Kenneth Bagamuhunda
Director Customs
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Theory and Scope of Regional Integration and
CU
Background and objectives of EAC CU
Legal and institutional Framework
Implementation Mechanism
Achievements
Challenges
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CU is stage of Regional Integration process
CU is conceptualised as a key pillar of
Regional Economic Integration
RI is a phenomenon that eludes specific
definition and this state of ambiguity is
echoed by various scholars of RI
Some define RI as
◦ “a form of collective action among countries to
attain a certain goal” (Feng and Genna, 2003)
◦ ‘any policy designed to reduce trade barriers
between a subset of countries, regardless of
whether those countries are actually contiguous or
even close to each other’ Winters 2003
◦ portrayed in the context of geographical proximity
and this may explain the usage of the terms ‘trading
blocs’
◦ a series of voluntary decisions by previously
sovereign states to remove barriers to the mutual
exchange of goods, services, capital, or persons’
(Smith, 1993).
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Regional integration have been explained
under the economic and political disciplines
What is a Customs Union?
A legally binding voluntary commitment/
agreement of cooperation by neighboring
countries to dismantle trade barriers amongst
themselves and adopt harmonized trade
regimes amongst themselves and apply
common trade regimes to third parties
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There has been a surge of Regional
Integration Agreements since 1990s.
as of 15 May 2011, some 489 RTAs, had been
notified to the GATT/WTO.
◦ 358 RTAs were notified under Article XXIV of the
GATT 1947 or GATT 1994;
◦ 36 under the Enabling Clause; and
◦ 95 under Article V of the GATS.
◦ At that same date, 297 agreements were in force
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History of EAC integration stretches back to
1900 when a single customs collection point at
Mombasa for Kenya and Uganda
A CU was established in 1917 which was later
joined by the then Tanganyika in 1919
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EAC integration is among the oldest initiatives in
Africa dating back to the beginning of the 20th
Century
Collapsed in 1977 due some factors
Cooperation was rekindled in mid 1990s through a
cooperation agreement
The Agreement was upgraded into a Treaty that
came into force in 2000
Scope of cooperation covers economic, social,
cultural and political areas
Degree of integration is progressive with Customs
Union (CU) as the entry point followed by Common
Market (CM), Monetary Union (EAMU) and Political
Federation (PF)
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Provided in the Treaty that EAC will establish
a Customs union as the first stage of
integration followed by a Common Market,
subsequently a Monetary Union and
ultimately a Political federation
A Protocol establishing the Customs Union is
part of the Treaty and was negotiated in 4
years
commenced on 1st January 2005
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liberalization and promotion of Intra EAC
trade for mutual benefit of all
Enhance production efficiency
Promote domestic, cross-border and foreign
investment
Industrial diversification – import substitution
leading to Economic development
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Create more trade (trade creation)
Promote production and consumption of
locally manufactured goods (Import
substitution)
welfare gains – price reduction and stability
greater opportunity to exploit economies of
scale
lock-in effects of economic reforms
thrust for economic growth
promoting competition and economic
efficiency, and
promoting regional integration into the
global economy
The customs Union is administered under the
customs law of the Community comprised
of:
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Relevant provisions of the Treaty
Regulations and directives made by the Council
Acts of the Community enacted by the Assembly
Decisions made by the EAC Court of Justice
Relevant provisions of the international law
Specifically the administration of the CU is
provided for in the:
 EAC Customs Management Act
 EAC Customs Regulations
 Decisions and directives of the Council
Decentralized framework with the centre at
Arusha in the transitional period of 5 years
Structures
1. The Council
2. The committee on Customs
3. Directorate of Customs
4. The Customs/Revenue Authorities
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Adoption of the Common External Tariff with
three tariff bands of 0%, 10% and 25%
Sensitive rates on specific products
Internal Tariff elimination
Common Rules of Origin
Common Customs law- EAC CMA
Common Competition policy
Common SQMT Law and Protocol
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Adopted a mechanism for elimination of NTBs
In process of operationalization a trade dispute
settlement system
Established a regional legislative body which enacts
necessary laws
Have in place an active regional court that deals with
matters relating to implementation of the Treaty
Development of private sector linkages, organisation
and participation at the regional level
In process of establishing a Single Customs Territory
as a strategic initiative to consolidate the CU
Project to interconnect customs systems is on-going
Building supranational institutions to drive the
integration process
Extra EAC trade cooperation under the COMESA-EAC
and SADC Tripartite FTA, EPA with EU, TIFA with US
and trade cooperation with China
Trade performance
 Total intra- trade grew from $1.6 billion in 2005
to $3.8 billion in 2010 which is more than 100%
increase.
 Percentage of intra trade to total trade has
increased from 7.8% in 2006 to 11.4% in 2010
 Total EAC exports grew from $6.4 billion in 2006
to 11.1 billion in 2010 hence 73% increase
 Intra EAC exports to total exports was 20.2% in
2010 compared to 14% in 2006
 Intra EAC imports to total imports averages to 5%
 Cross border investment and FDI
Revenue and Investment
 Average total revenue growth in the 5 partner
states was 11% in 2010 compared to 2009
 The overall growth in revenue since 2006 for the
first three states of the EAC has grown by 42%
 Rwanda and Burundi's revenue has grown by 20%
between 2008 and 2010
 The Revenue/ GDP ratio has stagnated over the
period in all the partner States between Kenya at
22%, Tanzania 18%, Uganda and Rwanda at 12.5%
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In 2009, EAC attracted total FDI of US$ 3,732
million which was 2% of Africa’s total FDI inflows
Uganda, Tanzania and Rwanda have been
registering growth in FDI inflows over the last 5
years
FDIs accounted for 61%, local investment 36%
and portfolio investment at 3% in 2009
investment has been in capital intensive sectors
such as oil exploration, mining and
telecommunication
Banking and Insurance has also attracted both
Foreign and cross border investment.
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Attainment of free circulation of goods is
hampered by retention of internal borders
Some key tax and trade related regimes and
policies are not yet harmonised
Multiple membership which may create
grounds for trade deflection
Limited awareness
NTBS
Dependency on Customs taxes as source of
revenue
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Inter governmentalism approach vs supra
nationalism
Interconnectedness between the centre and
the executing level is weak
Weak regional institutional mandate to drive
the regional programmes