per day.4s In early May 2008, approximately 8,000 containers were reported to be waiting at the Mombasa port.

" Including inputs for goods produced and traded within EAC. 46 Time at port refers to the time taken from unloading containers to exiting ports; or from entering port to loading on ships. World Bank (2006; p. 212) considers 7 days to be the reasonable standard time at port.

48 Based on Harnmels (2001), which studies willingness to pay for reduc6g transit time o f goods. Assuming an interest rate o f 20 percent 47

27

4.26 The Dar es Salam port takes two to four weeks to clear containers. Increasingly stakeholders in the land- locked EAC countries who have a choice in terms o f using the two ports on the Indian Ocean are moving away from using this port (because o f both the implementation o f regulations and the quality and capacity o f infrastructure at the port and along the central corridor). In September 2005, about 11,000 containers had not been cleared after four weeks, while they start incurring demurrage after two weeks. For Burundi, the finalization o f the agreement with government o f Tanzania to allocate land for the construction o f a warehouse for i t s goods in the port area i s awaited.

4.27 The Bujumbura port clears all goods entering Burundi through all i t s border crossings-since the border posts are largely nonfunctional-while the clearance paperwork undergoes a process o f control and verification simultaneously with the actual goods. Forwarding agents and transporters estimate that clearance to often take three to seven days to complete. During this span, fees for services are charged on the trucks, including truck fees o f USD250 per day and parking fees o f BFr 9,000 per truck per day. In specific cases, goods can be unloaded for a registered address or are authorized for removal by a high-ranking authority in the government and are processed faster. Authorizations to unload goods at a registered address are granted by the Minister o f Finance for fragile products (such as t i les or cement) and perishables (such as drugs) to avoid repeated handling, which could damage the product during verification operations. Authorizations for removal are issued by the same authority in the case o f imports by NGOs, projects, and diplomatic missions that are exempt from customs duty and taxes.

4.28 In Rwanda the border ports are functional, but customs offices in Magasins Generaux du Rwanda (MaGeRwa) finalize the clearing processes o f goods and hand over to the final importer or the actual owners. A privately operated container terminal has just started operation in Kigali in 2008 to supplement the work done in MAGERWA. The minimum time i s three days for the issuing o f an arrival note and customs procedures to be completed, but usually clearance o f goods can range from one to two weeks. However in the process o f clearing and releasing these goods to their owners, a number o f different bottlenecks occur. Consider the multiple service charges at MAGERWA, illustrative o f many similar locations in the EAC: Every truck i s charged a weighbridge fee o f FRw 5,000. There i s FRw 7.5 per kilogram o f the goods carried for storage /demurrage. For goods kept in the warehouses, a grace period o f 15 days in provided. Thereafter, a fee o f FRw 1 per kilogram per day i s charged. In addition, MAGERWA charges a parking fee on goods o f FRw 5,000 and a VAT o f FRw 900 for any extra working day (beyond one day) that the vehicle remains parked. Charges by RRA may vary depending on the product’s categorization.

Delays at weigh bridges 4.29 The mandatory weighbridges for goods all along the transit route, and not only at the border, impede trade through addition to transit time and cost o f transporter upkeep. These are particularly significant on the Kenyan and Tanzanian sides o f the transport corridors. Tanzania requires every vehicle carrying goods, small or large, to be weighed, including passenger buses. Along the Central Corridor, between Rusumo and Dar es Salam, there are five compulsory weighbridges: at Nyahahura, Mwenda Kulima, Mkundi, Mikese, and Kibaha. Along the Northern corridor, there are 7 weighbridges on the Kenyan route at Mombasa, Malaba, Kilindini, Maliyakani, Athi River, Webuye and Amagoro. Trucks heading to Kigal i have to be weighed another four times in Uganda, at Busitema, Masaka, Mbarara, and Ntungamo. Neither the acceptable weights per axle nor the number o f axels are not yet harmonized in the region, causing further conflicts (more on this later). The system that Kenya i s moving toward (awaiting fully

28

compliance to the directive o f the Minister o f Roads and Public Works) i s that transit trucks will be weighed only once and need to carry the issued certificate,, as preferred by transporters.

C. D i s t r i b u t i o n restrictions (WTO VII).

Multiple police road blocks and mobile control 4.30 Unrelated with weighing or clearing the cargo, police road blocks are constantly cited by traders and transporters as location for rent seeking and transit delays. The roadway along the Northern Corridor i s particularly noted for such practices, especially on the Kenyan part. “Police check points have become ‘police cash-points’ as they no longer serve their intended purpose o f security but are being used as medium o f soliciting money from transit trailer trucks, especially those with foreign registration numbers,” said one irritated transporter. For example, there are about 10 police/local government roadblocks from Mombasa to the Uganda border (down from about 27 about four to ten years ago). In addition, there are mobile checkpoints, more frequent in Kenya, run by the revenue authorities o f the respective countries, such as the Revenue Protection Department in Rwanda. It i s estimated that 12 percent o f checks o f commercial vehicles take one to two hours. In some cases, these roadblocks cause delays even for returning vehicles not carrying any goods. Along the Central Corridor, 26 checkpoints were reported between Rusumo and Dar es Salam (distance 1,48Okms), and 5 in Rwanda between Rusumo and Kigal i (168 kms distance). What bothers transporters i s that there i s a general lack o f coordination among the police in carrying out their duties, such that a truck i s subject to similar checks at all traffic stops. This creates room for the police to openly press for petty bribes-for example, in Tanzania, commonly referred to as “kahawa,” meaning a cup o f coffee.

Prohibition on transportation of locally produced goods 4.3 1 This i s applied in most countries. For example, transit goods license issued for a truck by the KRA/RRA allows the truck only to route goods through KenyaRwanda, but not to undertake any local goods transportation within the country. It prohibits transportation o f locally produced goods from KenyaRwanda as exports and transportation o f goods from another EAC member into KenyaRwanda as imports. Such restrictions, on what could be normal occurrence for returning trucks, escalate transport costs, as empty trucks have to be sent back.49

Refueling 4.32 Ugandan transporters stated that the trucks registered in Uganda are not allowed to refuel in Rwanda. Since fue l prices are lower in Rwanda than they are in Uganda, refueling Uganda’s trucks in Rwanda i s equated to smuggling. Ugandan transporters have to make sure that they have enough fuel before crossing the Rwanda border to avoid getting stranded. This does not seem to be true, when cross-checking was done with the Rwandan authorities

Discriminatory treatment toward foreign trucks in Tanzania 4.33 Allegations o f discriminatory treatment on foreign-registered trucks have been made concerning all member countries, though the problem seems to be most acute in Tanzania. Few trucks bearing Rwandan, Burundian, Ugandan, or Kenyan number plates ply along the Central Corridor. Most producers, traders, and transporters in these countries prefer to use trucks registered in Tanzania driven by Tanzanians because o f discriminatory treatment o f foreign- registered trucks. Transporting companies register part o f their fleet in Tanzania to avoid

Traders asked, “If the COMESA Yellow Card i s acceptable in the region, why isn’t the EAC Transit Goods License 49

similar?’

29

problems. Among other things, foreign registered vehicles in Tanzania pay a road fee o f USD5O per week, compared to local vehicles that pay nothing. In Kenya, Ugandan truck drivers allege “injustice and unfair treatment- everything i s judged in favor o f the Kenyans” at the road blocks. Harassment o f Rwandese truckers has also been reported at weighbridges in Kenya and by police in Uganda. Such practice i s often considered a sign o f growing corruption in these countries.

EAC transit licenses for goods 4.34 These are being issued as part o f the new EAC transit regulations, with multiple fees: USD 1,500 for a company transit license; USD600 for a transit goods license, and KSh 10 mill ion for a security bond on goods transited across Kenya. Information shared with transporters i s limited. Moreover, different countries seem to continue to charge their own rates at present. For example, it costs USh 500,000 (approx. KSh 20,000) for a transit license in Uganda and KSh 42,000 for one in Kenya.

Truck entrance fees and grace period 4.35 Contrary to the EAC Protocol, Kenya, Tanzania, and Rwanda charge fees on each truck entering their territory (often referred to as “road toll”). Kenya charges USD60 for a truck going up to Nairobi from Mombasa and USD90 beyond Nairobi; Rwanda charges USD76 per truck; while Tanzania charges USD5O per truck per week. In addition, local levies may apply. For example, the municipality o f Mombasa has introduced a new levy on Uganda-bound trucks. The EAC transit regulations allow a grace period o f seven days without payment o f fees for vehicles entering the territory o f a member state, but compliance varies across member states and across time periods.

Variation in application of axle load limits 4.36 The EAC has passed a specific 3 axle-7 tonne per axle load requirement for trucks. All member governments agree that the new restriction i s good for protecting the road surface in the region and, in addition, the private sector agrees that it will eventually be good for truck maintenance and reduced workshop time. Tanzania has been strictly applying such axle load limits, as a member o f SADC, for a while. However, ,the other four members have traditionally allowed 4-axle trucks with much larger loads. These larger capacity trucks had become an important l i fel ine for the EAC, as the railways became less and less an alternative for bulk commodity transportation.

4.37 In the interim, while the rule i s being sporadically applied by Kenya, Uganda, and Rwanda, decisions at the border do not agree on the same axle loading. In extreme cases, entry i s temporarily denied, limiting market access. In Burundi, the regulations to restrict axle load have not yet been introduced. Along the Northern Corridor, transporters and traders find the enforcement o f the axle load controls more flexible than along the Central Corridor. Those who submit to the EAC restrictions along this route feel that it amounts to unfair competition, in as much as they are penalized by having to pay higher unit cost for cargo transport than those who may have bribed agents responsible for checking axle load. For example, Uganda registered trucks are sometimes denied transit permits to the DRC by Rwandan authorities for unclear reasons related to the concern that “Ugandan trucks spoil roads in Rwanda.” For the time being, trucks must remove the fourth axle only when entering Tanzania, an activity costly both in terms o f time and money. During the end-2007 political crisis in Kenya, Tanzanian authorities invited Uganda to use i t s ports. But continued transit became impossible on the Tanzania route even for two weeks because o f the huge fines charged on loads in excess o f the standard axle load. While

30

the railways remain a poor alternative for bulk commodity transit across the region, EAC-wide implementation o f the axle-load decision will hike unit transportation cost o f cargo in the region and reduce the transport capacity o f the existing fleet. For reasons o f fairness and reciprocity between countries, all partner countries should harmonize implementation o f the axle load regulation.

D. Specific limitations (WTO V)

Cost of translation 4.38 The official language o f EAC business i s English. However, the government and business processes o f Burundi remain francophone, with very limited programs to improve English- and Kiswahili-speaking capacities o f the traders and transporters. Hence, the language o f communication i s yet another NTM recognized by Burundian traders and trucks that travel in Uganda, Tanzania, and Kenya. Traders face specific charges. For instance, those who export goods to francophone Burundi from Kenya pay a USD300 fee to translate the required regulations to English at Jomo Kenyatta International Airport in Nairobi. Traders suggest that regulations should be translated in all official national languages spoken in EAC by the issuing country.

Use of immigration and visa procedures 4.39 These are cumbersome, duplicative, and in many instances used contrary to the EAC Protocol. EAC-wide, visa fees was removed in June 2007 and replaced by temporary work permits for visitors seeking temporary work assignments. These do not apply to traders, transporters, and visitors who are not seeking temporary employment. At the border, officials at Nymanga, Tanzania not only charge each truck USDDSO, but also impose a charge o f USD 100 as work permit for accompanying businessmen who would like to exhibit their products in Tanzania.

Business registration 4:40 Treatment o f businesses originating in the EAC as “foreign” and different national procedures make cross-border registration o f business branches difficult. Payment for registration o f business names and the multiplicity o f licenses for production, distributionhale o f goods among the five EAC countries i s cumbersome. Moreover, exemptions on certain WTO obligations apply to four EAC members that are categorized as less developed countries. When it comes to cross border trade in manufactured products, it i s not clear how this should impact their trade with Kenya in specific areas, such as pharmaceutical and medicinal products.

E. Technical barriers to trade (WTO 111)

4.41 Technical standards and SPS concerns about goods are slowly emerging as NTMs in the EAC. These two difficult areas o f action are likely to be in the forefront as the members develop their economies and industrial base. If EAC members continue to view intra-region trade in manufactures as being in conflict with the national political agenda o f promoting industrialization, traded goods compliance to product technical standards and mutual recognition o f such standards may prove very difficult to implement in EAC. Notwithstanding the immense capacity constraints presented below, the political will in the EAC countries i s key in the adoption o f technical standards for traded goods. Trade in the region has been affected when the credibility o f the NBSs have been in doubt. But the problem can be alleviated by mutual understanding and an establishment o f a good track record over time.50

For example, that done by the Uganda Bureau o f Standards.

31

4.42 In close relation with the technical barriers, there are allegations o f NTMs impeding sale o f manufactured goods in Kenya. Producers and traders from other EAC members seeking to access this high-income market find it difficult to advertise and place their products on shop shelves in Kenya, even if they meet the technical standards specified by Kenya Bureau o f Standards. Billboards o f advertisements are reported to be taken down overnight. The retail outlets in Kenya face difficulty renewing the Kenyan business licenses in the subsequent years.

Goods inspection and technical standards en forcement 4.43 The EAC member states are expected to adopt the EAC harmonized standards o f goods traded within the region. Enacted into law i s a mechanism to ensure mutual recognition o f quality marks on products by the national bureaus o f standards (NBS). Currently the bureaus are also responsible for enforcement o f the standards at the border. Goods are to be exempt from rigorous verification upon importation once they bear such national and/or EAC quality marks.

4.44 These steps largely remain unimplemented, due to human capacity and/or political will. At present, all EAC member states do not recognize one another’s quality marks. Members continue to set their individual standards and require other states to comply on all goods for sale and for transit. The concerns o f traders and transporters hinge on training /information available to agents applying the technical standards at the border; the product verification methods and continuance o f inspections despite national/EAC quality marks/certificate issued by specific NBS; and the inspection fees on goods in transit. For example, Tanzanian food exporter pays TSh 200,000 per shipment for a Tanzania Bureau o f Standards certificate, but the certificate i s not recognized by other EAC members. Another example i s the case o f Ugandan tea. Shipments transited through Kenya to countries outside the region must pay an inspection fee o f USD400 at the border despite the Uganda Bureau o f Standards certificate. The inspection systems for goods at the borders are not harmonious across EAC, and may not use the needed international standards o f inspection, accepted procedures, and accepted sample sizes such that tests are unbiased. There are instances where goods are returned or destroyed due to the lack o f standardization

Box 4.4. The Dairy War: Kenya versus Uganda and Tanzania

Milk processed by Musoma Dairy Limited, Tanzania was denied entry into Kenya in mid-2008 by the Kenya Revenue Authority on the grounds that the milk did not qualify under the EAC’s ru les of origin requirement. As a result, the imports into Kenya attracted a duty o f 60 percent, the prevailing common external tariff (CET) o f the customs union. In addition the company has had to obtain an export permit for each consignment from the Kenya Dairy Board, at the charge o f USD77 per consignment. The company had a contract to export 100,000 liters o f UHT milk to Kenya, but in the end was allowed to export only 10,000 liters at the 60 percent duty. The dairy war has resulted from a complex regulation regime that prevents imports of dairy products from Tanzania and Uganda into Kenya, in effect defeating the spirit of the EAC Customs Union. Tanzania and Uganda argue that the restrictions and multiplicity o f controls are contrary to what EAC member states had agreed on milk exports. First, the Kenyan regulations require that milk exporters from Tanzania and Uganda must have certificates proving that these products have been processed under constant supervision by the veterinary authorities in the region. Second, it i s argued that the veterinary standards imposed by the Kenyan authorities are neither made public nor i s the information shared with the veterinary authorities in the region. Third, too many institutions-the Kenya Dairy Board, Kenya Bureau o f Standards, the Veterinary Department, and Kenya Revenue Authority-deal with authorizing Kenya’s dairy imports. The main NTMs restricting milk trade are the national legislations and the outdatedcumbersome import authorization systems that in effect are not really intended for checking applying the EAC-wide norms on ru les o f origin or enforcing technical standards o f the imuort or it sanitarv and food safetv standards.

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Goods definition and quality certification, according to technical standards 4.45 The EAC Protocol requires harmonization o f technical standards for goods across the region. It i s the mandate o f the NBS to develop and certify that products meet required technical standard^.^^ Slowly EAC i s also developing technical standards for goods produced in the region, with the associated quality mark. Inadequate capacity in technical standards/ quality management leads to misapplicatiodmisinterpretation o f standards with regard to requirements/ certification.

4.46 Though the EAC policy o f harmonized standards i s laudable, given the various constraints, a pragmatic way forward may have to be devised. The top export value products that the EAC trades internally are often also the key products that that it exports externally. Accordingly, many standards really do not need to be developed for the member countries. For example, for commodities l ike tea, coffee, fish, tobacco, vegetables, and petroleum, the quality requirements for exports outside the region do not need to be translated into regional (or national) standards; they just need to be complied with. Expanded efforts at regional harmonization o f standards may o n the one hand build up capacity; o n the other, such capacity may not be used to ease NTMs. It may be used for the exact opposite purpose: t o increase inspection, certification requirements

4.47 The five bureaus in the EAC operate at very different levels o f physical capacity (of laboratories, for example), human capacity, and resources for investment and technical training, with the one in Kenya leading and the one in Burundi trailing the list. Accreditation o f laboratories to perform required tests- taking into account the general laboratory environment, competence o f personnel in testing products, procedures followed in performing tests, validation o f the tests through comparison with standard products-is not similar among the members.52

Box 4.5. Product Definition: The Case of Incompatible Sugar

In Uganda, imported sugar i s sold at prices lower than locally produced sugar. This i s beneficial for the consumers, but a cause o f concern for the local producers. 0 A factory has been set up in the Kagera basin o f western Tanzania to manufacture brown sugar. 0 Sugar produced at this factory bears the certification o f quality by the Tanzania’s Bureau o f Standard.

The Tanzanian sugar i s exported to Uganda. Existing technical standards in Uganda do not apply to brown sugar.

1 I

In the EAC, the NBS play a critical role in goods standards, but are not the focus of capacity 5 1

development efforts. In all EAC members a national law, establishing a system o f quality standards and control, forms the legal basis o f the country’s system o f standards, such as the December 1999 law for Burundi. It designates the NBS as the official entity responsible for quality standards and control. The bureau then defines and enforces standards, verifies product compliance, including both imports and exports, and ensures product quality control. I t i s a member o f the International Organization for Standardization (ISO). I t i s often also charged to assist businesses in setting up quality assurance systems appropriate to their technical and economic wherewithal and to carry out activities to raise awareness on the part o f private operators. It i s also in charge o f ensuring compatibility EAC and COMESA standards, and promoting intra-REC harmonization o f such standards. It then sets up it own laboratories andor collaborates with various national laboratories for purposes o f sampling and analysis. The status o f compulsory standards o f any manufactured product or process may be attributed by a decision o f the Minister o f Commerce and Industry. For agro-products, this role i s played by the Ministry o f Agriculture.

