Regional Integration

Tanzania and other African States are in a tireless pursuit to deepen economic integration so as to become competitive, attract investments and promote trade. Tanzania is a partner to several Regional Economic Communities (RECs) in Africa. Each Bloc presents numerous opportunities for Tanzanian manufacturers. CTI has been actively participating in the negotiations of these regional blocs and trade arrangements which are indicated below:

 

East African Cooperation (EAC)

East Africa Cooperation signed the EAC Customs Union on 1st January 2005. The EAC Common Market was signed on 1st January 2010. Negotiations for the establishment of Monetary Union is ongoing. EAC has five (5) Member States with an internal market of 143 million consumers.

 

South Africa Development Cooperation (SADC)

The SADC Trade Protocol was adopted in 1996 and came into effect on 1st September 2000.All SADC Member States except Angola and DRC implement fully the SADC Trade Protocol since 2012. SADC has a total of fifteen (15) Member States and a market of more than 200 million consumers. 

 

Tripartite Free Trade Area (TFTA) 

COMESA, SADC and EAC TFTA comprises of 26 countries ranging from Egypt to South Africa with a market of about 625 million consumers and an aggregate GDP of USD 1 trillion.

 

Continental Free Trade Area (CFTA)

African countries are deliberating on plans and actions to turn Africa into a Continental Free Trade Area by 2017 followed by an African Customs Union in 2019. 

 

Economic Partnership Agreements (EPAs) 

EPAs are trade agreements meant to safeguard African, Caribbean and Pacific (ACP)countries’ preferential access to the EU markets.EPAs present a number of challenges for ACP countries that are required to open their markets to EU imports and furthermore, require liberalisation in other areas such as investment and services. 

 

African Growth Opportunity Act (AGOA) 2025

The African Growth Opportunity Act was signed into law on May 2000 as Title 1 of Trade and Development Act of 2000. The act offers tangible incentives for African counties to continue their efforts to open their economies and build free markets Tanzania is one of the African countries that is eligible for AGOA. The Act has recently been renewed up to 2025 and provides Sub-Sahara African nations a duty-free access to the vast US market for over 6,500 products such as agricultural products, chemicals, textiles and apparel, minerals, metals and equipment.

REPORT ON THE NATIONAL TASK FORCE ON EAST AFRICAN COMMUNITY COMMON EXTERNAL TARIFF (EAC CET) REVIEW FROM 16TH TO 22ND FEBRUARY, 2019.

INTRODUCTION

The Ministry of Finance and Planning organized a National Task Force meeting to deliberate on the Regional Report on EAC CET Report in order to develop a National Position to review the EAC CET. The meeting was held from 17th to 22nd February, 2019 in Morogoro Sub Treasury Offices.

PARTICIPANTS

The meeting was attended by members of the National Task Force (Public and Private) on EAC CET Review from Mainland Tanzania and Zanzibar.

Participant                                                          Organisation

Mr. Shogolo Msangi                                        Ministry of Finance and Planning

Prof. Razack Lokina                                         University of Dar es Salaam

Ms. Genoveva Kilabuko                                                Ministry of Industry and Trade

Ms. Fatma Mangunda                                    Ministry of Finance and Planning

Ms. Magdalene Mkocha                               Tanzania Chambers of Commerce Industry and Agriculture

Mr. Hafidh Ussi                                                 Ministry of Finance and Planning Zanzibar

Mr. Othman Hamad                                        Zanzibar Revenue Authority

Mr. Elliah Chiligazi                                            Ministry of Industry and Trade

Mr. Aminiel Malisa                                          Tanzania Revenue Authority

Mr. Juma Juma                                                 Ministry of Foreign Affairs East African Cooperation

Mr. Timoth Mbagga                                        Agriculture Centre Tanzania

Mr. Iddi  Alfani                                                  Ministry of Agriculture and Livestock

Mr. Mwinyihaji  Juma                                     Tanzania Revenue Authority

 

AGENDA

  1. Recap on the Tanzania Report on EAC CET Review
  2. Deliberation on the Regional Report on EAC CET Review
  3. Review of the Matrix on proposals for EAC CET Review

DISCUSSIONS

  1. Recap on the Tanzania Report on EAC CET Review

The members of the Task Force reviewed the National Report on EAC CET review to update some of the members on the country proposals including:

  1. Proposed Criteria for classification of goods
  1. Raw materials: All products that are unprocessed waste and scrap converted to or used as raw materials or with minimal level of transformation. Other criteria including: level of value addition and use in production process.
  2. Capital goods: Those goods used directly in the production process including plant and machinery. While accessing the nature of these goods, one should consider the need for regional infrastructure, energy and ICT development.
  3. Intermediate goods: These are the goods imported in semi processed form. Apart from their direct use in the production process, they may also be used interchangeably with other goods depending on the level of value added or degree of transformation.
  4. Secondary intermediate goods: These are further processed intermediate goods. They are not finished and will be used in the manufacturing process as part of a finished product.
  5. Finished goods: These are the ready-made imported products that are ready for use by the final consumer.    

