On Thursday, the U.S. signed a trade agreement with the East African Community (EAC), comprising Burundi, Kenya, Rwanda, Tanzania and Uganda, to ease trade flows and provide American technical assistance. East Africa has some of the fastest-growing economies in the world, and the recent discovery of oil in Kenya and Rwanda make the region even more attractive in terms of future development.

Trade between the U.S. and the EAC already increased 52% in 2014 to $2.8 billion, and this agreement will help it to continue expanding. The African countries’ main exports to the U.S. are agricultural goods and textiles, while U.S. exports have so far consisted in large part of heavy machinery and aircraft. But the rapidly expanding middle class throughout East Africa is a tempting and largely untapped market for American firms which sell consumer goods.

The U.S. has had bilateral partnerships with the individual EAC states since 2013 but this agreement marks the first of its kind with the regional trading bloc. The mutual benefits of the EAC are becoming increasingly evident for its members, and the organization is taking regional integration seriously. Intra-EAC formal trade rose from $3.7 billion in 2010 to $5.8 billion in 2013, and it is further reducing internal non-tariff barriers. “Container transit times from Mombasa, Kenya, to Kigali, Rwanda have declined from 21 days several years ago to six days, while associated transport costs are down by over $1,700 per container,” according to the Office of the U.S. Trade Representative. Furthermore, “One-Stop-Border-Posts” soon to be operational at three separate locations will supposedly reduce cargo clearance time by 40%.

EAC customs revenues reached 97% of their targets in 2013, up from 90% in 2010, and the bloc is trying to remove surcharges for international telecommunications traffic within its territory by July 15. That said, much work remains to be done, as 24 non-tariff barriers remained unaddressed at the most recent EAC summit.

The U.S. said that this accord is a stepping stone to an eventual free trade agreement, and that the initiative will be broadened to include other African nations. Also establishing a new five-year, $64 million “Trade and Investment Hub in East Africa,” the agreement builds upon the African Growth and Opportunity Act (AGOA), a program that grants 40 African countries duty-free access to U.S. markets. (The Obama administration has begun pressing Congress to extend the AGOA beyond its September expiration.)

Here, the U.S. is playing catch-up to China, India, and the E.U., which have all increased their economic links and trade deals with African countries over the past decade. The E.U. “has already signed free-trade agreements with 33 African countries in which European goods receive preferential treatment even ahead of African exporters—a move some critics say undermines intra-African trade,” noted the Wall Street Journal. China, which surpassed the U.S. as Africa’s largest trading partner in 2009, is busy building an entire network of railways throughout East Africa. In May 2014 China signed a deal to build a $3.8 billion rail link between Mombasa and Nairobi in Kenya, with 90% Chinese financing. This will be the first phase of a line that will eventually connect Uganda, Rwanda, Burundi, and South Sudan as well.

Perhaps surprisingly for Beijing, China’s rail network (said to become “the backbone of the East African countries’ public transport system and a key component of growth,”) may soon be transporting goods between the EAC and its sometime rival — the U.S.

Source: Blouin News

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