Rwanda i s facing accreditation problems concerning its laboratories. 52

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4.48 In contrast, the products for export outside the EAC continue to depend on international testing and certification through laboratories located outside the region, usually in Europe. EAC producers and traders have a good record in this area, motivated by the desire to maintain and expand product sales in developed country markets. The NBS in EAC are seldom equipped to test and credibly certify that local industries meet the international standards, and therefore compete in the international markets. International product standards require confidence in the measurements o f the industry equipment. Confidence i s obtained from tests carried out to ensure that the industry equipment i s up to the standard, which i s difficult for the NBS. Industries that cannot have their equipments tested are therefore restricted in the markets for their products.

Driving on the lefuright 4.49 The issue o f driving on the le f t side o f the road i s mentioned by Burundian and Rwandan drivers as a NTM to trade with the founding members o f EAC. Since they are used to driving on the right, changing sides increase the probability o f accidents. Within the context o f EAC, standardization o f driving ru les should be considered.

4.50 In 2005, Rwanda enacted a law requiring importation o f le f t hand-drive cars; no right hand-drive car will be licensed in Rwanda if the vehicle does not comply with the law. The law does not affect cars imported into the country before 2005. Consequently, vehicle importers have resorted to fabricating trucks to the le f t hand-drive and comply with the enacted law while in Dubai, Mombasa, and Kampala by changing positions o f the steering from right to left, using local mechanics. These fabricated vehicles have caused a number o f accidents. Importers are shying away from contracting such Rwandese-fabricated trucks for fear o f losing their goods in accidents, and end up hiring trucks from elsewhere in the region. Rwandese transporters have continuously complained against this law.

F. Sanitary and Phyto-Sanitary Measures (WTO IV)

4.5 1 Awareness o f the potential impact o f noncompliance with SPS standards on their exports, following the EU fish trade restrictions at the end o f 1990s, brought SPS standards to the forefront o f EAC member state interest, and led to the application o f stringent national measures. Whi le the focus o f this effort has mostly been on products exported outside Sub-Saharan Africa by EAC members, heightened national standards concerns over food safety and health are increasingly showing up as NTMs in intra-EAC trade in agro-based and animal products.

Goods inspection and SPS standards en forcement 4.52 . The EAC region has focused a lot o f development programs on promoting national agro-based exports. In intra-EAC trade, awareness o f the importance o f food safety and health issues has spread beyond livestock and fisheries into agro-processing. Involvement o f government departments abound, and most are seeking increased budgetary resources to carry out regulatory enforcement on technical and SPS standards (see box 4.3). Simultaneously, there i s l i t t le effort at EAC-wide harmonization and mutual recognition o f standards, with arbitrary application o f technical quality standards and inspection for compliance with compulsory SPS requirements-mainly in the area o f food safety, and animal and plant health-prevailing.

4.53 In intra-EAC livestock trade, noncompliance o f SPS standards i s often related to “endemic diseases” (see box 4.6 for details o f current status). an example i s the ban on Kenyan beef exports to Uganda due to unspecified animal diseases. In August 2007, Kenya and neighboring countries imposed a trade ban on Ugandan poultry due concerns over a suspected case o f highly pathogenic avian influenza (bird flu). Kenya required a test for bird flu to be

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conducted first; the test results came up negative. But the ban has not been lifted yet (as o f mid- 2008). The ban on Kenyan poultry and processed poultry products to Uganda due to suspected incidence o f avian flu may reflect a certain degree o f reciprocity. Technical standards imposed by Uganda o n milk and milk products f rom Kenya prevent active trade in this perishable product group, as the Uganda Dai ry Development Authority does not accept a certificate o f analysis from Kenya Bureau o f Standards. The fruit juice industry has similar concerns about the application o f quality standards.

4.54 In enforcement, building up sustainable SPS/ technical quality management capacities has been slow, with past interventions often too broad to create any impact. Attention should now be focused o n (i) priorit izing investments to specific SPS compliance issues and related capacity- building needs; (ii) raising awareness and promotion o f good practices among primary producers, enterprises, and regulatory agents; (iii) clearly defining the roles and responsibilities o f different players; and (iv) strengthening institutional collaboration-within the private and public sector agencies, and among donors-in implementation o f agreed strategies and programs. 53

Goods quality certification procedures for SPS standards and safety 4.55 Coordination and capacity are significant problems in standards development. W h i l e SPS standards are largely the mandate o f the ministry o f agriculture, there are instances where several government agencies overlap, with competing roles and influences on regulations on SPS issues. It remains to be resolved whether the issue o f food safety should be the mandate o f the ministry o f agriculture, or ministry o f health, or the national drug authorities. The agencies with the most direct involvement in the adoption and enforcement o f standards for traded agro-food products are the NBS, and the various departments in the ministry o f agriculture, and animal husbandry.54 Many o f these agencies need to work closely with health, veterinary, or other departments at the local government level.

53 Based on the Diagnostic Trade Integration Study (DTIS) Action Plan and other capacity assessment and evaluations; and a 2008 workshop WTO in Kampala, Uganda on mobilizing aid for SPS-related technical cooperation in East Afiica.

In Burundi, such agencies include the Burundi Coffee Marketing Board (OCIBU)/the Burundi Tea Marketing Board (OTB); Burundi Institute o f Agronomic Sciences (ISABU); regional companies for advance laboratory analysis and certification services, such as in South Afi-ica; and the Hygiene Unit, housed at the customs office o f the port o f Bujumbura or at the Burundi Bureau o f Standards.

54

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Box 4.6. Kenya-Uganda Standoff in Livestock Trade: How Not to Trade Chicks, Beef, and Bull Semen

The standoff between Kenya and Uganda on chicks, beef and bull semen trade i s affecting free trade in spite o f an earlier stand taken by the two countries to promote intra-EAC trade. Kenya maintains that Ugandan f m s w i l l be allowed to export day-old chicks and chicken products to Kenya only on condition that they are sold through agents in the latter country, who would conduct risk assessments on the imports. Uganda on the other hand maintains that their Kenyan counterparts must first submit a risk assessment report before an 11-year old ban on importation o f beef, bull semen, and other associated products from Kenya can be lifted. The positions taken by both countries contradict an earlier stand taken by both countries on the sidelines o f a World Organization for Animal Health general session, where they agreed in principle to l ift the bans unconditionally. The industry players in both countries blame one another for politicizing the issue against the spirit o f EAC trade integration.

The stalemate i s likely to hrther affect the ailing livestock industry in both countries, especially their leading f m s , Ugachick in Uganda, and Kenchick, in Kenya. It i s estimated the Ugachick i s loosing up to USD200,OOO per month as a result o f the stalemate. Kenchick i s the largest integrated poultry business in the region and i s the f i r s t in East Africa to achieve the so-called farm-to-fork standard, which means that all products such as eggs and chicken meats sold by the fm can be traced back to the specific farms o f origin. Kenya’s leading beef processing fm, Farmer’s Choice, was the f i r s t to suffer as a result o f the ban on importation o f beef and beef products into Uganda in 1997. Later it evaded the ban by constructing a subsidiary in Kampala with a trade name Your Choice. Whi le Uganda claims that it banned importation o f meat and meat products in the wake o f mad-cow (BSE) disease and that the ban was imposed for all countries, the Kenyan industry argue that their Ugandan counterparts are politicizing the issue.

Whi le Kenya claims that they had lifted the ban on the import o f one-day old chicks fiom Uganda and urged Ugachick to resume exports to Kenya with agents in Kenya, Ugachick representatives maintain that Kenya has previously stated a similar position but in practice denied their products’ entry into the market. As regards imports o f beef and beef products Uganda says the ban following the BSE scare wi l l be reviewed for Farmers Choice on a product-by-product basis. It says it wi l l form a technical committee for the review and feedback. Wh i le the bull semen does not pose a risk to spreading BSE, as in the case of meat, Uganda maintains that there was s t i l l a problem with regard to traceability and origin. A new agreement directs Farmers Choice to make a f iesh application for review o f ban, and suggests a meeting o f sector authorities from both countries every six months.

As a way forward, the players from both countries could adopt internationally accepted guidelineshtandards on trading o f livestock and livestock products, vaccination, and traceability so that neither side perceives being disadvantaged due to the arbitrary nature o f national decisions.

4.56 The inspection bodies have not developed adequate capacity to suppoduse accredited laboratories, let alone have them located at the entry and exit points, which would be ideal. Accredited laboratories, where they exist, have stricter standard requirements and higher inspection charges, adding to the costs o f expanding the market for the product. For E A C exports destined for EU and the West, the producers continue to depend on accredited laboratories outside EAC. A range o f activities could to be undertaken in SPS standards development for both EAC and each o f i t s member countries (see appendixes A8.1 and A8.2).

IV. OTHER CONSTRAINTS ON GOODS TRADE IN EAC

I n formation constraints 4.57 N o t only are the rules and regulations not mutually recognized or harmonized, as discussed earlier in this chapter, but the dissemination o f information on them i s extremely poor

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across member states and within them. Traders are not aware o f some o f the decisions made at the EAC Council, such as the new transit regulations. At the borders, the customs agents often do not have the latest directives and/or forms from their revenue authorities, and truck drivers may not know the regulations specific to their cargo. Application o f national legislations often appears to be arbitrary and protectionist, based on outdatedcumbersome import authorization systems.

Insecurity/ highway crimesAoss of goods at the container freight stations 4.58 Heightened security concerns along the trade routes and highway thefts add to concerns for traders and transporters. Along the Ugandan segment o f the Northern Corridor, transporters who make night runs complain about acts o f banditry. In 2007, 32 containers were lost to thieves and a number o f people lost their lives on the way to Kampala. The events that unfolded after the December 2007 election in Kenya led to one o f the worst spurts o f highway crimes witnessed in Kenya. Users o f the Kigoma port in Tanzania note frequent thefts o f goods during transshipment operations. In Burundian territory, night travel i s banned because o f the prevailing lack o f security. Operation o f the CFSs at various locations i s affected by pilferage o f cargo. Importers end up losing their goods and are often unable to lodge claims because they do not know whose responsibility it i s to pay for the claims.

Influx of counterfeit products 4.59 Trade in counterfeit and adulterated products i s spreading for goods entering through the two sea ports and across the EAC’s common external border. The regulatory authorities have inadequate financial and human resources to curb the problem o f counterfeits practices. The sale o f these products unfairly competes with the legitimate industry within the EAC, and more importantly adds unnecessary risk for the users. Only recently have member state parliaments approved laws to deal with the problem o f counterfeits.

4.60 For example, in 2004 in Uganda about 50 metric tonnes o f counterfeit goods were impounded by the Uganda National Bureau o f Standards (UNBS) because they failed to meet the minimum quality standards. These included foodstuffs, soft drinks, salt, cosmetics, clothes, building materials such as cement, and other manufactured goods. According to officials at UNBS, counterfeit goods worth over USh 600 mill ion were either denied market in Uganda (returned) or destroyed by inspection units at various border points. Other affected products are pens (the case between Mulwana and Picfare), tiger head battery, textiles, and foam products (the case between Euro foam and Vita Foam), tooth brush (the case between Mulwana ship toothbrush and another firm that produced the same model at a German factory).

I n formal trade 4.61 The borders o f the EAC’s member states are inherited from a colonial era that split communities that shared historical trading, cultural, and family l inks. Hence, historically cross- border trade in the region has been informal, has not passed through the major border crossings, and has been in small-scalehmall value transactions that do not attract much attention o f border authorities or are captured in official statistics. A large part o f this trade comprises day-to-day transactions between traders living in locations near the national borders. Most commodities crossing borders are absorbed by the local markets along the border. It i s usually carried in small quantities on bicycles, or in “caveras” (polythene bags). Identifying cross-border i l l icit trade of this nature i s not straightforward because the items are easily claimed as goods for personal use or gifts from relatives. The case o f grains trade in the EAC i s considered in box 4.7.

4.62 In addition to the traditional informal trade, smuggling or illegal sale o f high value commodities occurs across the national borders o f EAC member states. For example, even with

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physical escorts provided by customs authorities, diversions o f transit trucks passing through Kenya (especially targeting non-Kenya registered trucks) have been reported, with resultant delays and loss o f goods. Following such incidents, importers using the Northern Corridor are losing confidence in non-Kenyan transporters, making the latter uncompetitive.

Box 4.7. Grains Trade in the EAC: Informal Trade and NTMs

Arbitrary and unpredictable NTMs are reported at the border to be significant in the grains trade in the region.a The NTMs reported on the formal grains trade, include regulations requiring proof o f origin, phyto-sanitary certificates, and invoices from vendors, “required side-payments’’ to police at road-blocks and border crossings.b Most important among such NTMs i s the periodic physical ban imposed by Kenya and Tanzania, preventing Uganda, Rwanda, and Burundi’s farmers from reaching more lucrative markets (as well as northern Tanzanian ones from entering Kenya). Tanzania has often followed a practice o f banning food exports following a poor harvest to ensure that local supplies go to deficit areas within the country. Kenya periodically imposes temporary restrictions on grain imports to protect i t s farmers. Rwanda usually imposes bans on the export o f beans when it suspects supply shortage.

To date, monitoring the active cross-border grain trade in EAC and the associated NTMs has been very problematic since the trade remains mostly informal (unrecorded in official statistics). It i s also seasonal and often the transi t routes are away fi-om the two major Corridors. Preliminary estimates by the East Africa Grains Council posit that about 60 percent o f the grains among EAC’s founding members may be informal. I t i s estimated the intra-regional grain trade among the founding members o f EAC has amounted in exports to 10 to 15 percent o f grain production in Uganda and Tanzania, and as imports for about 10 percent o f Kenya’s grain consumption. The fact that so much trade i s informal leads to questions o f whether this practice i s a rational response to NTM problems, over and above the historical l i nks . The EAC countries must carefully consider whether the private sector faces distinct drawbacks in attempts to formalize trade.

This i s clearly an area where product-specific follow-up work on NTMs i s necessary through survey instruments and other means. Some research has been initiated in this area. For example, a World Bank analysis o f maize trade among Kenya, Tanzania, and Uganda only i s starting wi th data fi-om USAID- funded RATES, the Famine Early Warning Network (FEWS-NET), and others, includes the Michigan State University/Tegemeo Institute in Kenya, the World Food Program, and the International Livestock Research Institute. I t i s expected that for major wholesale markets in the three founding members o f EAC, marketing chains linking key production and consumption points across borders w i l l be indentified. Primary data w i l l then be collected on marketing flows, transactions cost, and margins from interviews with traders, farmers, transporters, and other informants. The choice o f maize, among other grains and beans, was made based on the importance in caloric intake, total production, and estimates o f intra-regional grain trade. Even such rough estimates are hard to find for Burundi and Rwanda.

a. See USAID RATES Program, 2003. Also, EAC 2000. b. See IFPRI, 2008.

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Table 4.2. Severity of NTMs on Goods Trade in EAC: A Perspective from Burundi’s Traders and Transporters

Category o f NTM by Corridor Political economy o f NTM Severity o f NTM Quadrant in figure 3.1 WTO involved

Govt. monopoly Congested ports Central Ineffectiveness o f Lengthy delays, added D of Dar & Kigoma stakeholders costs Customs & admin procedures for entry/ passage Lengthy transit Port of Dar Processing o f paperwork How long: 3-4 days B formalities

Lengthy customs clearance Port of Control & verification Added cost: USD250 fee B

Multiple checkpoints and Central & Load inspection How long: 2 hrs B police barriers North How long: 1-2 hrs B

formalities Bujumbura process How long: 1-3 days

Multiple institutions Port of Distances & supervisory ties How long: 6-10 days C

Escorts of convoys in Central & regulations Results in lost time B

exercising controls Bujumbura Product-specific customs

transit North

Pre-shipment inspection North & Monopoly awarded to SGS- Cost: 1.5 percent of the B Central Bujumbura, a inspections, value o f imports

verification, testing and certification company.

Technical barriers Quality standards North & Lack of equipment and Reliance on foreign C & control Central skills services

Driving on the left North & Different practices Cause of accidents B

Lang. of communication North & Different practices Translation fees and lost B

Central & colonial past Specific limitations

Central & colonial past business Distribution constraints Axle load restrictions

Border closing hours & North transport community works in

Central & Regulatory measure Doubles unit cost of B

Burundi Central & Closing hours, Community How long: 6 hrs waiting B Bujumbura works time every Saturday

P - Related Infrastructure Constraints

L

Railroad Central and Aging track, shortage of How long: 3-4 months C North cars, in ad. locomotives Coffee: 1 month on

Central Corridor

Juxtaposition o f border Central Congestion & lack o f How long: 2 hrs at both B posts equipment posts

Congested ports Central Congestion & lack o f Lengthy delays, added D o f Dar & Kigoma equipment costs

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B 8 8 5 3

a 5

3

L

e, u

m e, 5 D

.c M 8

e"

n ; 211)

9

C .e

m

e f

E 3 a d

3 . : q a

m

5 % 3 c = .P

4c4

1 0

P

m d

V. FACTORS LIKELY TO INFLUENCE SPEED OF EAC ACTION ON NTMS

4.63 Compared to i t s pursuit o f tariff reductions to date, the elimination o f NTMs in EAC i s widely expected to be more difficult because o f the complex nature o f the NTMs, the need to shore up political wil l to tackle them, the need to build technical capacity across member states, the financial dependence at the national level, and other considerations. Init ial interviews with stakeholders-especially private firms-indicated to the task team that the following factors are likely to influence the speed o f decisions and action to reducehemove NTMs on goods trade in the EAC.

A. Council o f Ministers’ meetings

4.64 The decisions o f the EAC Council o f Ministers require unanimity across all members states. Currently, delays occur as the Council finds it difficult to meet on a regular schedule. Consensus building i s a prolonged exercise, requiring both extensive time and effort across the member country ministers at the level o f policy choice and the national civi l service in charge o f the implementation o f EAC-wide decisions. Unilateral decisions taken by members have few channels to impact actions o f other EAC members.

B. Synchronization by EAC members

4.65 EAC member states are required to give similar treatment to all agreed EAC policies. Within the short period o f the regional economic community’s existence, the members are finding the agreed harmonization o f the national laws/policies and standards governing intra-EAC slow, cumbersome, and resource- and capacity-intensive given their L D C status. Currently, the harmonization process for policies and standards on traded goods i s being driven by the public sector, with little or no involvement o f the private sector-the sector most affected by the process.

