By Daniel Sabiiti
The report- Building the Future “A look at the economic potential of East Africa” shows that EAC trade with the US remains limited and despite deepening relationship between the blocs wielded significant results.
Since 2000, the United States signed several trade agreements with East African countries and regional organizations. However, U.S. trade with the region has been marginal and represents only 5% of total East African trade. In contrast, China and India have become the region’s largest trading partners.
It indicates that there is a possible shift of focus to dealing with the Asian markets according a 2016 report by the US Chamber of Commerce.
Trade between the United States and the EAC increased by 103% from 2010 to 2015, and in 2014, U.S. exports to East Africa rose to more than $2 billion (Exports totaled $2.0 billion; Imports totaled $743 million), while in 2015 the US had $2.0 billion in total (two way) goods trade with the region.
“But there are still significant obstacles limiting U.S. trade with East Africa. While most tariffs have been removed, NTBs, bottlenecks, and infrastructure constraints have limited U.S. businesses’ ability to trade with the region,” the report said in part.
EAC game changers
The report says that East Africa has been the fastest-growing region on the continent over the past decade and all regional countries had higher growth rates than the United States by 2014, and U.S. exports to East Africa rose to more than $2 billion
However, the report indicates that despite a growth in trade in the regional countries and the US in 2014, the region’s trade with USA has been marginal and represents only 5% of total East African trade.
This has partly been caused by the region seeking trade ties with China, India, and the European Union (EU), regional integration efforts, several large-scale infrastructure projects that are underway stand to vastly improve trade in the region, and improvement in removal of non-Tariff barriers.
China and India have become two of the region’s largest trading partners and for example Kenya, the US’s leading trading partner in the region, imported 14 times as many goods from China than it did from the United States in 2014
The report also fears that in the next few years, the EU could see its share of East African trade increase as its new reciprocal trade agreement comes into force.
The EAC is currently negotiating an Economic Partnership Agreement (EPA) with the EU, which will increase bilateral trade between the two regional organizations. The deal was finalized in October 2014; however, ratification has been delayed until January 2017
This report highlights the projects that have the potential to transform the future of EAC trade both regionally and globally and the ways in which U.S. firms can engage as investors and service providers and how U.S. firms can engage in them.
The report indicates that the only way the US can increase its trade with the region is to tap into the existing development projects since the region is one of the most promising trading partners for the United States on the African continent.
For example, the 16 Northern Corridor Integration Projects (NCIP) estimated at $14.8 billion, tourism and the energy resource needs in the region which has population of over 145.5 million as per the 2010 census.
For example Tanzania, Kenya, Ethiopia, and Rwanda are expected to add between 40,000 MW and 50,000 MW of generation capacity by 2030, and the private sector is expected to play a role in financing and services. Rwanda, Kenya, and Burundi are seeking investments to develop power generation projects, especially in hydropower and natural gas.
U.S. trade with East Africa still makes up a small fraction of East Africa’s trade with the rest of the world.
In 2015, the United States’ share of imports among EAC countries ranged from 1.8% to 4.0% with Rwanda having the least of imports and Burundi having the highest import dependence.
Even with this Rwanda beats Burundi six times in its trade dealings with the rest of the world according to the report, but Rwanda remains a fertile ground due to its investment and political policies compared to the rest.
Having signed the only Bilateral Investment Treaty with the US in the region, the report refers to Rwanda as widely considered one of ‘Africa’s 21st century success stories’ contrary to , Burundi’s which has been marred by economic and political instability, and continues to lag behind its EAC neighbors.
Rwanda has been listed as a priority countries enlisted as a beneficiary for Tax-Free exports to the USA under the US Annual Product Review of June 2016- which added 27 travel and luggage goods from developing countries on the list of products that receive duty-free treatment in US
In August this year Rwandan trade officials and USA diplomats started discussing the President Obama’s Tax-Free initiative on more Rwanda’s travel goods and luggage targeting the US Market…
Analysis of the report shows that East Africa’s economic development largely mirrors the growth of Asia’s new emerging economies- Bangladesh, Pakistan, the Philippines, and Vietnam.
For example Ethiopia, Rwanda, and Tanzania all had higher GDP growth rates than any of these four countries in 2014 and Kenya’s GDP per capita alone exceeded that of Bangladesh and Pakistan.
In addition, Ethiopia, Rwanda, and Tanzania all had higher GDP growth rates than any of the four Asian countries in 2014 with Rwanda and Tanzania having the highest GDP growth of 7.0 percent in the same period while Uganda had lowest at 4.8 percent.