 

  1. Tariff bands  

The report proposed to have a five band structure comprise of rates of 0%, 10%, 20%, 25% and 35%. The rates are such that Raw materials and Capital goods 0%, Primary Intermediate goods 10%, Secondary Intermediate Goods charged at 20%, Finished Goods not available in the region at 25% and Finished Goods available in the region at 35% while some few items remaining under the sensitive items list are charged over 35%.

 

  1. Analysis of Trade

Despite the increasing intra EAC trade and a positive trade balance with all countries except Kenya in the period under review, a significant proportion of Tanzania’s trade is still the Rest of the World (ROW). It was reported that, most of the imported goods from ROW were pharmaceutical products, machinery and mechanical appliances, while major exports are agricultural, gold and mineral products in their raw form.

 

  1. Deliberation on the Regional Report on EAC CET Review
    1. Criteria for clustering products

The National Monitoring Committee noted that the Regional Report has included product usage as criteria for determining proposed rated. It was proposed to remove usage as a criterion under the justification that it will be covered when one considers the degree of processing.

  1. Removal of Stays of Applications (SOAs)

The National Committee considered the recommendations by the report on elimination of SOAs. They also noted the need for eliminating SOAs as they hinder full implementation of EAC CET.

 

  1. Proposed Tariff bands from EAC Partner States

The recommended tariff bands by the EAC partner States are as follows:

 

Burundi

Kenya

Rwanda

Tanzania

Uganda

Category

No. of Tariff Bands

4

5

4

5

5

Definition/criterial

 

 

 

 

 

Raw Material

Raw materials

0%

0%

0%

0%

0%

Intermediate

Intermediate goods that are produced in the region - available

5%

25%

10%

10%

10%

Intermediate goods that are not produced in the region – not available

10%

10%

10%

20%

5%

Finished Goods

Finished goods available in the region

25%

30%

35%

25%

35%

Finished goods not available in the region

25%

30%

25%

35%

25%

Capital Goods

Capital Goods available in the region

0%

0%

0%

0%

0%

Capital goods not available in the region

0%

0%

0%

0%

0%

Sensitive

Sensitive list goods

>35% after rationalising products under SOA

>35%

add fish, leather, iron & steel

25% except 2nd hand products & shoes

>35% except wheat

Add Meat, Internet services

>35%

except forthe products under SOA

 

 

  1. Recommendations for reviews of Sensitive List

According to the report, all Partner States agreed to maintain the current list of sensitive list.Uganda, Rwanda, Tanzania and Kenya proposed to add new products in the Sensitive Items. These products include vegetable oils, meat (poultry, animals and fish), leather, iron and steel.

The Task Force agreed that the criteria for goods to be added in the sensitive goods should be unfair competition from subsidized imports, sufficient domestic production in terms of quality, quantity and price, imported second hand products, goods of economic importance in terms of revenue; investment; and backward and forward linkages and goods of social importance with respect to employment; health; food security; culture & religion; and poverty reduction.

 

  1. Key recommendations on the Duty Remission Scheme

The Task Force considered and accepted the recommendation from the report to maintain a Duty Remission. Noting that it was provided for in the EAC Customs Management Act to cover for products that serve the dual purpose of strengthening industrialization, export promotion and protection of products of national/regional and strategic interest.

 

It also noted the need to reclassify some of the tariff rates in order to cover for some of the products that have received frequent duty remission for example Wheat.

 

  1. Products of Interest in the region

The Task Force considered the products of regional, strategic and export interest and proposed that the EAC CET Review should consider some of the following products:

  1. Articles of stone (glass bottles)
  2. Cashew nuts
  3. Cloves
  4. Coal
  5. Coffee
  6. Coral and similar materials
  7. Gold
  8. Horticulture products
  9. Iron and steel
  10. Kraftliner
  11. Leather and footwear
  12. Meat, poultry and fish
  13. Natural rubber
  14. Sea salt
  15. Sea weed
  16. Sugar
  17. Textile and apparel
  18. Tobacco
  19. Vegetable seeds and other seeds oil
  20. Wood and wood products

 

  1. Simulation of outcomes after applying the proposed tariff rates.

The report considered the proposals for new tariff rates from Kenya, Tanzania and a pilot tariff developed by the consultant in simulating results of the impact of applying full tariff rates under the condition that all factors remain constant in isolated market. The results shows that the pilot tariff is the only offer with positive results across the measured parameters of welfare effects, trade effects, employment, revenue, industry and agriculture.

 

Following the results of the simulation the Task Force recommended the consultant to revise the simulation based on new assumptions that will be approved by the Partner States and with the consideration of all Partner States proposals.

 

The assumptions and results for the current model were critisised for being limited as they seemed to favour the pilot tariff rates proposed by the consultant.

 

  1. Review of the Matrix on proposals for EAC CET Review

The National Task Force considered the proposals for EAC CET Review on each product line and recommended revised tariff lines based on the proposed tariff bands of 0%, 10%, 20%, 25%, 35%.

The proposed matrix with proposals on different lines was consolidated and compiled by the Ministry for Finance and Planning for approval by the Minister.

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