4.66 Where action has been taken significant variance i s developing with regard to decisions and regulatory systems on the optimum standards o f goods.55 Enhanced capacity for EAC-wide harmonization o f standards may or may not be used to ease NTMs. It may end up being a double- edged sword for the exact opposite purpose, i.e. to increase inspection, certification, and other requirements.

4.67 EAC-wide harmonization i s made more difficult by multiple memberships in regional trade arrangements. Uganda, Kenya, Rwanda, and Burundi are members o f the COMESA, while Kenya belongs to the free trade area in COMESA, but Uganda does not. Tanzania i s not part o f COMESA, but belongs to SADC. The COMESA members in EAC perceive that Tanzania might be delaying certain key decisions in goods trade integration and adoption o f best practices at the EAC Council in order to maintain the lead already attained through i t s SADC membership.

” Consider this example: In the FY08 budget, Uganda imposed a ban on production and importation o f polythene bags less than 30 microns. Kenya did not. I t continues to produce polythene bags less than 30 microns and these are smuggled into Uganda. On the other hand, in Rwanda, the use all polythene bags i s completely banned. Hence, Uganda, Kenya, and other members cannot export products to Rwanda using such material for packaging.

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C. Implementation o f current EAC rules and new decisions of the Council

4.68 There i s widespread perception in the private sector that implementing agents (including those manning customs and ports) in each member state continue to think and act on behalf o f the individual countries and not in terms o f the EAC. Hence, they tend to favor their own citizens in production, trade, and transit decisions related to goods trade. Private stakeholders across the EAC recommend that all member states need to devise a mechanism to restrain domestic players from undermining regulations that are put in place by other partner states.

4.69 Several reasons are cited-by both private sector agents and officials in ministries across EAC-for the observed low commitment o f member governments to remove NTMs. First, government agencies (port officials, revenue authorities, police, and others) in the region have not been fully sensitized and oriented to play their role effectively in implementing EAC directives and agreements. Second, the EAC Secretariat has only observer status at present and hence limited power to penalize noncompliant members. For example, some stakeholders are frustrated with the pace o f development and application o f arbitration processes at the EAC Secretariat. The process o f reaching a decision on mitigation i s so slow that some NTM problems reported in goods trade and transit are never resolved. EAC also lacks a policy on how f i r m s who are recognized to have incurred business losses can be compensated.

4.70 Third, as the tariff walls have come down, NTMs are often cited as deliberate actions to protect the trade interests o f the country and stem competition from neighbors. Fourth, the functioning o f the National Monitoring committee^^^ for NTM monitoring i s hampered due to the dearth o f budget resources in member governments to locate and support N M C activities, the scarcity o f specific NTM information available for use, the lack o f clarity o f the monitoring mechanism to be adopted, and the absence o f agreement on actions for reductiodremoval o f NTMs.

D. Flow o f information

4.71 In all EAC member states, the traders and officials o f traders' associations criticize the national governments for monopolizing information (deliberately or because o f lack o f dissemination capacity) on decisions relevant to goods trade. Information gaps persist between the policy makers, the implementing agencies like national bureaus o f standards, and the producers and traders. For example, the majority o f the EAC traders are not even aware o f the NTM monitoring mechanism through which they can report constraining measures. There i s widespread concern that the mechanisms and the language used to explain issues concerning goods trade in the EAC are not simplified enough to be useful to small indigenous traders. This i s particularly problematic for Burundi-where the government systems are focused on early stages o f post conflict recovery-but are prevalent EAC-wide. The complaint i s least in Kenya, where deliberate efforts have been made by the government since 2002 to consult and incorporate key private entities.

4.72 Broadening and deepening ownership o f EAC among the citizens o f East Africa remains a big challenge. Whereas awareness at the level o f senior government and regional administration i s high, public participation in the E A C member states i s very limited. The task team was reminded several times that majority o f the citizens o f the member states do no know about the

*' The NMCs have not met since their inauguration in 2007. The fiamework for the NTM monitoring mechanism i s yet to be implemented, and i t s progress to be evaluated.

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EAC and/or what it i s expected to achieve. Traders feel that unless the people are sensitized about the EAC objectives, structure, integration process, and region-wide benefits, they wil l remain reluctant to endorse certain strategies decided upon. This can be achieved through increased information sharing, adoption o f improved networking by national governments with national and EAC-wide stakeholders, and more deliberate public interaction by the E A C Secretariat.

E. Capacity o f national institutions

4.73 The regional structure for goods trade facilitation i s not adequate. The capacity o f the numerous regulatory bodies varies significantly and national institutional frameworks remain largely ineffective in developing and harmonizing standards. O f these, the customs administration in most member states i s undergoing enhancement o f capacity and modernization, though not in a very coordinated fashion within EAC.

The bureaus o f standards are generally not high on the national priority for capacity building- except in Kenya, through donor and private sector support. Most o f the certification for the foreign exchange earning exports outside EAC i s through internationally recognized laboratories in Europe. Hence, the national bureaus remain inadequately staffed and may not have the right ski l ls to develop standards and implement the standards certification and harmonization. The junior bureau staff, in most cases carrying out the enforcement at the border, i s yet to be sensitized o f the regional impact o f their work.

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CHAPTER 5. LEARNING FROM OTHER REGIONAL ECNOMIC COMMUNITIES

5.1 The regional economic communities (RECs) in Afr ica do not have an impressive record o f dealing with contentious non-tariff measures (NTMs). However, the E A C has quickly achieved a lo t that remains desirable for RECs in Sub-Saharan Africa. This study suggests looking beyond the continent for examples, t o learn f rom successes o f RECs and emulate them, as appropriate, and to avoid failures.

5.2 The current chapter moves away from direct discussion o f NTM issues in the EAC. We examine here the course o f action taken by the European Un ion (EU) and Association o f Southeast Asian Nations (ASEAN), since they contain a number o f lessons that can help E A C plan wel l and minimize policy errors. Although the economic profi le o f the EU member states and the decision-making authority has by now evolved to be very different f rom the EAC, in the area o f NTM removal, it has a long history and by far some o f the best practices over the long term. Some A S E A N members have economic profiles closer to the founding members o f the EAC. Hence, their ongoing experiences in handling NTMs are perhaps the one the EAC will be able to emulate more easily in the medium term.

I. THE EU APPROACH TO NON-TARIFF MEASURES

5.3 The European Union i s a good example o f a successful economic integration achieved through the removal o f barriers to trade, including NTMs. The EU was established in 1957 with the Treaty o f Rome, and since i t s inception it has called for the removal o f NTMs, as has the EAC. The discussion that follows f i rst highlights the most important steps undertaken by the EU toward the elimination o f NTMs and the creation o f the internal market. It describes the EU’s major tools to reduce NTMs: mutual recognition and the harmonization process. Next, it describes the catalysts-such as foreign competition and the enlargement process-that pushed toward a quicker integration process in the EU. Lastly, it briefly describes the EU tools for monitoring the emergence o f new NTMs and reporting the correct transposition o f EU regulations into national legislation.

A. Main direct action toward eliminating NTMs and events to establish a single market

5.4 The achievement o f a working internal market in the EU has been a long and complex process, with a series o f initiatives and legal steps required to achieve free trade. The European Economic Community (EEC, now EC) was established in 1957 with the signing o f the Treaty o f Rome. The Treaty built a customs union o f six members and, through Art. 3, called for the removal o f NTMs that have equivalent effect to tariffs and quotas on trade. NTMs were the main obstacles to the creation o f a Single European Market (SEM) because they were the outcome o f diverse national rules, regulations, taxation, and subsidies.

5.5 At first, the EU tried to remove such NTMs through the adoption o f European laws and regulations, with the aim o f determining European standards for a large range o f products. This “old approach” required product-specific (even component-specific) legislation; implementation was based on an extensive use o f directives. Needless to say, this system was extremely

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cumbersome and difficult to implement, as it required a very technical harmonization and extensive consultations. In addition, the unanimity required in Council decision making was a tool for member states to veto any proposed European law if they considered it damaging to their own economies.

5.6 As a result, very l i t t le progress was achieved and the need became clear for a simplification o f the harmonization process and for the adoption o f the qualified majority in the C o ~ n c i l . ~ ’ To overcome the difficulties o f the “old approach”, in 1978 the European Court o f Justice (ECJ) established the principle o f mutual recognition in the famous Cassis de Dijon case (see box 5.1). The ECJ established that goods that are produced in a member state in respect o f national rules and regulations should be able to be sold in any other member state. So companies should be allowed to produce according to their national rules and s t i l l be able to sel l their products throughout the Community. The principle outlined in the Cassis de Di jon case provided a precedent for break with the long-used harmonization process, to be replaced by the principle o f mutual recognition (finally adopted in 1985).

5.7 In the same year, the 1985 White Paper called for a program o f legislation to complete the internal market by 1992. Apart from calling for a simplified harmonization process (the new approach), the White Paper also called for strengthening the capacity o f the European standards bodies. Similar to the EAC’s objective o f eventually adopting EAC-wide standards, these bodies in the EU were considered an essential tool in the gradual replacement o f national standards by European standards. The White Paper also highlighted that the new harmonization policy had to put particular emphasis on certain sectors, such as information technology and telecommunications, construction, and foodstuffs. The EAC could similarly identify sectors in which the initial harmonization would be critical and prioritize those. As regards monitoring, the White Paper encouraged the adoption o f preventive measures, such as Directive 83/189/EEC. This directive obliged member states to notify the Commission o f all draft regulations and standards related to technical specifications to be introduced on national territories. In this way, the EC could monitor and prevent the raise o f new national barriers to intra-EU trade.

5.8 Following the EU example, the EAC’s immediate objective i s to take steps toward establishing a common market. The various planned steps toward this would impact on the elimination o f NTMs. For the EU, the Single European Act (SEA) was approved by all member states in 1986, and implemented in 1987, to execute the White Paper recommendations and create a SEM. Thanks to the SEA, majority vote replaced unanimity in the Council in areas related to the establishment o f the internal market. This facilitated the decision-making process and reduced the delays associated with unanimity. The SEA resulted in the establishment o f a detailed program to achieve the single market, including the removal o f legal barriers to the free movement o f goods, services, capital, and labor. It i s also important to note that the SEA established a Community Policy o f Economic and Social Cohesion, to mitigate the effects o f the completion o f the internal market on less-developed member states and consequently reduce development discrepancies among the regions. Physical barriers for goods at the borders were removed in 1993, together with the associated customs documents. This step helped facilitate trade through reduced delivery times and lower associated costs.

57 See Brenton and Vancauteren (2000).

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I Box 5.1. Establishing the Principle of Mutual Recognition: The Cassis de Di jon Case

The Cassis de Dijon case i s the founding father o f the principle o f mutual recognition, a huge step toward the abolition o f NTMs. In 1979, the European Court o f Justice ruled that Germany could not ban imports o f Cassis de Dijon (a French alcoholic drink) on the basis that it did not conform to German rules governing alcoholic dr inks . According to such rules, Germany prohibited the sale o f any drink with alcohol content between 15 and 25 percent, arguing that beverages with low alcoholic content may encourage alcoholism more than high alcoholic content dr inks . Moreover, Germany claimed that the ban had health grounds, as it was a measure to reduce the proliferation o f alcoholic drinks in the German market. A German importlexport company brought Germany to court with the accusation that the German regulation on minimum alcohol content was an illegal NTM. After the case was brought against the German courts, the European Court o f Justice ruled that cassis could not be banned from the German market, as it met French standards.

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Most importantly, the Court ruled that: “There i s therefore no valid reason why, provided that they have been lawfully produced and marketed in one o f the Member States, alcoholic beverages should not be introduced into any other Member State.”

B. Specific criteria used in EU enlargement and functioning

5.9 The fol lowing are relevant to the EAC’s learning o n reducing and eliminating NTMs.

Principle of mutual recognition and the harmonization process in EU 5.10 Mutual recognition was a very important achievement toward the removal o f NTMs. In the EU this principle allows free intra-EU trade in goods. Based o n the mutual recognition principle, a product that i s produced and marketed in one member state must be allowed in any other member state, even when the product does not fully comply with the technical rules o f the member state o f destination. Only in the presence o f public safety, health, or environment risks i s mutual recognition not applied. In such cases, the member state o f destination can ban the r isky product, but only after demonstrating that the implied NTM is the least trade-restrictive measure. For example, mutual recognition has facilitated trade through the removal o f technical barriers to trade o n beer. According to the EC, over 90 percent o f EU imports o f beer come from other member states.

5.1 1 Nonetheless, EU technical harmonization remains necessary to regulate more complex or sensitive sectors through EU directives. Mutual recognition can easily apply to new and specialized products and it can be relatively effective for equipment goods and consumer durables. It encounters difficulties where the product risk i s high, and consumers or users are directly exposed (as i s the case with chemicals, motor vehicles, pharmaceuticals, and foodstuffs). Here the resulting system i s a combination o f mutual recognition and EU harmonization, so that harmonization can ensure the free movement o f goods in those cases where mutual recognition cannot work. According to the nature o f the product, two different approaches are used:

0 The “old approach” i s based on harmonization with performance requirements, involving a single set o f fully harmonized and detailed provisions. This approach i s used for products (pharmaceuticals, chemicals, or automobiles) that could put consumers’ safety at risk and for which performance-oriented legislation (with detailed testing methods) i s needed. For example, in the case o f passenger cars, according to the E C type-approval system, once a car has been type-approved in one member state, it can be registered and

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put on the market anywhere in the Community without further testing. The measure has resulted in an increase o f both the competitiveness o f the European car industry and the foreign investment into the EU, particularly from Japanese carmakers.

The “new approach” applies to products with similar characteristics and where there has been widespread divergence o f technical regulations in EU countries. This approach i s more streamlined, with i t s reliance only on “essential requirements” and greater freedom for manufacturers on the way to satisfy those requirements. Moreover, th is approach provides the private sector with a number o f choices for attestation methods: self- certification against the essential requirements; generic standards; or using notified bodies for type approval and testing o f conformity o f type.58 For example, the Radio Equipment and Telecommunications Terminal Equipment Directive cover a vast range o f radio and telecommunications equipment. Manufacturers are now allowed even to certify their own products and to attach the CE-mark, a single mark o f conformity recognized throughout the Community.

EU’s Internal market and foreign competition 5.12 The process o f creating the internal market was accelerated in the 1980s. These years were characterized by a slow growth rate and high unemployment in Europe. At the same time, Japanese f i r m s were entering very sensitive European markets+ars, electronics, and computing equipment-while high technology European companies were unable to maintain their presence in these markets. In 1983 the growing difficulties in facing U.S. and Japanese competition called for a Solemn Declaration o f European Union. The EU recognized that a failure to establish the internal market could only exacerbate the difficulties encountered by European f i rms .

5.13 Thus, the pressure o f externallforeign competition was a very important catalyst for the creation o f the Single European Market. It also had some consequences on foreign investment, as the Japanese example can show. Some analysts argue that economic integration roduces changes in the distribution o f ownership-specific advantages across international firms.’ The removal o f NTMs on intra-EU trade was about to increase the degree o f protection o f European producers vis-a-vis extra-EU exporters. This move was encouraged by lobbies o f industries threatened by the strengthening o f Japanese competition. Between 1973-7 and 1983-7, the share o f Japanese direct investment located in EU doubled from 6.0 to 14.5 percent, with most o f the increase coinciding with the years o f publication o f the White Paper on the completion o f the internal market and with the start o f the discussions on “Fortress Europe.” It i s clear that fears o f protectionist European policies and an increased economic stability associated with the creation o f the internal market acted as a catalyst for Japanese direct investment in the Community. Needless to say, such reaction was stronger in the sectors where the Japanese f i r m s had considerable technological advantages over European f i r m s : motor vehicles, electronics, and office equipment.

Internal market and EU expansion 5.14 Since the beginning, the EU expansion process has been an important factor in the creation o f the internal market, for both the opportunities and the challenges associated with it. The expansion o f the EEC in 1973, with the accessions o f the United Kingdom, Ireland, and Denmark, was not followed by a fast integration progress. When Greece (1981) and then Spain and Portugal (1986) joined the EU, they contributed to the creation o f a potential market o f 320

Brenton and Vancauteren (2000). 58

59 See Yannopoulos (1990),

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mill ion consumers. They also brought new challenges to the integration process, with their lower level o f economic development and difficulties encountered in complying with the constraint imposed by the Treaty o f Rome (including the removal o f barriers to trade). This situation accelerated the process o f regional integration and led to the approval o f the Single European Act, a necessary program for the implementation o f the Single European Market.

5.15 The enlargement process6’ poses new challenges to the functioning o f the internal market, as new member states may bring new constraining measures to internal trade and stretch the EU monitoring capacities. In order to be eligible for accession, candidate countries must align their regulatory systems with the acquis. The Copenhagen criteria for accession (see box 5.2) -which follow mainly from the Treaty o f Rome-require “the ability to assume the obligations o f membership” and consequently to comply with the internal market rules allowing free trade. As a consequence, no waivers are granted to the new member states. In fact, EU membership i s a long and rigorous process, which includes a pre-accession strategy meant to prepare the candidate country to become a member.

Box 5.2. The Copenhagen Criteria for Accession to the EU

Countries fidfill the Copenhagen criteria for accession into the EU, adopted in 1993, by having: Stable institutions that guarantee democracy, the ru le o f law, human rights, and respect for and protection o f minorities, A functioning market economy, as well as the ability to cope with the pressure o f competition and the market forces at work inside the EU, and The ability to assume the obligations o f membership, in particular adherence to the objectives o f political, economic, and monetary union.

5.16 The candidate’s submitted application i s evaluated by the EU. If it i s accepted and the applicant meets the required criteria, negotiations for accession may start. This long and cumbersome process i s intended to make sure that candidate countries have the capacities to absorb and implement the EU legislation. Moreover, the EU also becomes sure o f i t s own capacity to integrate the new members without compromising the effectiveness o f the internal market and the future development o f the community.

Internal market monitoring and reporting by EU 5.17 The proper functioning o f the internal market i s supervised primarily by the European Commission, in charge o f monitoring the quality o f the internal market regulatory framework. Other European institutions contribute to this important function (the European Council, the European Court o f Justice, and the European Parliament), and have a set o f tools to enforce European law. The EU has put in place a complex system o f monitoring and reporting. This i s necessary to enforce the transposition and application o f European laws by every member state.

