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EAC member states split over African trade pact regulations

Fibre2Fashion - 11 July 2022

EAC member states split over African trade pact regulations

Member states of the East African Community (EAC) are reportedly lacking a consensus over preferential Rules of Origin and tariffs on textile and apparel and goods produced in special economic zones (SEZs) among other products. Rising protectionism could expose the region to unfair trade practices under the African trade pact AfCFTA.

The requirement for local content is 40 per cent now, and is considered too steep for sustainable production, according to a report in a Kenyan newspaper.

The Democratic Republic of Congo, Kenya and Burundi support the African Continental Free Trade Area (AfCFTA) Secretariat’s position. Rwanda is undertaking internal consultations to joining them, while South Sudan and Tanzania are split on the review terms as they seek to allow more imports.

Though the draft ministerial regulation states that goods produced in SEZs shall be treated as originating goods provided they satisfy the rules of origin, member states are yet to agree on import duties being paid on the inputs of these products.

The private sector in East Africa, which feels it makes economic sense to treat such goods as originating, provided they satisfy the AfCFTA rules of origin, attributes the divergence between the EAC partner states to the lack of a regional policy on goods produced in SEZs.

“This is due to the fact that goods produced in SEZs are already circulating freely in COMESA and SADC, and that the same will apply to the Tripartite Free Trade Area once the agreement establishes the TFTA enters into force,” a report by the East African Business Council (EABC) states.

Countries in the region, which enjoy a huge export market under agreements like US African Growth Opportunity Act, have also differed on imports of raw material for the local textile and apparel industries as those seek to curb cheap imports.

There are at least 44 elements on textile that are yet to be agreed upon related to natural fibres, man-made staple fibres, chemical materials and textile pulp.

EABC experts say the fact that Rules of Origin alone will not solve all the historic challenges facing the textile-apparel sector, there is a need for a deliberate industrialisation strategy that puts in place the right policy mix and environment to support the development of a vertically integrated value chain.

This should include affordable credit and energy, advanced technology, a skilled and productive workforce, and a favourable regulatory and policy environment.

It proposes the provision of preferential market access for African textiles and garments in the uniform market, including police, military, schools and hospitals.

Companies should also be allowed to import fabric, fibre and yarn not available in Africa, EABC says.

“Stringent rules of origin will lock out trade in textiles and apparel in the continent against the objectives of AfCFTA,” EABC notes.

 source: Fibre2Fashion