Two forms of regional trade agreements are free trade areas and customs unions. In a free trade area, members liberalise trade with each other, but each country sets its own tariffs for imports originating from non-members of the agreement. A customs union goes one step further: members negotiate and adopt a uniform tariff schedule called a Common External Tariff (CET), resulting in each member applying the same tariff rates on imports originating from outside of the union.
In this project we assess the integrity of the CET of the East African Community (EAC), a customs union consisting of Uganda, Kenya, Rwanda, Burundi, and Tanzania. We develop a novel dataset of country- and firm-level deviations from the EAC-CET by digitising information published in the gazettes of the EAC secretariat between 2009-2019. Using these data, we establish five findings on the state of the EAC customs union and the tariff policy of its members:
- Increased usage of country-level deviations has rendered the Common External Tariff of the EAC Customs Union less and less “common”;
- Kenya, Tanzania, and Uganda predominantly use country-level deviations to increase external protection while Rwanda makes use of the mechanism mostly to decrease tariffs;
- Kenya, Tanzania, and Uganda increase tariffs for the same broad classes of products, but target different industries;
- Tariff reductions at the country level are mostly used to facilitate access to inputs rather than to improve consumer welfare by decreasing tariffs on consumption goods;
- Data on firm-level exemptions through the EAC Duty Remission Scheme suggest that private sector development in the EAC would benefit from lower tariffs on intermediate inputs.
Taken together, our findings emphasise the importance of a comprehensive review of the CET of the EAC and yield a number of relevant questions for further research on tariffs and exemptions schemes in the EAC.