5.18 In order to check how long it takes for a member state to transpose ‘European laws into national laws, the EU has created an internal market scoreboard. This reports the status o f the harmonization process and the number o f infringement proceedings initiated by the EC against member states. These proceedings are initiated as a consequence o f an incorrect or missing application o f an EU law by a member state. In this case, the member state i s encouraged to quickly remedy the situation, and if it fails to do so i t i s referred to the ECJ, which can impose a

In 1995, Austria, Finland, and Sweden joined the EU, followed by the historic enlargement in 2004 when 60

Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia joined. Lastly, Romania and Bulgaria joined in 2007.

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sanction. An example i s the decision taken by the ECJ against France in 2005 (P/05/917), caused by France’s failures to comply with a Court judgment o f June 1991 (regarding the fisheries control system). Wi th this decision, the ECJ condemned France to make a lump sum penalty o f € 20 mill ion and a periodic payment o f € 57.7 mill ion every six months, until France had taken the necessary steps to revert the infringement.

5.19 Even though the monitoring system has been put in place, legislation problems arise. With the aim o f solving them, the Commission has an additional tool, called SOLVIT. It i s an on- line network among member states that allows every citizen or business in any member state to report directly a problem in the functioning o f the Single European Market. Every member state has a SOLVIT center, which i s an integral part o f the national administration, and i s committed to provide a real solution within ten weeks.

11. THE ASEAN APPROACH TO NON-TARIFF MEASURES

5.20 The Association o f Southeast Asian Nations (ASEAN) represents a major example o f regional integration and commitment to the removal o f constraining measures to trade among developing countries. I t was created in 1967 with the signing o f the Bangkok Declaration by Indonesia, Malaysia, the Philippines, Singapore, and Thailand. The integration process i s ongoing. It i s meant to strengthen i t s members’ external linkages rather than create a protectionist bloc and i s considered an example o f open regionalism, based on the principle o f adherence to GATT/WTO rules. Another major characteristic that distinguishes the ASEAN experience from that o f the EU in dealing with NTMs i s i t s sector-based approach. In this strategy, ASEAN has focused i t s economic integration and elimination o f trade barriers on a few sectors (chosen among sectors with the highest potential for intra-regional trade and integration).

5.21 To enhance the learning o f EAC from the ongoing process in ASEAN, the discussion below describes rather than assesses the steps undertaken so far toward the elimination o f NTMs. It follows with a description o f the tools (harmonization and mutual recognition agreements) and the strategy used by ASEAN to identify and eliminate such barriers. Last, it briefly covers the few steps already undertaken by the region to monitor the integration process and ASEAN’s intention to strengthen i ts capacity o f doing so.

A. Main direct action toward eliminating NTMs and events to establish the ASEAN

5.22 In 1977, even though the ASEAN Free Trade Area (AFTA) had not been created, ASEAN countries committed to the removal o f NTMs with the signing o f the Preferential Trading Arrangement Agreement. A decade later, in 1987 the memorandum o f understanding (MoU) on standstill and rollback on NTMs followed. This M o U was based on the principle that barriers inconsistent with the GATT ru les had to be eliminated. The NTMs in line with the GATT rules s t i l l had to be removed, but on a preferential basis. In general, the member countries had to give priority to the elimination o f those barriers that were affecting the most important industries for regional economic integration. With this aim, the M o U also obliged the member countries to provide the ASEAN Secretariat with an inventory o f all existing NTMs and to notify it o f new ones. Reverse notification was also included, so that countries were allowed to make formal complaint to the Secretariat about NTMs imposed by other members. The Secretariat was in charge o f dealing with such complaints and facilitating reconciliation.

5.23 In 1992 the AFTA was created, with member agreement o f a Common Effective Preferential Tariff (CEPT) Scheme. The steps included the immediate elimination o f intra- regional tariffs for products enjoying concessions under the CEPT scheme. In addition, Article 5

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o f AFTA called i t s members to “eliminate other non-tariff measures on a gradual basis within a period o f five years after the enjoyment o f concessions.” To achieve this objective, the member countries agreed on a work program for the removal o f NTMs, including:

A process o f verification and cross-notification: many NTMs affecting intra-regional trade have already been identified

Update o f the working definition o f non-tariff barriershon-tariff measures in ASEAN, based on the classification developed by UNCTAD

Setting-up o f a database on all NTMs maintained by member countries

Eventual elimination o f unnecessary and unjustifiable non-tariff measures.

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5.24 As per the MoU, the ASEAN members had to focus on the removal o f those NTMs affecting the most important products in intra-regional trade. The products identified were minerals, electrical appliances, and machineries. In order to recognize the NTMs affecting these sectors, the Secretariat used a variety o f sources: submissions made by member countries, the GATT Trade Policy Review, submissions by the ASEAN Chambers o f Commerce & Industry (ASEAN-CCI), and the UNCTAD’s Trade Analysis and Information System (TRAINS) database. The outcome o f the analysis o f NTMs was the identification o f the main measures affecting intra- regional trade: namely, customs surcharges, technical measures, product characteristic requirements, and monopolistic measures. Table 5.1 presents the most widespread NTMs in the ASEAN.

Table 5.1. Most Prevalent NTMs in ASEAN

Non-tariff barrier Number o f tariff lines affected

Source: ASEAN Secretariat.

5.25 In 1997, the priority areas for harmonization (to be achieved by 2003) were identified, mainly focusing on consumer safety and health.61 The harmonization o f standards for these products was achieved by 2003 based on international standards, as suggested by the WTO’s technical barriers to trade (TBT) Agreement. With the aim o f protecting customers’ health and safety, two initiatives were undertaken: the harmonization o f sanitary and phyto-sanitary (SPS) measures in priority crops and livestock products in 1997; and the harmonization o f standards in electrical products in 1999.

The included products were: air conditioners, refiigerators, monitors and keyboards, inductors, loudspeakers, video apparatus, telecommunications equipment, radio, television, parts o f TV and radio, capacitators, resistors, printed circuits, switches, cathode ray tubes, diodes, mounted piezo-electronic crystals, motors and generators, rubber condoms, and medical rubber gloves.

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5.26 In 2003, the A S E A N Economic Ministers’ High Level Task Force o n A S E A N Economic Integration requested accelerating the reduction o f tariffs, the harmonization o f customs and standards, and conformity assessment. This opened the door for accelerating the implementation o f Mutual Recognition Agreements for priority sectors.

B. Specific criteria used in ASEAN functioning

Harmonization and mutual recognition in ASEAN 5.27 In 1998, the A S E A N members signed a Framework Agreement o n Mutual Recognition Arrangements (MRA). These were intended as “agreements between two or more parties to mutually recognize or accept some or a l l aspects o f one another’s conformity assessment results,” so MRAs could accelerate both bilateral and regional agreements. The signing o f the framework agreement encouraged the conclusion o f three sectoral MRAs in electrical and electronic equipment, telecommunication, and cosmetics. A S E A N members are currently implementing the application o f these agreements. A MRA for pharmaceuticals i s under preparation and a MRA for prepared foodstuffs i s planned. In a number o f sectors (traditional medicines and health supplements, medical device, automotive, and wood industries), A S E A N has achieved the harmonization o f standards and texting procedures.

5.28 Below i s a br ie f description o f such achievements:

Cosmetics. The A S E A N Cosmetic Directive has been the outcome o f cooperation between the A S E A N cosmetic regulators and the cosmetic industry. The directive aims at facilitating the removal o f TBTs for cosmetic products. By providing a l l requirements that cosmetic products should comply with in al l A S E A N countries, the directive allows a product t o be produced or marketed in an A S E A N country and to be sold in any other member country.

Electrical and electronic equipment. The A S E A N Sectoral MRA for Electrical and Electronic Equipment has been preceded by a series o f activities aimed at building confidence among member countries, such as seminars/forums for regulatory authorities, study visits to testing laboratories, and analysis o f regulatory regimes in ASEAN.

Telecommunications equipment. The MRA for telecommunications equipment was an initiative led by the A S E A N Telecommunications Regulators’ Council (ATRC). It was finalized in October 2000 and i s expected to promote cross-recognition o f conformity assessment procedures for type-approving telecommunications equipment in the region.

Pharmaceuticals. The outcome o f a comparative study o f the A S E A N regulatory regimes for pharmaceuticals identified four areas for harmonization: quality, efficacy, safety, and administration data. With the aim o f placing the requirements in a harmonized structure, an A S E A N Format o f Common Technical Requirements (CTR) was developed. Member countries are working on the A S E A N Common Technical Dossier (CTD) for pharmaceutical product registration. This dossier will constitute a basis for a possible MRA in this sector.

5.29 Last but not least, the region i s trying to reduce government involvement in securing health and safety standards, with the aim o f increasing the role and responsibilities o f the private sector. For example, the directive on cosmetics-which became effective in January 2008-aims at substituting the cumbersome pre-sale product-by-product approval system with a risk-based post-sale surveillance.

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ASEAN strategy to remove NTMs 5.30 A S E A N members identified eleven priority sectors in 2004: namely, electronics, information technology, healthcare, wood-based products, automotives, rubber-based products, textiles and apparel, agro-based products, fisheries, air travel, and tourism. The choice o f these sectors was done o n the basis o f comparative advantage in natural resource endowments, labor skills, and cost competitiveness, and value-added contribution to the economy o f ASEAN. The importance o f the priority sectors i s reflected in the share o f intra-regional trade (approximately 50 percent in 2003), contributing USD48.4 bi l l ion and USD43.4 b i l l ion o f intra-ASEAN exports and imports, respectively. A 2005 analysis on NTMs confirmed to the Secretariat that most o f these measures were in the priority sectors.62

5.3 1 o f criteria:

Once identified as NTMs, A S E A N wil l prioritize their elimination through a combination

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5.32

Trade impact criterion. This gives an idea o f the trade restrictiveness o f the measure. In order to assess such restrictiveness, the Interim Technical Working Group on CEPT for AFTA (ITWG) will consider the following elements: number o f private sector complaints, difference between domestic and wor ld prices, and trade value.

Regulatory objective criterion. This takes into account the objective o f the measure, whether consumers protection or generation o f revenue.

WTO consistency criterion. This allows A S E A N to classify NTMs o n the basis o f the WTO principles. According to such principles, NTMs must: be transparent, be nondiscriminatory, have scientific basis (in case o f SPS measures), and have no better alternative.

The examination o f a l l the above-mentioned criteria will a l low A S E A N to classify NTMs into three main categories:

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Red-NTMs to be immediately eliminated Amber-NTM not clearly identified as barriers Green-NTMs that can be maintained, as they are justified.

The ESEAN monitoring system 5.33 The A S E A N model differs f rom the EU model in being based o n a declaration (the Bangkok Declaration) rather than a legal binding treaty (the Treaty o f Rome). Moreover, the ASEAN does not have a powerful body l ike the European Commission to guarantee and monitor implementation o f decisions taken at regional level. Hence, it will be interesting for the E A C to see how A S E A N i s trying to ensure compliance and more specifically monitor the correct elimination o f NTMs.

5.34 The ITWG i s the body currently responsible for the elimination o f NTMs. However, other A S E A N bodies will have to participate in this important task. One o f these bodies, the ASEAN Consultative Committee for Standards and Quality (ACCSQ), has already set up a task force to deal with NTM elimination. The strategy envisaged by A S E A N reflects i t s members’ reluctance to encourage rigid structures and centralization o f power. Such strategy i s based on:

62 World Bank (2008a). Specifically, they were prevalent in electrical equipment, organic chemicals, motor vehicles, tobacco, cereals, sugar, cosmetics, beverages, cereal/flour/milk preparations, edible fruit and nuts, pharmaceuticals, cocoa, dairy products, coffee/tea/spices, live animals, vegetables, meat/fish preparations, vegetable preparations, waste from the food industry, seeds, live trees, meat, and edible offal.

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0 Market forces, specifically the ASEAN members’ motivation to increase intra-regional trade. An increase in trade would increase the dependence among member states and consequently reduce the probability o f potential retaliation.

Third party enforcement. As per the EU experience, ASEAN i s considering the possibility o f creating a sovereign body. The ASEAN decision-making model i s very flexible at present and i s based on informal agreements rather than legal binding decisions. Consequently, the third party enforcement will be tested only on a single sector at first. A sovereign body wil l be created with the purpose o f managing and supervising the correct functioning o f this sector by issuing rules and directives when necessary and ensuring their correct transposition in national laws.

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5.35 ASEAN envisages that should these mechanisms be insufficient in some sector, the enforcement o f compliance will have to be ensured by counter-notification, dispute settlement, and sanctions. However, the monitoring system has not yet been put in place. For this, ASEAN i s looking at the WTO’s Trade Policy Review Mechanism and at the EU Scoreboard as possible models.

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CHAPTER 6. LOOKING FORWARD: RECOMMENDATIONS FOR FOLLOW-THROUGH

6.1 In the EAC, non-tariff measures--coupled with poor infrastructure, limited human ski l ls capacity and considerable scope for corruptiodfraudulent behavior-add to the difficulty and cost o f trading goods. Since the imposition o f the NTMs largely follow the trade corridors, the farther the member country and i t s various regions i s located from the source o f goods, the greater i s the likelihood that NTMs will add to delays in time and monetary cost.

6.2 The instruments under the EAC Customs Union Protocol are just being initiated to curb NTMs on formal goods trade along the trade corridors. Based on the consensus at the EAC Council o f Ministers on the need to eliminate most NTMs, the EAC Secretariat needs to develop a mandate and capacity for monitoring and classification o f NTMs and implementation o f the action plans for reductionhemoval o f the non-transparent and discriminatory ones. The implementation o f elimination plans through the member governments may face specific challenges, ranging from difficulties in estimating the constraint imposed by individual NTMs on specific trade flows to the national political and economic interests that make targeting difficult. The phase 1 task team recommends that the EAC observe, learn from, and take specific practicable decisions to emulate the successful steps in NTM removal undertaken by other RECs, especially the EU (as discussed in chapter 5). The member states should also prepare for a prolonged period over which such decisions will actually be implemented after the decisions are taken.

6.3 The phase 1 task team makes the following recommendations:

I. NTM DECISIONS

A. General WTO consistency for existing NTMs

6.4 The team recommends that the Council o f Ministers consider and agree on the principle that NTMs inconsistent with the WTO ru les have to be eliminated within the EAC. As noted in chapter 3, WTO consistency requires NTMs to be “transparent,” “non-discriminatory” among the domestic goods flow and intra-EAChnternational trade, “scientifically based,” and “with no better alternative.” The preliminary l i s t o f NTMs, prepared in chapter 4, should be investigated for these characteristics. At the start o f this process in phase 1, it seems that the prevailing NTMs can be nontransparent and are mostly discriminatory against other EAC members. With immediate effect, NTMs that are not WTO-consistent in EAC-whether or not they restrict intra- EAC trade in certain products, and irrespective o f the political economy-are to be eliminated.

B. Specific decisions for existing NTMs

6.5 The NTMs in line with the WTO rules s t i l l need to be removed, but could be considered on a preferential basis. Here, the ongoing choices in ASEAN could provide guidance for the EAC decisions (see chapter 5). The team recommends that the priority for EAC action be determined on the basis o f the following criteria:

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Regulatory objective 6.6 The choice could be on the basis o f the NTM’s objective, be it national consumer protection or the generation o f revenue at the national/local level. This criterion may be important for the EAC since many o f the NTMs, found in chapter 4, apply across a range o f products, and the revenue needs are important due to the economic status o f the various members.

Trade impact 6.7 The choice could be made on the basis o f the NTM’s trade restrictiveness, including the following elements: number o f private sector complaints, value o f expodimport affected, and difference between domestic and world prices for consumer. The findings in chapter 4 are prioritized on the basis o f the f i rst element.63 Though it will be difficult to assess the total value o f expodimport affected by a particular NTM, chapter 2 listed the top goods by value traded in the EAC. For most E A C members, other than Kenya, these goods are also the most important ones in the value share o f overall trade. Hence, prioritizing the NTMs that apply specifically to these goods will yield added benefits from expansion o f EAC’s global trade. Further investigation may be needed, in phase 2, to determine the extent to which the NTMs increase the consumer prices o f these goods.

6.8 One way forward for developing a strategy for reducinglremoving NTMs given national differences and capacity constraints i s to adopt a producthector view in a phased manner. In ASEAN, the choice o f these sectors was made on the basis o f comparative advantage in natural resource endowments, labor skills, cost competitiveness, and value-added contribution to the REC economy or share o f intra-regional trade. As analyzed in chapter 2, the intra-EAC trade i s quite product-specific. However, the current NTMs on formal goods trade revealed by private sector f i r m s and public sector institutions, in chapter 4, are largely not product -~peci f ic .~~ Going through some o f the supply chains o f intra-EAC traded products and following the flows across borders would reveal the costs faced by the private sector. In this way, it would be possible to deal with the problem o f formalityhformality o f trade and big differences between written ru les and actual border practice. As noted, this i s being investigated for the intra-EAC maize trade, one o f the top products traded in the region by Tanzania and Uganda.

6.9 In a few goods, like milk, beef, poultry (including day-old chicks), the EAC may want to develop specific region-wide technical and/or SPS standards after detailed investigations. In choosing the specific product it would be important to consider the regulatory objective and /or intra-EAC trade impact o f the NTM. Here the guidance from the ongoing process o f deliberations and decisions in the ASEAN countries will be useful. This could be based on harmonization with performance requirements, involving a single set o f fully harmonized and detailed provisions. This approach i s used for products that could put consumers’ safety at risk and for which performance-oriented legislation i s felt needed. Any capacity building initiatives in the overall area o f the technical and/or SPS standards for goods should be assessed vis-a-vis clear articulated demand from end-users in the publidprivate sector, rather than from the national bureaus o f standards.

The private sector complaints in the EAC are the strongest about poor infrastructure. This i s followed by the NTMs listed in chapter 4, and cormptiodfiaudulent behavior. The private sector also complained about the limited human skills and technical capacity o f the tradekransit facilitators and national government officials in the EAC. 64 Further investigation of informal trade in the EAC may lead to a revision o f this conclusion, especially in traded “food and live animals.”

63

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6.10 Given the fiscal and human capacity constraints that exist in the EAC for now and dependence on implementation o f region-wide decisions only by national institutions, it i s by no means being suggested that the EAC choose the above course o f action for al l major goods traded among the five members. For most goods, the “new approach” o f the EU could apply to products with similar characteristics and where there i s widespread divergence o f technical regulations in EAC countries. This streamlined approach would rely only on the “essential requirements” and allow greater freedom for manufacturers on the way to satisfy those requirements. This would significantly reduce the red-tape originating from various standards agencies that mires goods trade in the region in particular and in developing countries in general. Gradually, this approach could provide private f i r m s with a number o f choices for attestation methods: self-certification against the essential requirements; generic standards; or using notified bodies for type approval and testing o f conformity o f type. On the TBT and SPS measures, the WTO guidelines tend to be most relevant for the OECD countries and the EAC i s advised to be cautious as not to constrain the potential for growth in the region.

