(DTIS) Update, Volume 1 – Main report - Enhanced Integrated ...

collection remain destination-based and joint revenue sharing mechanism for tariffs are absent; (iii) thepersistence of various controls at customs for goods circulating within the Community; (iv) the limitedinstitutional authority to ensure compliance with the customs union policy framework; and (v) theprevalence of non-tariff barriers (see 3.1 below) (ASI 2012). Moreover, significant efforts will be neededin the coming years to progress towards the realization of the Common Market enacted in 2010 and theeffective implementation of the four freedoms it grants. This section discusses in more detail severalissues that hamper the broad integration agenda, such as the prevalence of non-tariff barriers, the missinglinks between policy and infrastructure reforms, and the insufficient provision of regional public goods.3.1. Removing Non-Tariff Barriers (NTBs) is essential to free-up regional tradeThe EAC has made good progress with tariff liberalization, but numerous behind the borderbarriers remain in place that hamper trade within the Community. Tariffs in the EAC have beenreduced dramatically. In the last two decades, the EAC partner states reduced their tariffs fromapproximately 26 percent in 1994 to 10 percent in 2011. The tariffs currently in force are set out in theCommon External Tariff (CET) adopted in 2007 47 . Burundi has largely liberalized trade with EACpartner countries since its accession to the Customs Union, and has adopted the community’s CET. Theprogressive reduction and elimination of tariffs applied to imports from other EAC countries has to alarge extent been facilitated by the preexisting COMESA free trade agreement. 48 The application of theCET in 2009 resulted in a further reduction of Burundi’s average level of protection, following theliberalization dynamic initiated in 2003. Despite initial concerns, the public revenue losses incurred afterthe adoption of the CET were limited 49 , and offset by the improvement of revenue collection andcompensation funds received in recent years from the COMESA Adjustment Facility. Importantremaining issues concern the reduction of tariffs for sensitive products and the harmonization of dutyexemptions, which still apply to a large proportion of Burundi’s import, with the Customs UnionProtocol and the Customs Management Act provisions (World Bank 2011b).While rapid progress has been made on the tariff front, progress with the elimination of NTBs 50remains limited. A wide range of NTBs and regulatory measures restrict intra-regional trade in EastAfrica. These include, inter alia, restrictions relating to rules of origin, import and export bans, andcostly import licenses. The main NTBs limiting intra-EAC trade concern the following categories:47 The EAC’s CET is a three-band cascading tariff: 0 % for raw materials and capital goods; 10 % for intermediategoods; 25 % for consumer goods. Higher rates, ranging from 35 % to 100 %, apply to a list of sensitive productslike dairy, wheat or corn. Burundi has proposed that other products be added to the list, for budgetary or infantindustry protection purposes (Geourjon and Laporte 2008).48 Burundi joined the COMESA FTA in 2004. As a result, exchanges with other members were totally (Kenya,Rwanda) or almost totally (Uganda) liberalized. Tanzania is no longer a member of the COMESA since 2000 andBurundi had not liberalized trade with this country prior to its accession to the EAC CU (Geourjon and Laporte2008).49 A 2008 study by the PAGE estimated that, while the full liberalization of intra-EAC trade would entail a loss ofcustoms revenue of around FBu 1.3 billion, the adoption of the EAC’s CET would actually result in an increase ofcustoms revenue of FBu 2 billion (tariff and VAT) (Geourjon and Laporte 2008).50 A NTB is any non-tariff measure imposed to protect a domestic market. While there are legitimate reasons forgovernments to introduce non-tariff measures to protect consumers (such as food safety regulations), thosemeasures can also be imposed to protect the domestic market (as substitutes to tariff) instead. Moreover, evenwithout protectionist intent, private-sector surveys have repeatedly shown that non-tariff measures can raise tradecosts, divert managerial attention, and penalize small exporters and those located in low-income countries, whereaccess to legal and regulatory information is difficult. The elimination of the non-tariff measures (NTMs) that areapplied in a trade-restrictive manner, and therefore constitute non-tariff barriers (NTBs), is a major dimension ofmultilateral and regional trade negotiations. This objective is explicitly stated in the EAC Customs Union Protocol(Art. 13) but limited progress has been achieved by member States since the establishment of the customs union.47 / 153