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Tuesday, 15 September 2020

Avoid trade war with Comesa, SADC blocs, Kenya told

 

The Kenya National Chamber of Commerce and Industry (KNCCI) has thrown its weight behind EAC-COMESA-SADC trade pact , calling on the government to evade a possible a trade war.

This is in the wake of a slow adoption process by the 26 member states, who are supposed to sign and ratify the Tripartite Free Trade Area (TFTA) agreement, which spells out preferential tariff treatment for goods across the markets.

This is imports and exports across the Common Market for Eastern and Southern Africa (COMESA), East African Community(EAC) and the Southern African Development Community (SADC).

The EAC has been according preferential treatment to goods from COMESA and SADC under Section 112 of the EAC Customs Management Act , 2004.

However, this lapsed in December 31, 2019, a time when member states were expected to have adopted the new trade deal.

Only 22 out of 26 member states have however signed the TFTA agreement which includes all the EAC Partner States except South Sudan.

While it requires ratification by 14 member states to come into force, only about eight partner states have ratified including Kenya, Egypt, Uganda, South Africa, Rwanda, Burundi, Botswana and Namibia.

Kenya Revenue Authority last week started rejecting COMESA entries as it sought duty on imports.

“We have been instructed by the Commissioner Customs and Border Control to reject all Comesa entries and notify the clearing agent or importers to pay the requisite taxes,” a KRA internal communication seen by the Star read.

The KNCCI is now worried the move could lead to a fall-out between Kenya and other trading blocs.

In a detailed statement seen by the Star, KNCCI has requested the Kenyan government, through the Industrialization, Trade and Enterprise Development and the EAC ministries, to look at ways of ensuring that business is not interrupted by the introduction of trade barriers.

This, it says could lead to “a possible trade war between Kenya and the rest of the COMESA partner states.”

According to the chamber, led by president Richard Ngatia, supporting businesses and protecting jobs to cope with the negative effects of the Covid-19 crisis is particularly critical at this time when the global economy is facing an unprecedented downtime.

“Imposing trade barriers will only compound the challenges already being faced by local businesses, but ultimately the cost will be passed down to the consumer which means  we might see an increase of prices for basic commodities very soon if this matter is not resolved,” KNCCI says.

The Shippers Council of Eastern Africa (SCEA) has also expressed concerns on Kenya demanding taxes on imports from these markets.

“This will disrupt trade between Kenya and Comesa member states. Kenya should allow imports without demanding duty as they wait for the EALA ( East African Legislative Assembly) to approve the protocol extension to 2023,” SCEA told the Star.

According to shippers, COMESA is one of Kenya's largest market and in the event of retaliation, it could lose out.

The TFTA is a product of a June 12, 2011 declaration by the Heads of State and Governments of the three blocs who signed an agreement, launching negotiations for the establishment of the COMESA-EAC-SADC Free Trade Area.

Last year, the EAC Secretariat sought an extension of terms by the East African Legislative Assembly, to allow preferential tariff treatment for goods from COMESA and SADC, until 2023.

This would allow time for the TFTA to be fully adopted, according to EAC director general-customs and trade– Kenneth Bagamuhunda.

“Currently, there is no legal basis for the partner states to accord preferential tariff treatment to goods from COMESA and SADC, since the extension granted by the assembly expired on December 31, 2019,” Bagamuhunda says in a communiqué.

The Common Market for COMESA-EAC-SADC has a combined population of nearly 600 million people and a total GDP of approximately $1.0 trillion (about Sh108.45trillion).

The main objective of the TFTA is to strengthen and deepen economic integration through harmonisation of policies and programmes across the three Regional Economic Communities (RECs) in the areas of trade, customs and infrastructure development.

COMESA takes up more than 73 per cent of Kenya’s total exports to Africa while the EAC takes up about 54 per cent.

In 2018, 18 per cent of Kenya’s total trade was intra-Africa where 80 per cent of that was with EAC, COMESA and IGAD member states.

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