C. Monitoring for new NTMs

6.1 1 With respect to the monitoring for new NTMs that may be imposed by member states, the EAC could learn from the EU’s adoption o f preventive measures which oblige member states to notify all draft regulations and standards related to technical specifications to be introduced on national territories. In this way, the Commission i s able to monitor and prevent the raise o f new national barriers to intra-EU trade.

6.12 The EU’s internal market scoreboard may prove to be a useful instrument for the EAC Secretariat to emulate. The European Commission maintains this scoreboard on member adherence to REC-wide rules including those on NTMs on trade, which can be used to name and shame members into compliance. For the EAC, such a scoreboard could report the status o f the NTMs action plans and the number o f infringement proceedings due to new NTMs initiated against member states. These proceedings could be initiated as a consequence o f continuing or new application o f a NTM by a member state. In this case, the member state i s encouraged to quickly remedy the situation, and if it fails to do so it i s referred to the EAC court, which can impose a sanction. To supervise the proper functioning o f the internal market for goods in the EAC, the Secretariat would need to develop adequate capacity for classifying NTMs reported and monitoring, as would the member states in identifying and notifying the observed NTMs. Later this could be supplemented by capacity for enforcement and redress action. Other EAC institutions could be needed to contribute to this important function.

6.13 It has been agreed by the EAC Council o f Ministers that all truck drivers should carry NTM spot-and-patch forms to record all the barriers they face along the transit routes in the region. This form would then be submitted to the Ministry o f Trade, Tourism and Industry in the member country for review, and subsequently forwarded to the EAC Secretariat for classification and redress action, if needed. This plan has yet to take o f f in the member states. The current capacity o f the Secretariat to undertake this sensitive activity i s unclear, as i s the role o f the NMCs in this monitoring activity i s unclear, neither are the current capacity to do so by the NMCs or the E A C Secretariat

D. Associated Common Market Operation

6.14 The trade links o f the EAC members with their external markets remain a significant source o f growth for the region, as seen in chapter 2. Hence, in the development o f the EAC Common Market the team recommends that the EAC consider the open regionalism model o f the

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ASEAN, based on the principle o f increased adherence to WTO rules, in order not to lose benefits from the large external market size o f most i t s members relative to other RECs. Through feasible processes, the EAC could urge i t s members to adopt consistency to WTO agreements on technical barriers to trade (TBT), sanitary and phyto-sanitary measures (SPS) and import licensing procedures, as well as develop the related implementation guidelines as a means for NTM elimination.

6.15 As integration deepens and associated activities expand, the EAC may want to explore the option o f reaching REC-wide decision making by majority, on the lines o f the EU, rather than the current decisions made by unanimity only. Majority voting in the EAC may the means to alleviate a specific member’s ability to hold the adoption o f EAC-wide policies hostage, in case protectionist national interest i s the basis o f a specific NTM.

6.16 removing o f NTMs emanating from these areas.

Such decisions will go a long way toward simplifying the monitoring, reducing, and

11. WORKING WITHIN THE CURRENT EAC SYSTEM

6.17 On the private sector side, f i r m s requested overall simplification, transparency, and more rigorous application o f EAC-wide rules and procedures surrounding intra-regional goods trade. In cases where the f i r m s were also trading in markets external to the REC - mostly in Europe - they proposed that the regional ruleshtandards adopted be largely consistent with their global participation. Various proposals by private f i r m s to alleviate NTMs impeding goods trade in EAC emerged during the stocktaking interviews. The f i r m s tended to focus on the implementing agent in the EAC. They perceive that each member state could go a long way in reforming national policy or implementing follow-up actions unilaterally behind the border to alleviate the NTMs. Examples o f such recommended national action include instituting a one-stop clearance at ports and border posts; opening up private competition for management o f weighbridges and pre- shipment inspection; seeking private funding to upgrade institutions for product quality control; etc. Actions recommended at the EAC level include establishing a common road transit system and a common carrier license; initiating mutual automated data exchanges; etc. Such recommendations are expected help planning o f the phase 2 work program on this activity. However, a clear priority across the range o f actions mentioned did not emerge clearly across various interviews, and across member states.

6.18 The task team understands that the EAC Council o f Ministers may want to deliberate at length over the specific features o f EAC-wide strategy for NTMs constraining goods trade - on the lines recommended in section I - in order to implement Article 13 o f the Protocol effectively. NTMs that are not WTO-consistent in EAC need to be eliminated, but capacity needs to be built up to do so and monitor compliance. This remains critical.

6.19 The Council may simultaneously want estimates the time and effort it may take to make progress on implementation o f reductionhemoval plans under the current circumstances. A distinguishing feature could be whether or not the EAC-wide agreement i s already adopted (but not implemented). This i s considered further in the current section. Table 6.1 suggests some NTMs on EAC goods trade for action, where the team concurs with the private sector suggestions and tr ies to estimate the ease by which NTMs could be removed.

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A. Category1 6.20 Where EAC-wide consensus agreements the action steps have to be devised, implemented, and mutually monitored by the members. Where a statement within the Protocol i t se l f or a unanimous decision o f the Council o f Ministers the political commitment o f the members to remove these NTMs has been underscored. Most o f these NTMs continue to exist because member governments or their agencies are delaying implementation o f the provisions in the EAC Protocol or the decisionshesolutions o f EAC Council o f Ministers, or the follow-up directives by responsible ministers to eliminate them. (Some others, like the ‘harmonization o f technical standards’ may need a framework for decision making and several steps. Hence they would be in category 3 below). The team expects the implementation span for category 1 NTMs to be short. Such NTMs may vary in their trade restrictiveness (that is, according to the classification schemes in figure 3.1 they may lie in quadrants A or B). Technical assistance may be needed for implementation, especially for the new members, Burundi and Rwanda. Nonetheless, all category 1 NTMs may well be the low-hanging fruits that EAC may wish to target first.

B. Category2 6.21 If an EAC-wide agreement has yet to be reached, a medium-term program o f consensus building in and among the member states and unanimous agreement on policy and action steps at the Council i s envisaged. Such category 2 NTMs are expected to account for the bulk o f the total action in this area. In the traditional EAC thinking, such NTMs arise from policy differences or lack o f cross-border harmonization and standardization o f procedures and regulations.66 Benchmarking the EAC and national development o f harmonized and simplified clearance and transit procedures and standards (such as by the widely used Kyoto Convention) could proceed according to WTO recommendations/ requirements or along the lines followed by other RECs. Various instruments such as Single Administrative Documents (SADs), Time Release studies, the World Customs Organization (WCO) Diagnostic, and the WCO data model have been developed to enhance this process.

6.22 However, this i s not the only way forward. Sections I and I1 in this chapter have delineated an alternative, simplified way forward in dealing with category 2 NTMs, based on promotion o f open regionalism through increased adherence to WTO rules by the members. For most products, the prolonged and resource-intensive process o f harmonization o f standards could be replaced by the simpler principle o f mutual recognition, as in the EU (see chapter 7). In the limited number o f product cases where the Council chooses to harmonize, separate EAC-wide standards do not need to be developed. Quality requirements for EAC exports outside the region already exist. Intra-EAChational standards just need to adopt and comply with these, not revise them.

6.23 In both cases, the way forward wil l require technical assistance and capacity building over the short and medium term, as significant time and effort may be needed to devise and implement a plan for removing each NTM.

65 The task team has yet to verify the status o f specific decisions on NTMs taken by the EAC since the Trade Review Committee report (February 2008).

technical complexity expected than category 1. In general, category 2 NTMs can be located anywhere in figure 3.1, although with greater political and 66

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C. Category3 6.24 Where government monopolies and/or fiscal constraints have given r ise to severe infrastructure constraints, the consequenthelated (category 3) NTMs will need prior large-scale investments, and long-term interventions in expansiodrehabilitation o f physical infrastructure in a coordinated manner across the EAC, especially along the two corridors. Here the prioritization could consider the potential for (i) combining the economic strengths o f EAC members for regional advantage; (ii) facilitating intra-EAC trade and investments; (iii) attracting and retaining manufacturing activities within EAC; (iv) promoting outsourcing in EAC; and (v) developing EAC products and services.67

6.25 The decisions and action related to technical standards for goods and the associated SPS considerations can be visualized in this category, since it i s expected to take a prolonged period to intervention to adopt a general framework, adopt it and install the appropriate infrastructure and human capacity to implement the decisions

Despite recognition of their obvious trade-restrictive nature and country commitments made under the 67

Uruguay Round. See the APRISproject in ASEAN for successlshortcomings of similar choices made. http://www.aseansec.org/apris2/index.htm.

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Table 6.1. Starting ReductionEternoval of Non-tariff Measures in EAC

Selected EAC Causes Solution agreed but not Category NTMs implemented/ Responsible agency for action ’ reported Action recommended TBT and SPS: Inspection of Misapplication/ EAC Protocol alreadv reauires EAC to choose the goods. 3 goods for export and import with incompatible standards and archaic national certification procedures in use

interpretation of standards with regard to certification.

Mutual recognition of national quality marks on products by national standard agencies yet to take off.

Too many agents involved in certification.

harmonization o f sthdaris. Synchronized action needed to develop a combination of mutual recognition for most goods which fulfill certain ‘essential requirements’ and harmonization of standards for specific sensitive goods traded.

Private firms want relevant stakeholders, e.g. commodity associations. Attention i s requested to (i) focus on product wise technical standards/SPS compliance and related capacity-building needs in entities that oversee quality control and product certification; (ii) raise awareness and promote best practices among primary producers, manufacturing enterprises, and regulatory agents; (iii) define clear roles and responsibilities o f different players; and (iv) strengthen institutional collaboration in implementing agreed strategies and programs - within public sector and funding agencies, and vis-a-vis the

NBS to determine the ‘essential requirements’ on some; as well as harmonize standards for others. Ministry of Trade and Industry; Ministry of Agriculture and Livestock. NBS agents at the border posts

Since national governments are making least investments in the NBS, explore options for private funding from businesses within EAC to improve the physical infrastructure and train staff of NBS and laboratories.

private sector. Distribution:

Varying Harmonized 3-axle Council of Ministers decision already Ministry of Transport in 1 application o f and standard axle requires EAC-wide harmonization. member states axle load limits and vehicle dimensions members. in the Kenya transporters court case.

transit good standardization of 2. Explore option that such a license member states license fees

load limits yet to be applied in four Expected application after the decision

Variation in Lack of 1. Device an EAC-wide carrier license. Ministry of Transport in 2

transit license fees. No transit back- loads allowed point of origin

should allow transit of goods for part or whole o f the return journeys to the

Customs and administration:

fees and bonds streamlining transit system for the full length of a given member states Multiple transit Lack o f 1. Establish a common road transit Ministry of Transport in 2

fees or bonds; currently issued by country.

corridor, to harmonize required trade and transit documentation. 2. Institute single bond for goods transiting in EAC

customs synchronized o f and border posts. inspection customs 2. To simplify transit trade and procedures and procedures and customs clearance, reorganize documentation documentation institutions in charge o f customs

Lengthy Lack o f 1. Explore one-stop clearance at ports Revenue authorities 2

clearance and administrative controls at the ports and at the border. 3. Harmonize EAC-wide customs documentation

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Selected EAC Causes Solution agreed but not Category NTMs implemented/ Responsible agency for action a reported Action recommended

4. Sensitize business community on import procedures and processes. 5. Initiate mutual automated data exchanges across customs administrations. An operational network system linking all EAC revenue authorities allowing them to share data would improve customs tax appraisals and curb avoidance. 6. Establish routine advance shipping information systems in ASYCUDA and SIMBA 7. Explore scope for bilateral/ joint control of administrative and customs formalities at juxtaposed border posts

Varying system of import declaration, with arbitrary use of rules of origin

Delays at police roadblocks.' Delays in clearing goods at border posts

Problem o f interpretation; failure to standardize certificate of origin; centralized location of issuing agency in the member state capitals.

Limited mismatched customs opening hours/ failure to implement decision of 24- hour service.

Standardize EAC certificate or origin Monitor and reduce police roadblocks.

Rwanda has started operating a 24- hour border post with DRC, but Uganda has not followed suit quoting capacity constraints.

EAC Council of Ministers 2

Police in member state

Revenue authorities

Uganda and Kenya agreed to introduce 24-hour service at common border posts.

Government monopoly:

monitoring and implemented. Truck drivers are to Industry; NMCs; EAC redress process carry NTM spot-and-patch forms to Secretariat. for NTMs.

No standard Council of Ministers decision yet to be Ministry of Trade and 1

record along the transit route the constraints on goods trade and note new ones emerging.

The redress mechanism in EAC i s specified precisely and functional yet.

The form i s to be submitted to the Ministry of Trade, Tourism and Industry in member state for review, and subsequently forwarded to EAC Secretariat for redress actions

Delays at Too many 1. In 2007 Kenya Ministry of Roads Ministry o f Roads and 1 weighbridges weighbridges; and Public Works directed transit Public Works in member

acceptable weights goods be weighed once and issued states not synchronized. with one certificates.

3. Abolish excessive number o f weighbridges on transit route 2. Open up competition among nationaUinternationa1 firms to work the weighbridges

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Selected E A C Causes Solution agreed but not Category NTMs implemented/ Responsible agency for action reported Action recommended Delays in Low off-take Investment to improve Port Authorities in member 3 offloading at capacity; limited 1. off-take capacity and port facility states; government in the port and physical facilities. 2. Physical premises o f the border member states overseeing customs posts the revenue authority and premises customs within it Source: Team summary from interviews ASYCUDA - Automated Systems for Customs Data a. See section I1 in this chapter for description o f the categories.

111. NEEDED EAC ACTIONS OUTSIDE THE DIRECT ARENA OF NTMS

A. Improve infrastructure

6.26 There i s l i tt le doubt among the private sector producers and traders in EAC that the infrastructure bottleneck i s critical in the region. The three key suggestions emerging in this area are as follows. (i) Prepare and execute regional infrastructure improvement plan(s), especially the roads network, with a v iew to ease the costs imposed on landlocked countries. (ii) Provide wagon ferry vessels o n Lake Victoria and Lake Tanganyika, through public or private investments, with adequate safety regulations for their operation. (iii) Institute an efficient railway system through the required investment by the national government in rails and by the private operators in wagons to improve the competitiveness and safety o f the transportation o f bulk products in the region. The need for developing dual ra i l tracks across the region i s also imperative. There i s need to regulate the railway service provider to prevent inefficiency and abuse o f market power in niches that railways could dominate] (such as container traffic) (see appendix A6.2 for some immediate needs).

B. Promote effective information sharing by public entities; and stakeholder participation in decision making

6.27 The public sector in E A C needs to consult with the private sector more regularly and systematically and develop a framework for providing information to them (including the business community). This would build towards the next stage o f collective public-private decision making. The private producers and traders perceive a clear need for a focal point institution (at the national level) outside the national governments to disseminate information effectively. In the areas related to goods trade in EAC, these could cover new regulations, the resolution and decisions o f the Council o f Ministers, the issuance o f standards, and the creation o f awareness-and to update or educate stakeholders on progress in the integration. Through the focal point network, effective mechanisms for solving problems that traders face while doing business and for getting feedback can be developed to improve beyond the border relations.

6.28 Article X o f WTO requires that laws, regulations, and other information (including on cross-border procedures and customs administration) that affect or relate to importing and exporting must be published promptly in such a manner as to enable governments and traders to familiarize themselves with them.

C. Apply the principle o f asymmetry

6.29 As E A C explores a program to achieve the common market-including the removal o f legal barriers to the free movement o f goods, services, capital, and labor-the team recommends

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putting in place a policy to mitigate the effects o f the completion o f the internal market on relatively disadvantaged member states (those that are landlocked or are the least economically developed). This will reduce development discrepancies between the member states. Removal o f physical barriers for goods crossing the intra-EAC borders i s merely the f i rs t step to facilitate trade through reduced delivery times and lower associated costs.

D. Promote the use of English

6.30 The agreed language across EAC for overall administration, public trade facilitation, and private transactions i s English. However, for members that were originally francophone, especially Burundi, concrete steps are recommended to promote English in government administration, and in doing so, facilitate the private sector goods trade o f these members.

6.3 1 These are a few ways, expected to be explored further in phase 2, on how the EAC could rethink i t s strategy to encourage intra-region goods trade and effectively observe, monitor, and reduce the NTMs hampering it.

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APPENDIX GROUP A

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APPENDIX Al. DETAILS OF TRADE FLOWS OF EAC MEMBERS

Years Burundi 1993-9

2000-5 Kenya 1990-9

2000-5 Rwanda 1994-9

2000-5 Tanzania 1994-9

2000-5

2000-5 Uganda 1994-9

Burundi Kenya Rwanda Tanzania Uganda _- 0.3 1.5 0.1 0.2 _ _ 0.4 0.5 0.2 0.5

3.4 _ _ 29.8 6.1 17.8 10.4 -- 30.9 6.0 25.3

1.1 1.1 -_ 0.2 1.9 2.1 0.8 __ 0.1 0.9 2.9 3.4 7.0 -- 1.4 7.8 2.8 5.4 -_ 1.1 1 .o 5.0 4.9 0.5 -- 2.8 5.8 5.8 0.6 --

With EAC 1994-9 2000-5

With rest of SSA 1994-9 2000-5

With rest of World 1994-9 2000-5

8.4 9.8 43.2 6.8 21.3 23.1 9.7 42.5 7.0 27.8 9.0 8.7 5.3 10.0 6.6 7.8 10.2 7.7 12.2 9.9

82.6 81.5 51.5 83.2 72.1 69.1 80.1 49.7 80.8 62.4

(average 1990s and 2000s, percent)

Burundi 1993-9 2000-5

Kenya 1990-9 2000-5

Rwanda 1994-9 2000-5

Tanzania 1994-9 2000-5

2000-5

Years

Uganda 1994-9

To E A C 1994-9 2000-5

To rest o f SSA 1994-9 2000-5

To rest o f world 1994-9 2000-5

Source: COMTRADE.

Burundi Kenya Rwanda Tanzania Uganda _ _ 0.7 1.8 0.4 0.3 -- 0.9 0.9 0.9 1.5

1.7 -- 56.7 4.8 6.3 5.0 -- 44.1 7.9 14.2 2.9 2.6 -- 0.8 4.9 8.6 1.9 -- 0.4 2.7 1.9 7.7 14.7 _ _ 0.9 2.0 6.8 7.3 _ _ 1.5 0.4 12.4 4.1 1.5 _ _ 1.8 14.0 9.0 1.3 --

6.8 23.4 77.4 7.5 12.4 17.5 23.6 61.2 10.4 19.9 3.2 9.5 3 .O 7.5 8.8 2.5 10.1 6.3 7.2 10.3

90.0 67.1 19.7 85.0 78.8 80.0 66.4 32.5 82.4 69.7

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Burundi Coffee and coffee substitutes Gold, nonmonetary Tea and mate Sugar and honey Alcoholic beverages

Tea and mate Petroleum products, refined

Vegetables, fresh, chilled, fi-ozedpres. Coffee and coffee substitutes

Kenya

Crude vegetable materials, n.e.s.

Rwanda

0.0 18.3 0.0 0.2 1.6

13.0 1.7 1.8 0.0

12.7

T o E A C To rest o f SSA To rest of world 10.8 0.9 88.2

1.4 1 .o 97.6 4.8 0.0 95.2

99.4 0.0 0.6 91.8 7.4 0.8 87.5 9.7 2.8 14.4 4.0 81.6 0.2 5.3 94.5

68.0 5.6 26.3 0.9 1.7 97.4 0.1 1.8 98.2 0.5 2.5 97.0

60.2 4.9 34.8 Ores and concentrates o f base metal Coffee and coffee substitutes Tea and mate Hides and skins (except fur skins),

20.6 13.6 65.8 70.5 0.0 29.5

100.0 0.0 0.0 37.3 0.0 62.7

Petroleum products, ref ined

Petroleum products, ref ined Other cereal meals and flours Telecommunications equipment and part Maize (corn), unmi l led Passenger motor cars, for transport

62.9 10.7 26.4 Tanzania

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3.1 11.4 85.5 Gold, nonmonetary Fish, fresh (livelfresh, chi l ledfiozen) Ores and concentrates o f precious metals Tobacco, unmanufactured; tobacco ref.

19.1 80.9 0.8 80.9 0.3 99.6 7.5 92.3

Coffee and coffee substitutes Uganda

0.7 97.7 10.8 76.2

Coffee and coffee substitutes Fish, fi-esh (live/fresh, chi l ledfiozen) Gold, nonmonetary Tobacco, unmanufactured; tobacco ref.

11.7 86.6 0.2 98.0

30.8 69.2 13.6 73.7

Tea and mate 99.4 0.1 0.5

Kenya Petroleum products, ref ined Tea and mate Made-up articles, wholly/chiefly o f Passenger motor cars, for transport Motorcycles, motor scooters, inval id

To E A C To rest o f SSA To rest o f world 65.1 2.0 32.9 66.2 1.4 32.5 0.3 24.6 75.1

19.1 18.9 61.9 33.4 57.5 9.0 42.5 33.8 23.7

Share o f total re-export/total gross exports Uganda

51.7 9.1 12.9 18.8 17.8 63.4

Share o f total re-exporthotal gross exports 18.2 21.7 6.8

Burundi 1993-9 2000-5

Kenya 1990-9 2000-5

Rwanda 1994-9 2000-5

Tanzania 1994-9 2000-5

2000-5 Uganda 1994-9

From EAC 1994-9 2000-5

From rest of SSA 1994-9 2000-5

From rest o f world 1994-9

Burundi Kenya Rwanda Tanzania Uganda _ _ 0.0 1.3 0.0 0.0 _ _ 0.0 0.4 0.0 0.0 4.3 -- 24.5 6.7 25.3

11.6 _ _ 27.7 5.5 29.3 0.4 0.2 -- 0.0 0.1 0.5 0.0 __ 0.0 0.1 3.3 0.5 6.1 _- 1.7 9.2 0.4 4.9 _ _ 1.0 1.2 0.3 5.3 0.3 _ _ 3.0 0.3 5.1 0.3 _ _ 9.2 1.1 37.2 7.1 27.1

24.4 0.7 38.1 5.8 30.3 11.8 8.2 5.9 12.0 5.2 9.2 10.6 8.0 14.0 9.4

78.9 90.8 56.9 80.9 67.7 2000-5 66.4 88.7 53.9 80.2 60.3

Bold demarcates increases or no change. Import-Gross import-Re-import.

Appendix A1.6 Non-Oil Import Value Shares: Within EAC, from Rest o f SSA, and from Rest of the World (average 1990s and 2000s; percent)

Burundi 1993-9 2000-5

Kenya 1990-9 2000-5

Rwanda 1994-9 2000-5

Tanzania 1994-9 2000-5

Uganda 1994-9 2000-5

From EAC 1994-9

From rest of SSA 1994-9 2000-5

From rest of world 1994-9 2000-5

Source: COMTRADE. Bold demarcates increases or no change

2000-5

Burundi Kenya Rwanda Tanzania Uganda _ _ 0.0 1.3 0.0 0.0 _ _ 0.0 0.4 0.0 0.0 3.8 -- 11.5 5.7 19.9 5.3 _ _ 15.5 3.6 12.7 0.4 0.2 _ _ 0.0 0.1 0.5 0.0 __ 0.0 0.1 2.7 0.5 6.1 _ _ 1.5 6.1 0.4 4.9 _ _ 0.9 1.2 0.3 4.3 0.3 -- 3.0 0.3 4.6 0.2

8.1 1 .o 23.2 6.0 21.5 14.8 0.7 25.3 3.8 13.7 11.4 7.0 8.7 11.1 1.9 8.9 10.4 7.5 13.0 10.2

80.5 92.0 68.2 82.9 76.6 76.3 88.9 67.2 83.2 76.1

--

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APPENDIX A2. TRADE ROUTES IN EAST AFRICA

Country Burundi Kenya Rwanda Uganda a

Total in EAC EAC's share o f total N C road network (percent)

The East African Community i s served by two main corridors. The Northern Corridor connects the port o f Mombasa to Nairobi, Kampala, Kigali, Bujumbura, and eastern Democratic Republic o f Congo (DRC). The Central Corridor connects the port o f Dar es Salam to Kampala, with branches to Kigali, Bujumbura, and entry points to DRC. The two corridors serve an area consisting o f three landlocked countries (Burundi, Rwanda, and Uganda), the eastern part o f DRC, southern Sudan, and Ethiopia. The port o f Dar es Salam also serves the landlocked countries to i t s southwest (Malawi and Zambia). A pictorial presentation o f the traditional road- rail routes o f the Northern and Central Corridors i s presented in map A2.

Paved (km) Unpaved (km) Total (km) 320 36 356

1196 _ _ 1196 814 _ _ 814

1042 657 1669 3372 693 4035

50 10 60

The Northern Corridor

This i s a multimodal corridor (road, rail, inland water transport and pipeline) that connects the port o f Mombasa to Nairobi, Kampala, Kigali, Bujumbura, and eastern DRC. The Northern Corridor has a longer history than the Central Corridor, and i s complete within the EAC. However, there i s a long missing link across DRC and parts o f Central African Republic, which prevents any transit trade traffic between East and West Africa.

Road. The key transit transport routes to the Great Lakes countries are from Mombasa to Bujumbura in Burundi (the southwest terminus). The average distance traveled by truck on this route i s 2,050 h.'* The bulk o f imports and exports destined to and from countries in the corridor are transported through either o f these transit routes. From Kenya to Uganda, the Mombasa-Malaba- Kampala road (1,170 km) i s preferred because the road i s o f relatively good quality and social amenities are available en route. Transit time in the recent months has averaged 10 days, depending on the period taken (usual i s about 5 days, after the transit truck leaves the port o f Mombasa). The alternative route i s Mombasa-Kisumu-Busia-Kampala. From Uganda to Rwanda, the principal routes are Kampala-Kagitumba-Kigali and Kampala-Gatuna- Kigali. Bujumbura in Burundi i s reached from Kigal i (Rwanda) through the border post o f Kanyaru- Haut. The terrain o f the roads has steep slopes for the trucks to negotiate.

The Northern Corridor road network by member countries i s shown in table A2.1.

a. Does not include thc Kainpala-Karunia-Pakwach-Nebbi-Cloli-Arua.

The road freight industry represented by the population o f cargo fleets that serves the Northern Corridor has expanded rapidly in recent decades, due to the growth within EAC, the post-conflict reconstruction in many immediate neighbors o f EAC, and a shift from a large share o f the market

In all, the Mombasa-Kisangani (in DRC) route stretches for about 3,000 km to access DRC, the largest market o f goods reachable through the landlocked EAC members. Bukavu, Goma, and Kisangani, all in DRC, are reached from Rwanda and Uganda.

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previously served by rai l transport. The advantage o f this overland route for road freight i s that no trans-shipment has been necessary at the various borders, although freight must pass through several countries.

Most o f the road transit traffic i s operated by private companies, which transport foodstuff, agricultural produce, livestock, consumer manufactures, and other industrial products across the corridor. About two-thirds o f the road network i s paved. Although the condition i s generally better than the Central Corridor, inadequate resources severely constrain rehabilitation and maintenance by various EAC members. Various spots-for example, the Bugarama-Bujumbura link spanning around 40 kilometers-are in extremely poor condition. Overloaded freight vehicles and poor enforcement o f axle load regulations further deteriorate the road network and reduce road life spans. Security conditions have been problematic in Kenya from December 2007 to February 2008. Burundi has longer-term problems with road security, and travel between 6:OO p.m.-6:00 a.m. i s not permitted. In Kenya, traffic f low i s slowed by the need for a police escort within national territory for identified products. EAC has adopted regulations to a limit o f 3 axle- 35 ton rule trucks. To date, however, no country has been enforcing the legal axle weight along the corridor. Unlike the other countries traversed by the North Corridor in which there are limits on axle loads, Burundi has no weight restrictions on road traffic. The Northern Corridor i s the route used for most o f the fuel imports (over 80 percent) and tea and coffee exports for EAC.

Railway. The rail transport network transports about 20 percent o f the cargo shipped overland along part o f the Northern Corridor. The single rai l track from Mombasa to Kampala via Malaba-a total o f 1,330 km-is currently the principal route for rai l transit. The network i s about 1,650 km, comprising o f a single rail track from Mombasa through Nairobi, Nakuru to Kisumu in Kenya, through to Busia in Uganda. The main route from Mombasa goes through Nairobi, Nakuru, and Eldoret, to Malaba in Kenya. From the border at Malaba, the rail runs through Tororo, Jinja, and Kampala to Kasese in western Ugandan6’

The route i s served by express block trains operated by a recently appointed railway concessionaire (Rift Valley Railway), with the aim o f facilitating faster movement o f cargo from Mombasa to Kampala and return. According to KRC, the trains have managed to reduce transit times from 14 days in 2006 to the current best o f 4-5 days. KRC estimates that average transit time i s 7-9 days from the port o f Mombasa to Kampala. This estimate, however, differs from business owner perception o f an average transit time o f 14 days. There are s t i l l no fixed schedule container trains. Shuttle trains from the port o f Mombasa to Nairobi internal container depot may run two times a day, depending on availability o f cargo.

Pipeline. A pipeline connecting Mombasa to Eldoret and Kisumu i s used for petroleum products by all EAC members, starting as far back as February 1978. The pipeline not only provides transport at a good price, but keeps many heavy vehicles with hazardous cargo o f f the busiest section o f the Northern Corridor. About 80 per cent o f imported petroleum products are destined for Kenya-including that for refining in Kenya before re-export to other countries-and 20 percent goes to the rest o f the neighboring countries. Industrial fuel also constitutes a significant proportion o f petroleum products transited along Northern Corridor countries. The oi l pipeline links the refinery in Mombasa with Nairobi, Eldoret, and Kisumu in Kenya. The Nairobi pipeline terminus has an extension to Nakuru, Kenya. The Nairobi-Mombasa pipeline segment has pumps at Mombasa and at three intermediate booster stations located at Maungu, Mtito, Andei, and Sultan Hamud. It i s 14 inches in diameter and about 450Km long. I t s installed pumping capacity i s 440,000 l i ters per day, with provisions for doubling the capacity. Even this increased capacity

69 From Kasese in Uganda, transit traffic en route to Rwanda, Burundi and DR Congo i s handled by the road network

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i s way below demand for fuel in Kenya and other EAC countries, at more than 2,000,000 liters per day. Other landlocked members o f EAC and inland cities in Kenya are served by transporting the petroleum products by road tankers from the end o f the pipeline.

Mombasa port. The port has a total annual capacity o f 20 mil l ion metric tons. It has two separate terminals, one devoted solely to containers and the other for miscellaneous goods. The miscellaneous goods terminal i s functioning below capacity, since there i s a shift away from break bulk to containerized traffic. In contrast, the capacity o f the container terminal i s limited, resulting in backlogs at the offloading stages. According to the users that were met with, however, goods in transit for Burundi are stored in separate areas at the port. The transshipment procedures for goods in transit to the landlocked countries have been simplified pursuant to the arrangements negotiated under the Northern Corridor Transit Agreement signed by the Governments o f Burundi, Kenya, Rwanda, and Uganda. The port i s operated by a parastatal, the Kenya Ports Authority (KF'A). The Government o f Kenya intends to concession port operations and make K P A a port landlord and regulator, but such concessioning o f operations has been highly controversial.

The Mombasa-Bujumbura overland route. This i s a mostly paved road in general good condition, except for the Bugarama-Bujumbura leg (spanning roughly 40 kilometers), which i s in extremely poor condition in some spots. This leg has steep slopes. Security conditions are problematic, and travel between 6:OO p.m. and 8:OO a.m. i s not permitted. In Kenya, traffic f low i s slowed by the need for a police escort within national territory, which compounds shipping delays and costs. One major issue concerning the Northern Corridor i s the fact that all goods traffic has to transit through the center o f Nairobi on the Uhuru Highway. This contributes to major traffic bottlenecks for local/urban traffic and delays the transit traffic. Plans are underway to build a southern bypass around Nairobi for the transit or up country traffic. Unlike the other countries traversed by the Northern Corridor which have stipulated limits on axle loads, Burundi has no weight restrictions on road traffic. This i s the route used by most o f the country's fuel imports (over 80 percent) and for tea exports.

Transit through Lake Victoria. Although not operating at a level even close to i t s potential, lake transport could play an important role in transit traffic between Kenya and the Great Lakes countries. The routes are marked in map A2. The Kenya Maritime Authority under the Ministry o f Transport regulates and coordinates all marine services in the Kenya, including ferry services at Lake Victoria, which are provided by Kenya Railway Corporation. The ferry links on Lake Victoria between Kisumu (Kenya), Port Bell/Jinja (Uganda), and Mwanza (Tanzania) could form an integral link to the rai l network in the Northern Corridor. At present, the ferry cargo services between Kisumu and Port Bell i s regular, though not often, and the service between Kisumu and Mwanza i s irregular. The only rail-lake route on the corridor i s through the Mombasa-Kisumu- Kampala route (1,242 km). This route leaves the main railway line at Nakuru to reach Kisumu on Lake Victoria. The inland water operations o f KRC and URC have been taken over by the concessionaire o f the Kenya-Uganda railway system. One priority activity underway i s to rehabilitate two rail ferries to provide more regular IWT from Kisumu to Port Bell. Currently there are four wagons operating between Kisumu, Jinja, and Port Bell, with the average transit time to Uganda o f 18-20 days. There i s adequate capacity in wagon ferries operating on the lake to handle more cargo, if bottlenecks that hinder full utilization o f this service are removed.

Burundi and Rwanda are anxious to utilize a fer ry link between Kisumu and Kemondo Bay, Tanzania, which would complete the Lake Victoria southwestern transport link between Kenya and the Great Lakes countries, for Burundi and Rwanda and for the southern towns o f DRC, such as Lubumbashi. Full utilization o f these water transit routes would require improving docking facilities at Kemondo Bay and rehabilitating the road links between Rwanda and Burundi.

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Rwanda also plans to study whether navigation on the AkageralKagera river into Lake Victoria i s technically/economically feasible.

The Central Corridor

This corridor connects the Port o f Dar es Salam through Tabora to Mwanza and Kampala, with branches to Kigali, Bujumbura, and entry points to DRC. The demand for the Central Corridor i s currently approximately 600,000 transit metric tonnes plus about 750,000 metric tonnes of. Tanzanian cargo. Burundi stands to gain the most from an upgraded Central Corridor, that would be 850 km shorter and crosses only one transit country instead o f three transit countries. Rwanda will gain from a 200 km shorter route through only one transit country instead o f two. Nevertheless, many products, such as tea, will continue to use the Northern Corridor because o f the established auction houses or other facilities in Mombasa.

Road. The Central Corridor i s a combination o f paved and gravel roads that can become impassable during the rainy season. An ambitious program to upgrade the whole road to bitumen standard with donor support i s underway and includes rehabilitation (5 17 km), construction (527 km), and routine maintenance (200 km). According to the government o f Rwanda, the Central Corridor section from Isaka to Rusumo Falls should be fully paved by 2010, i.e. the Central Corridor in EAC wil l be fully paved to Rwanda. Current demand on the road i s approximately 1.1 mill ion metric tonnes. The road network along the Central Corridor handles some 75-80 percent o f goods moving to/from Burundi. I t comprises two separate routes:

By road, Dar es Salam-Bujumbura, through Mwanza and onward via border crossing at Kobero: This route i s 1,200 km long and l ies mostly within Tanzania. I t has the advantage o f having only one border-crossing point. Most o f the roadway in Tanzania has been paved, with the exception o f the Manyoni-Singiola (90 km) segment. In Burundi, the Bugarama-Bujumbura segment (spanning around 40 km) i s in poor condition. I t s steep slopes are often the cause o f accidents over the travel time o f five to six hours. Roundtrip cargo shipment time i s estimated at about one month, taking into account the time required for travel, various customs and administrative formalities required, and loadinghnloading at Dar es Salam and Bujumbura, as well as the truck maintenance.

By a combined rail-ship route, Dar es Salam-Kigoma-Bujumbura. This route i s 1,670 km long. Although the combined route i s less expensive, it i s being used less and less in recent years because o f serious problems with aging infrastructure and transfer o f shipments, which cause long delays and extra costs. Rail transport between Dar -es Salam and Kigoma i s inefficient because o f the poor condition o f the rail tracks, shortage o f wagons, and inadequacy o f the locomotives. During the two annual rainy seasons, rail transport i s disrupted as tracks become flooded.

Railway. Tanzania Railways (2,706 km total length) joins the port o f Dar es Salam to the lake ports o f Mwanza on Lake Victoria and Kigoma on Lake Tanganyika. The rai l system i s characterized by lack o f wagons, poor track conditions, congestion at Kigoma port, time lost in intermodal transfers, and poor quality o f service. Before concessioning o f part o f the railway system, Tanzania Railway Corporation handles only about 20 percent o f the cargo from the Port o f Dar es Salam. The demand on the corridor i s approximately 1.3 mil l ion metric tonnes and i s growing at about 10 percent a year. Two factors may increase the overall demand: the success o f inland trade development and diversion o f traffic to the Central Corridor because o f better tariffs and service. At 20 percent, the rai l share i s roughly 250,000 metric tonnes.

Dar es Salam port. The port o f Dar es Salam has eight deep-water berths (1,478 m in length), and four terminals with a total capacity o f 10 mill ion metric tons per year. Both importers and

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transshipment agents complain about the congestion and abnormally long delays at the other terminals at the port.

Overall traffic has been growing steadily on the two corridors that the port o f Dar es Salam serves. (Approximately 53 percent o f transit traffic i s for the Central Corridor and 47 percent i s for the Southern Corridor connecting the Zambia, Malawi, DRC-Lubumbashi area). Dar es Salam handled 7.3 mil l ion metric tonnes in 2004, with an average annual growth in demand over the past five years o f 10 percent. The port handled about 350,000 TEUs in 2007. The demand for container handling i s growing by approximately 13 percent annually. The demand from Uganda and Rwanda for transit cargo on the Central Corridor varies year by year. Demand from Burundi and DRC, however, has steadily increased. Since 2001, the Container Terminal has realized a 60 percent increase in throughput, and transshipments have almost tripled. In 2002, the container terminal was taken over by a private sector consortium. With modernization through a computerized tracking system, it appears to have substantially improved i t s performance. The container terminal now operates at international standards. The terminal area i s constricted, however, and the growth in container throughput has congested the terminal area. This congestion i s reducing efficiency in clearing cargo from the port. The general cargo terminal i s also experiencing continued performance problems. A parastatal, the Tanzania Ports Authority, operates the port o f Dar es Salam.

Kigoma port. The major infrastructure problems identified by the private sector are the shortage o f suitable rolling stock and the age o f the cargo handling equipment. This results in long delays in loadinglunloading goods.

The shipment on Lake Tanganyika i s provided primarily by four Burundian companies: ARNOLAC, BATRALAC, SOTRALAC, and Tanganyika Transport. The Burundian fleet has a limited capacity. I t s vessels are old, with some in service for over a hundred years. The country does not have i t s own shipyard.

Bujumbura port. The port facilities have an annual capacity o f 500,000 metric tons, with underutilization at current traffic levels. There are five berths, four o f which are devoted to miscellaneous goods. The fifth i s devoted to the loadingloffloading o f petroleum products. The handling equipment needs to be modernized to speed up goods loading and offloading operations.

Trade Route Linkinp the North and Central Corridors

The Nairobi-Namanga-Arusha-Dodoma road route links the Northern and Central Corridors. This route i s critical for Kenyan exports to Tanzania and southern Africa (notably Malawi and Zambia), as well as east and central Tanzania’s exports to the large Kenyan market and to southern Ethiopia and Sudan. The route section between Dodoma in Tanzania, through Arusha to Nairobi serves Tanzanian towns located along the Central Corridor road route such as Manyani, Singida, Bukombe, Tabora, and Kigoma. Rwanda and Burundi can be accessed through connection with Central Corridor railway line that runs from Dar es Salam through to Kigoma. Products exported through this road link include manufactured items such as processed foods, cosmetics and perfumery, building materials such as cement, paint, iron and steel products, pharmaceuticals and medicines, and paper and paperboard items. Imports comprise agricultural products such as rice and maize, textiles, cotton, construction timber, and unprocessed hides and skins.

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APPENDIX A3. UNCTAD CODING SYSTEM OF TRADE CONTROL MEASURES (Code 3000 onwards)

The UNCTAD provides a comprehensive organizing principle for the myriad o f constraints on trade that may be identified as NTMs (besides tariff and para-tariff measures also listed below). These precisely defined categories and subcategories include six groups o f measures in areas o f price control, finance, automatic licensing, quality control, monopolistic (practices), and technical (requirements).’’

1000 TARIFF MEASURES 1100 STATUTORY CUSTOM DUTIES 1200 MFN DUTIES 1300 GATT CEILING DUTIES 1400 TARIFF QUOTA DUTIES

1410 Low duties 1420 High duties

1510 Low duties 1520 High duties

1500 SEASONAL DUTIES

1600 TEMPORARY REDUCED DUTIES 1700 TEMPORARY INCREASED DUTIES

17 10 Retaliatory duties 1720 Urgency and safeguard duties

19 10 Interregional agreements 1920 Regional and subregional agreements 1930 Bilateral agreements

1900 PREFERENTIAL DUTIES UNDER TRADE AGREEMENTS

2000 PARA-TARIFF MEASURES 2 100 CUSTOMS SURCHARGES 2200 ADDITIONAL TAXES AND CHARGES

2210 Tax on foreign exchange transactions 2220 Stamp tax 2230 Import license fee 2240 Consular invoice fee 2250 Statistical tax 2260 Tax on transport facilities 2270 Taxes and charges for sensitive product categories 2290 Additional charges n.e.s.

23 10 General sales taxes 2320 Excise taxes 2370 Taxes and charges for sensitive product categories 2390 Internal taxes and charges levied on imports n.e.s.

2300 INTERNAL TAXES AND CHARGES LEVIED ON IMPORTS

2400 DECREED CUSTOMS VALUATION 2900 PARA-TARIFF MEASURES N.E.S.

3000 PRICE CONTROL MEASURES 3 100 ADMINISTRATIVE PRICING

3 1 10 Minimum import prices 3 190 Administrative pricing n.e.s.

70 From UNCTAD, “Coding o f Trade Control Measures 2003, with Over 100 different NTMs.” UNCTAD, TD/B/COM.l/EM.27/3

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3200 VOLUNTARY EXPORT PRICE RESTRAINT 3300 VARIABLE CHARGES

33 10 Variable levies 3320 Variable components 3330 Compensatory elements 3340 Flexible import fees 3390 Variable charges n.e.s

3400 ANTIDUMPING MEASURES 34 10 Antidumping investigations 3420 Antidumping duties 3430 Price undertakings

3500 COUNTERVAILING MEASURES 35 10 Countervailing investigations 3520 Countervailing duties 3530 Price undertakings

3900 PRICE CONTROL MEASURES N.E.S.

4000 FINANCE MEASURES 4 100 ADVANCE PAYMENT REQUIREMENTS

41 10 Advance import deposit 4 120 Cash margin requirement 4 130 Advance payment of customs duties 4 170 Rehndable deposits for sensitive product categories 4190 Advance payment requirements n.e.s.

4200 MULTIPLE EXCHANGE RATES 4300 RESTRICTIVE OFFICIAL FOREIGN EXCHANGE ALLOCATION

43 10 Prohibition of foreign exchange allocation 4320 Bank authorization 4390 Restrictive official foreign exchange allocation n.e.s

4500 REGULATIONS CONCERNING TERMS OF PAYMENT FOR MPORTS 4600 TRANSFER DELAYS, QUEUING 4900 FINANCE MEASURES N.E.S.

5000 AUTOMATIC LICENSING MEASURES 5 100 AUTOMATIC LICENCE 5200 IMPORT MONITORTNG

52 10 Retrospective surveillance 5220 Prior surveillance 5270 Prior surveillance for sensitive product categories

5700 SURRENDER REQUIREMENT 5900 AUTOMATIC LICENSING MEASURES N.E.S.

6000 OUANTITY CONTROL MEASURES 6 100 NON-AUTOMATIC LICENSING

61 10 License with no specific ex-ante criteria 6120 License for selected purchasers 6130 License for specified use 6 13 1 Linked with export trade 6 132 For purposes other than exports 6140 License linked with local production 6 14 1 Purchase o f local goods 6 142 Local content requirement 6143 Barter or counter trade 6 150 License linked with non-official foreign exchange 6 15 1 External foreign exchange 6 152 Importers' own foreign exchange 6 160 License combined with or replaced by special import authorization

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6 170 Prior authorization for sensitive product categories 6180 License for political reasons 6190 Non-automatic licensing n.e.s.

6210 Global quotas 62 1 1 Unallocated 6212 Allocated to exporting countries 6220 Bilateral quotas 6230 Seasonal quotas 6240 Quotas linked with export performance 6250 Quotas linked with purchase o f local goods 6270 Quotas for sensitive product categories 6280 Quotas for political reasons 6290 Quotas n.e.s.

63 10 Total prohibition 6320 Suspension o f issuance o f licenses 6330 Seasonal prohibition 6340 Temporary prohibition 6350 Import diversification 6370 Prohibition for sensitive product categories 6380 Prohibition for political reasons (embargo) 6390 Prohibitions n.e.s.

66 10 Voluntary export restraint arrangements 6620 Orderly marketing arrangements 6630 Multifibre arrangement (MFA) 663 1 Quota agreement 6632 Consultation agreement 6633 Administrative co-operation agreement 6640 Export restraint arrangements on textiles outside MFA 664 1 Quota agreement 6642 Consultation agreement 6643 Administrative co-operation agreement 6690 Export restraint arrangements n.e.s.

6710 Selective approval o f importers 6720 Enterprise-specific quota 6790 Enterprise-specific restrictions n.e.s.

6200 QUOTAS

6300 PROHIBITIONS

6600 EXPORT RESTRAINT ARRANGEMENTS

6700 ENTERPRISE-SPECIFIC RESTRICTIONS

6900 Quantity Control Measures n.e.s.

7000 MONOPOLISTIC MEASURES 7100 SINGLE CHANNEL FOR IMPORTS

71 10 State trading administration 7120 Sole importing agency 7170 Single channel for sensitive product categories

72 10 Compulsory national insurance 7220 Compulsory national transport

7900 MONOPOLISTIC MEASURES N.E.S.

7200 COMPULSORY NATIONAL SERVICES

8000 TECHNICAL MEASURES 8 100 TECHNICAL REGULATIONS

8 1 10 Product characteristics requirements 8 120 Marking requirements 8 130 Labeling requirements 8140 Packaging requirements

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8 150 Testing, inspection and quarantine requirements 8 160 Information requirements 8 170 Requirement relative to transit 8 180 Requirement to pass through specified customs 8190 Technical regulations n.e.s.

8200 PRE-SHIPMENT INSPECTION 8300 SPECIAL CUSTOMS FORMALITIES 8400 RETURN OBLIGATION 8900 TECHNICAL MEASURES N.E.S.

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APPENDIX A4. WTO INVENTORY OF NON-TARIFF MEASURES The WTO applies a broader categorization o f notified NTMs that make the price o f traded goods at the border different from their domestic price. That is, the inventory accounts for government participation in trade and restrictive practices tolerated by governments; customs and administrative entry procedures; technical barriers to trade; and sanitary and phyto-sanitary

71 measures.

WTO Category partI

A B C D E

A B C D E F G H I

Part I11 A B C

Part IV A B C

partv A B C D E F G H I J K L

Part V I A B C D E

Part VI1 A B C D E

Description Government Participation in Trade and Restrictive Practices Tolerated bv Governments Government aids, including subsidies and tax benefits Countervailing duties Government procurement Restrictive practices tolerated by governments State trading, government monopoly practices, etc. Customs and Administrative Entry Procedures Anti-dumping duties Customs valuation Customs classification Consular formalities and documentation Samples Rules of origin Customs formalities Import licensing Pre-shipment inspection Technical Barriers to Trade General Technical regulations and standards Testing and certification arrangements Sanitary and Phvtosanitary Measures General SPS measures including chemical residue limits, disease freedom, specifiedproduct treatment, etc. Testing, ceriification and other conformaYy assessment Suecific Limitations Quantitative restrictions Embargoes and other restrictions of similar effect Screen-time quotas and other mixing regulations Exchange controls Discrimination resulting from bilateral agreements Discriminatory sourcing Export restraints Measures to regulate domestic prices Tariff quotas Export taxes Requirements concerning marking, labeling and packaging Others Charges on Imports Prior import deposits Surcharges, port taxes, statistical taxes, etc. Discriminatory film taxes, use taxes, etc. Discriminatory credit restrictions Border tax adjustments Other Intellectual property issues Safeguard measures, emergency actions Distribution constraints Business practices or restrictions in the market

From WTO Inventory o f Non Tariff Measures, TN/MA/S/S/Rev. 1,28 November 2003, (03-6324) 71

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APPENDIX A5. TRANSPORT COSTS AND PRICES IN EAST AFRICA

From: World Bank flagship study: Africa’s Transport Price/Cost, 2008 (S. Teravaninthorn, AFTTR).

High transport pricedcosts are a major obstacle to increased trade and economic growth o f the East Africa region. Amjadi and Yeats (1995) concluded that, in Africa, the effect o f high transport costs are a higher trade barrier than import tariffs and trade restrictions. World Bank (2007) demonstrates that transport prices are high compared to values o f goods traded and that transport predictability and reliability are low by international standards.’* Rizet and Hine (1993) estimated that prices o f road transport in three francophone African countries (Cameroon, C6te d’Ivoire and Mali) were up to six times higher than in Pakistan, and about 40 percent higher than in France where labor rates are much higher. Rizet and Gwet (1 998) comparing seven countries in three continents - Africa (Ghana, Cameroon, Burkina, C6te d’Ivoire), South-East Asia (Indonesia, Vietnam) and Latin America (Costa Rica) - demonstrated that for distances up to 300 kilometers, the unit costs o f road transport were 40-100 percent higher in Africa than in South-East Asia. MacKellar et al. (2002) found that transport prices for most African landlocked countries range from 15-20 percent o f imports costs, which i s three to four times higher than in most developed countries.

It has been observed that trade i s highly sensitive to transport prices and costs - a 10 percent drop in transport costs increases trade by about 25 percent and that transport costs are sensitive to the quality o f infrastructure, as measured by such variables as the density o f the road and rail network.

The principal causes o f low productivity o f the trucking industry and high transportation costs East Africa are the infrastructure constraints (Pedersen, 2001; Limao and Venables, 2001) and low levels o f competition between service providers (Rizet and Hine, 1993). Poor condition o f infrastructure characterized by inadequate quantity and substandard quality o f transport network, long distance from the ports and multiple roadblocks increases transportation costs.

A framework for Transport Costs and Prices

A distinction has to be made between transport prices (or tariffs), transport costs, and vehicle operating costs. This distinction i s useful both since the prices may/may not reflect transport costs, and the vehicle operating costs provide a good reflection on the quality o f road infrastructure and the type o f vehicles. A brief description o f transport costs and prices are given below:

(9

(ii)

(iii)

Vehicle operating costs (VOC) include the various direct costs the transport provider must pay to operate a given vehicle, notably labor, capital, fuel, tires, maintenance and depreciation cost o f a vehicle.

Transport costs (TC) are the costs the transport operator incurs when transporting a cargo. It covers VOC and other indirect costs, such as license fee, road block payments, etc.

Transport pricedtariffs (TP) are the rates charged by a transport company or a freight forwarder to the shipper or importer. Transport prices usually are the result o f negotiated rates between the shipper and the transport service provider. Transport price normally covers TC and the operator’s overheads and profit margin.

World Bank (2007d), Agriculture in Sub-Saharan Africa. 12

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Based on data from the trucking surveys, the average transport prices and costs in East Africa are presented below:

Eact Africa Corridors

Kenya, Rwanda, Uganda

Kenya (National corridor)

Table A5.1 Transport prices and costs in East Africa

Route Transport Variable Fixed Yearly Average Average Gateway- price cost Cost ratio FC/ yearly truck Destination USD/ (USD/ km) (USD/ vc mileage fleet

vehicle km day) age

1.47 40 80-90 10 Kampala-Kigali (Rwanda) Mombasa- 2.22 Kampala 0.98 61 (Uganda)

TemdAccra- 1.77 36 20-30 9 Comparator:

Bamako (Mali) Mombasa - 2.26 Nairobi Mombasa - Eldoret

56% - 43%

130- 140 7 69% - 30%

10% - 89%

54% - 45% 56% - 43%

0.83 63

0.98 62

Fuel Route Gateway-Destination Corridor

Notes: 1. These values include trucking services (3 or more trucks) and truckers (one or two trucks). We are reporting the destination city and country in parenthesis. 2. Average yearly mileage (in thousands) i s calculated distance time number o f turnaround per year.

Source: Trucking surveys data and own calculations; Exchange rates come from IMF-IFS,

Tires Maintenance Bribes

I t may be noted that there i s significant discrepancy in the operating costs, both variable and fixed, in different corridors and also on the same corridors between different trucking companies mainly established in Uganda and Kenya. Despite discrepancies in the Ugandan costs data set, Kenyan companies face higher fixed costs explained by acquiring recently a new fleet (and therefore have high depreciation costs) and high financial cost; and low variable costs because o f recent and economical f leet and good road condition on the main corridors.

Kampala-Kigali

Mombasa-Kampala East Africa

The breakdown o f variable transportation costs along the eastern corridor, presented below, shows that fue l accounted for the major share followed by costs o f tires and then maintenance costs and bribes.

67% 3 1% 1 Yo 1%

79% 13% 6% 2%

Table A5.2 Breakdown of variable transportation costs

The professional trucking companies account approximately for 20 percent o f total market share. There are about twenty large companies that operate over 100 trucks each. The largest Kenyan company owns a f leet o f 600 trucks. These large companies obtain load from long-term direct contracting (from one to three years). Yearly mileage to Kampala for these companies can reach more than 100,000 kilometers, which i s much higher than the average mileage in Central Africa.

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The quality o f service indicated by the transit time from Mombasa to Kampala and Kigal i i s presented below:

Gateway Destination Distance (km) Transit time from ship arrival to final destination

Mombasa Kampala 1100 5-6 days Mombasa Kigal i 1700 8-10 days

Transport price (in USD per ton)

90 100-110

Policies to improve efficiency of the transportation sector should consider the fact that transportation prices are significantly higher than the transportation costs. Hence, measures to improve efficiency should f i rst emphasize reduction in transport prices through improving efficiency o f truck fleet. The majority o f the fleet o f vehicles i s aging, which reduces the efficiency. Transport market in East Africa i s a strong seller’s market with access restrictions (through bilateral agreements, freight sharing schemes, quota auctioning, queuing system, etc.). These were the critical factors enabling the forming o f cartels. Price setting can be high despite l ow productivity o f the industry. Policy measures to reduce transport prices are abolition o f market access restrictions and promotion o f market competition and measures to reduce delays at border-crossings in order to decrease vehicle turnaround time so that truckers can make prof i t f rom efficiency improvement and higher vehicle utilization rates, not f rom protectionism.

Policy measures to improve the trucking efficiency and reducing cost through the renewal o f truck fleet include: using fiscal policy to discourage the import o f o ld trucks; providing business tax rebate or cheaper credit to encourage replacement o f aged second-hand trucks or to exit the market; and, reform fuel taxes.

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APPENDIX A6.1 RANGE OF CONSTRAINING INFRASTRUCTURE IN EAC

Some examples o f widespread problems are listed below.

Poor roads and bridges. In East Africa, the main regional corridors and core road network are mostly paved. Acute problems arise due to the variable condition o f parts o f the corehegional road network, and the fact that roads aroundthrough major urban agglomerations and for access to the ports are increasingly congested. The cost o f road services i s 38-56 percent above the rail rates (World Bank 2006). Goods transported between Mombasa-Kampala cost about US$3,000 per container. The bridge at Rusomo between Rwanda and Tanzania (50 meters long and 6 meters wide) allows only one truck to pass at a time.

Dilapidated rai l~ays.7~ Disrepair o f railroad infrastructure and equipment i s characterized by the aging track, shortage o f cars, and inadequate locomotives. The railway network has virtually collapsed along the Central Corridor, and i s not much better in the Northern Corridor. In Uganda, only two lines are functional: Kampala-Malaba and Tororo-Soroti, commissioned in July 2004. Along the Dar es Salam-Kigoma railway, the Isaka-Gitega-Musongati connection i s yet to be constructed. Most o f the railway system in Kenya, Uganda and Tanzania has now been concessioned out. This i s expected to eventually lead to improved operational and financial performance o f the railway transport. The viability o f constructing new railway l ines in the EAC needs to be scrutinized carefully due to very high cost and potentially relatively low levels o f traffic.

Inadequate ports and inland container freight stations. Problems include inadequate storage and handling capacity; the poor condition o f handling equipment, such as cranes; and lack o f adequate rolling stock at Kigoma, Bujumbura, and Dar es Salam. Burundi and Rwanda have yet to reach agreements with Ethiopia and Kenya on land allocation earmarked for the development o f a CFS to handle their cargo and maintenance at Dar es Salam and Mombasa, respectively. Just as an illustration, the port o f Dar es Salam, with built capacity i s 250,000 TEU i s operating at 350,000 TEU in 2007. Even then, at any given moment, there are about 10 cargo ships waiting to be offloaded. About 700 containers are offloaded per day, but maximum capacity o f Tanzania International Container Terminal Services (TICTS) to deliver containers out o f the port i s only 300. Inland CFS, such as at kaka, Tanzania have similar problems or are not fully functional.

Insufficient cargo vessel capacity at the Great Lakes. Age and disrepair o f the merchant fleet on Lake Tanganyika and Lake Victoria i s grave. There i s no shipyard on Lake Tanganyika that could maintainhenovate the existing fleet. Considering the current low levels o f traffic, a shipbuilding yard may not be viable at present.

0 Inadequate facilities at the border posts. Problems include: understaffing o f border posts in relation to the volume o f activities and cargo handled, such as at Malaba, Uganda; limited parking space for cargo trucks at most posts, such as at Katuna, Uganda; no parking yard at Rusomo, Rwanda; lack o f truck scales at Kayanza and Gitega, Burundi so customs agents estimate the actual figures; dilapidated, small offices; scarce computer equipment; accommodation and public amenities located about 50-100 km from the border; inadequate bonded warehouses. For example, Rusomo, Rwanda has only one customs bonded warehouse and Tanzania has none.

Poor power supply. Power supply may be infrequent at the remote, key border posts, such as in Uganda. At posts like Rusumo on the border o f Tanzania and Rwanda, there i s no electricity

73 All over the world, including in the EAC, railways remains the cheapest means for transporting heavy, large volume goods over land.

86

and the post i s dependant on unreliable small generators that often run out o f fuel. This forces manual book-keeping at the very least.

0 Expensive cross-border communication. Counterpart revenue authorities located just across a border communicate on land phones charging international rates. Private telecommunication companies-such as Zion, MTN, and Safaricom-are developing special arrangements for cross- border phone calls at local rates, but these do not cover Burundi.

87

APPENDIX A6.2 INFRASTRUCTURE IMPROVEMENTS THAT WOULD MAKE A DIFFERENCE

Stakeholders provided the following feedback:

Convert the Northern Corridor into a dual carriageway. The cost o f this for the whole Northern Corridor i s extremely high and may not be justifiable from the current economic point o f view. What i s required i s a staged approach where within the next five years the stretches going through major urban agglomerations are converted to four lanes. Progressively, depending on traffic growth, other stretches can be converted, with the whole process taking 10- 1 5 years.

Upgrade:

- Stretches o f the Northern Corridor in Uganda to Rwanda, with the DRC link from

- Manyoni-Singiola segment o f the Dar es Salam-Kobero road

- Eldoret-Nairobi in Kenya

- Ntungamo-Lyantonde in Uganda

-Kampala- Busia/Malaba.

Kyanika near the Rwanda border, as well as the Mbarara-Katuna main link

Make adequate government investment on the rai l lines along both corridors. The private management agencies should invest in more wagons and improve operation. The model that has been adopted i s concessioning out o f all aspects o f operating the railway systems in Kenya, Uganda and Tanzania. Thus, at this point, there i s no plan for governments to invest in railway infrastructure on the two corridors.

Develop the Tanga-Moshi-Arusha-Shinyanga rail link to operationalize alternatives for access to the sea via the port o f Dar es Salam. Here comparing the large investment costs vis- avis the current traffic levels i s critical

Rehabilitate wagon ferries on Lake Victoria and Lake Tanganyika. Purchase a new ferry wagon to replace the MY Kabalega, which sank in 2004, as being done with supportfrom the EATTFP

Expand storage areas and acquire new handling equipment for ports, especially Dar es Salam, Bujumbura, and Kigoma.

Implement the port authority’s plans to operate the Dar es Salam port on a 24 hour/7 day basis.

Replace dilapidated weighbridges and have multiple weighbridges at each checkpoint to minimize congestion. Parts o f this are already being undertaken with from the EATTFP.

Upgrade and furnish border posts and customs clearance offices, together with computerization. At juxtaposed border posts, ensure adequate parkindwaiting areas and public amenities. Parts o f this are already being undertaken with from the EATTFP.

Fast track construction o f the southendeastern bypasses o f Nairobi

Upgrade accesdlink rods to the port o f Mombasa

Complete bypass o f Kampala and Kigal i

Assess medium term requirements to construct bypasses around major urban agglomerations on the Central and Northern Corridors

88

APPENDIX A7. SENSITIVE PRODUCTS UNDER THE EAC CUSTOMS UNION Heading No. Description Duty rate (YO)

4.01

4.02

10.01

10.05 10.06

11.02 11.02 17.01

24.02

24.03

25.23 36.05 52.08

55.13

63.02

63.05

63.09

83.09

85.06

MilWand cream, not concentrated nor containing added sugar or other sweetening matter (of fat content, 1 4 % by weight) MilWand cream, not concentrated nor containing added sugar or other sweetening matter (in powder, granules or other solid forms) Wheat and M e s h Durum wheat Other Specially prepared for sowing Hard wheat Other Maize (Corn) Rice-in the husk (paddy or rough), husked (brown) rice, semi-milled or wholly milled, broken rice Wheat or meslin flour Maize (corn) flour Cane or beet sugar and chemically pure sucrose, in solid form (Raw sugar not containing flavouring or colouring matter) Cane sugar : jaggery Other Beet sugar : jaggery Other Other containing added flavouring or colouring matter Industrial sugar Other Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes Other manufactured tobacco and manufactured tobacco substitutes; "homogenized" or "reconstituted" tobacco; tobacco extracts and essences Portland cement, aluminous cement, slag cement, supersulphate cement and similar hydraulic cements, whether or not coloured or in the form of clinkers Matches, other than pyrotechnic articles of heading 36.04 Woven fabrics of cotton, containing 85% or more by weight of cotton, weighing not more than 200g/m2 (Khanga, Kikoi and Kitenge) Woven fabrics of synthetic staple fibres, containing less than 85% by weight o f such fibres, mixed mainly or solely with cotton, of a weight not exceeding 170g/m2 (including Khanga, Kikoi and Kitenge) Bed linen, table linen and kitchen l ine (including knitted or crocheted, printed bed linen, o f cotton and other)

Sacks and bags, of kind used for the packing of goods Ofjute or other textile based fibres of heading 53.03 Worn clothing and other worn articles-US Stoppers, caps and lids (including crown, screw caps, and pouring stoppers), capsules for bottles, threaded bungs, bung covers, seals and other packing Accessories of base metals Crown corks Primary cells and primary batteries (manganese dioxide, mercuric oxide, silver oxide. lithium. air zinc. others)

60

60

0 0 0

35 35 50

75 or US $200 per M T 60 50

35 100 or US $200 per M T whichever i s higher

35 100 or US $200 per M T whichever i s higher 100 or US $200 per M T whichever i s higher 100 or US $200 per M T whichever i s higher 100 or US $200 per M T whichever i s higher

35

35

55 35

50

50

50

45 45% or US ctsl45 per bag whichever i s higher

US $ 0.75 per kg or 50% whichever i s higher

40

35 Source: EAC Common External tariff (Annex 1 to ;he EAC Customs Union Protocol).

89

APPENDIX A8.1. SANITARY AND PHYTO-SANITARY PRIORITY NEEDS FOR A EAC MEMBER: UGANDA

SPS Area

DEVELOPMENT OF NATIONAL SPS POLICY Stock taking-Establishment of existing gaps and policy development following a consultative approach

Policy implementation-Include regulations development, legal reforms, institutional development and rationalization, awareness creation

Training on pest risk analysis

Monitoring & evaluation for the SPS policy LIVESTOCK SECTOR Awareness creation

Conformity assessment and establishment of certification system Infrastructure systems

Establish disease-free zones

Cattle movement routes

Research on breeding

Good Handling Practices (GHP)

Capacity building in animal husbandry

Traceability

ANIMAL DISEASE Policy enforcement surveillance mechanisms for cross-border animal disease-Regional aspect

Awareness creation

Proper information flow

Strengthening existing control mechanisms

Capacity building in risk assessment and mitigation measures for quarantining, holding, and pest risk analysis FISHERIES Awareness creation on GHP across the entire chain

Improve fish handling methods and the design o f fishing boats for proper hygiene

Build capacity in monitoring control and surveillance

Provision o f adequate upstream infrastructure at landing sites

Harmonize traceability system regionally

Approve other lakes and upgrade the landing sites

Timeframe Short term <lyr

X

X

X

X

X

X

Medium term 1-2yrs

X

X

X

X

X

Long term >3-5yrs

X

X

X

X

X

X

X

X

90

SPS Area

Infrastructure development in laboratories/accreditation and capacity building

Strengthening research institutions

Development of infrastructure for aquaculture

Environmental monitoring programming HORTICULTURE

Creation o f awareness among farmers

Creation of export groups/critical mass of small-scale exporters

Standard pack houses

Training quality controllers

Improvement of the cold chain infrastructure

Production marketing distribution and transportation infrastructure

Pesticide residue monitoring plan for fruits and vegetables FOOD SAFETY Safe water supply and its impact on SPS (water policy)

Implementation of national food safety strategic plan

Improvement of policy framework for food safety

Streamlining institutional responsibility framework

Food safety and handling infrastructure, including training o f enterprises and food inspectors.

Certification for enterprises

Awareness creation including on the demand side (food safety in education system)

Development of Codes of Practices (COPS) on good agricultural practices, good manufacturing practices, and mycotoxine detection in foods, food safety management systems

Bolstering the enforcement capacity, including training o f responsible enforcement agencies

Strengthening of national notification systems/information flow

Building capacity for sustained compliance with SPSlsustainability.

Awareness of SPS issues by policy makers and politicians

CROSS-CUTTING ISSUES

Development o f Codes of Practice Source: WTO workshop on Mobilizing Aid for Trade for SPS-Related Technic 28-29.2008.

Clyr

X

X

X Cooperation in Ea!

Medium term 1-2yrs

X

X

X

Urica, Kampala,

Long term

X >3-5yrs

X

X

X

X

y d a ; May

91

.. 1 . e . .

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WEB SITES

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Bank o f the Republic o f Burundi. www.brb.bi

Integrated Framework .www.integratedframework.org

European Union. http://europa.eu/scadplus/treaties/sinnleact en .htm#

Kenya Ministry o f Transport Web site, EA Trade and Transport Facilitation Project. www.transport.ao.ke

Northern Corridor Transit Transport Coordination Authority Web site. http://www.ttcanc.orq

Tanzania Ministry o f Communications and Transport, with respect to information on the Central Corridor. http://www.tanzania.go.tz/communication.htm

UNCTAD TRAINS database Web site. www.unctad.ordTrians

USAID: Regional Agricultural Trade Expansion Support (RATES) Program. 2003. http://eastafrica.usaid. gov/en/activity. 1006.aspx

Wikipedia, with respect to the Great North Road. http://en.wikipedia.org/wiki/Great North Road

98

MAP SECTION

ManyoniManyoni

NzegaNzega

EldoretEldoret

MachakosMachakos

VoïVoï

RusumoRusumo Sultan HamudSultan Hamud

IsakaIsaka

LusahungaLusahunga

BukambeBukambe

ChalinzeChalinze

KoberaKobera

NyanzaNyanza

MpandaMpanda

KaliuaKaliua

MagadiMagadi

NanyukiNanyuki

KitaleKitale

OyamOyam

NyahururuNyahururuFallsFallsButereButere

MubendeMubendeFort PortalFort Portal

PakwackPakwack

LodwarLodwar

LokicharLokichar

LokichokioLokichokio

Juba Juba

KakumaKakuma

MoyaleMoyale

DilaDila

MarsabitMarsabit

Archer’sArcher’sPostPost

GarissaGarissa

SongeaSongea

IringaIringa

ArushaArusha

MusomaMusomaBukobaBukoba

SingidaSingida

MbeyaMbeya

BabatiBabati

ShinyangaShinyanga

TangaTangaTaboraTabora

KigomaKigoma

MwanzaMwanza

MorogoroMorogoro

KisumuKisumu

NakuruNakuru

NtungamoNtungamo

KabaleKabale

KaseseKasese

MasakaMasakaMbararaMbarara

JinjaJinja

EntebbeEntebbe

TororoTororo

ButareButare

GitegaGitega

MakambaMakamba

Dar Es SalaamDar Es Salaam

MoshiMoshi

GuluGulu

LiraLira

MoyoMoyoFaradjeFaradje

ButemboButembo

AdjumaniAdjumaniKobokoKoboko

NebbiNebbi

BeniBeni

MityanaMityana

KilakKilak

MobaMoba

PwetoPweto

LulimbaLulimba

LubumbashiLubumbashi

IsiroIsiro

KalemieKalemie

BuniaBunia

NAIROBINAIROBI

KAMPALAKAMPALA

KIGALIKIGALI

BUJUMBURABUJUMBURA

DODOMADODOMA

K E N Y AK E N Y AUGANDAUGANDA

ZAMBIAZAMBIA

MOZAMBIQUEMOZAMBIQUE

RWANDARWANDA

BURUNDIBURUNDI

DEM

. R

EP.

OF

CO

NG

OD

EM.

REP

. O

F C

ON

GO

TANZANIATANZANIA

SOMALIASOMALIA

SUDANSUDAN

ETHIOPIAETHIOPIA

MALAWIMALAWI

MutukulaMutukula

IsebaniaIsebania

NamangaNamanga

Lunga-LungaLunga-Lunga

BusiaBusia

Karungu/MuleKarungu/Mule

Moyale/DilaMoyale/Dila

Moy0/JubaMoy0/Juba

MalabaMalaba

TavetaTaveta

GatunaGatuna

Nyanza-LacNyanza-Lac

GisenyiGisenyi

CyanguguCyangugu

UviraUvira

RusumoRusumoFallsFalls

KayanzaKayanza

3030°E

0°

2°S

8°S

0°

3232°E 3434°E 3636°E

3232°E 3434°E 3636°E 4040°E3838°E2828°E

2°N

4°N

2828°E

4°S

6°S

2°N

4°N

Port BellPort Bell

KemondoKemondobaybay

Manyoni

Nzega

Eldoret

Machakos

Voï

Rusumo Sultan Hamud

Isaka

Lusahunga

Bukambe

Chalinze

Kobera

Nyanza

Mpanda

Kaliua

Magadi

Nanyuki

Kitale

Oyam

NyahururuFallsButere

MubendeFort Portal

Pakwack

Lodwar

Lokichar

Lokichokio

Juba

Kakuma

Moyale

Dila

Marsabit

Archer’sPost

Garissa

Lindi

Songea

Mtwara

Iringa

Arusha

MusomaBukoba

Kemondobay

Singida

Mbeya

Babati

Shinyanga

TangaTabora

Kigoma

Mwanza

Morogoro

Kisumu

Mombasa

Nakuru

Ntungamo

Kabale

Kasese

MasakaMbarara

JinjaPort Bell

Entebbe

Tororo

Butare

Gitega

Makamba

Dar Es Salaam

Moshi

Gulu

Lira

MoyoFaradje

Butembo

AdjumaniKoboko

Nebbi

Beni

Mityana

Kilak

Moba

Pweto

Lulimba

Lubumbashi

Isiro

Kalemie

Bunia

NAIROBI

KAMPALA

KIGALI

BUJUMBURA

DODOMA

Mutukula

Isebania

Namanga

Lunga-Lunga

Busia

Karungu/Mule

Moyale/Dila

Moy0/Juba

Malaba

Taveta

Gatuna

Nyanza-Lac

Gisenyi

Cyangugu

Uvira

RusumoFalls

Kayanza

K E N Y AUGANDA

ZAMBIA

MOZAMBIQUE

RWANDA

BURUNDI

DEM

. R

EP.

OF

CO

NG

O

TANZANIA

SOMALIA

SUDAN

ETHIOPIA

MALAWI

INDIAN

OCEAN

Lake

Victor ia

LakeTanganyika

LakeMalawi

LakeRukwa

LakeNatron

LakeEyasi

LakeManyara

30°E

0°

2°S

8°S

0°

2°S

4°S

8°S

10°S

32°E 34°E 36°E

32°E 34°E 36°E 40°E

6∞S

38°E28°E

2°N

4°N

28°E

4°S

6°S

2°N

4°N

0 50 100

0 50 100 Miles

150 Kilometers

IBRD 36064

SEPTEMBER 2008

EAST AFRICA

MAIN TRANSPORTATION ROUTES IN EAST AFRICAROAD

RAILROAD

NORTHERN CORRIDOR'S ROAD

CENTRAL CORRIDOR'S ROAD

SELECTED CITY AND TOWN

PROVINCIAL CAPITAL

NATIONAL CAPITAL

INTERNATIONAL BOUNDARY

BORDER CROSSING

MARITIME PORT

WATER ROUTES

INTERMODAL PLATFORM

This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, o r any endo r s emen t o r a c c e p t a n c e o f s u c h boundaries.