Reducing Barriers to Trade to Trade

Reducing Barriers to Trade to Trade

Barriers to trade in Eastern Africa significantly raise trade costs for firms, eroding the competitiveness of the region’s goods and services, inhibiting exports and ultimately stifling prosperity. High internal or regional trade costs present a major obstacle to firms’ ability to connect to global value chains, effectively nullifying any comparative advantage by rendering exports uncompetitive. TMA believes it can reduce barriers to trade through the following.

IO 1.1 – Improved sustainable efficiency and capacity of transport infrastructure

Inadequate infrastructure is a key factor contributing to high transport costs, congestion and delays. Through investing in both physical infrastructure (at Mombasa Port and Dar Port, and One-Stop Border Posts) and soft infrastructure (such as integrated border management systems, ICT for trade and training), new and existing infrastructure will be managed more efficiently. This will lead to a reduction in key trade bottlenecks, faster movement of goods through key links and nodes, and ultimately lower transport costs. The big assumptions here are:

Transport and logistics service operators operate in a competitive manner and pass on cost savings to consumers via reductions in transport prices.
Demand curve elasticity of trade: resulting price reductions induce additional trade in those goods (i.e. demand is responsive to lower prices).

IO 1.2 – Improved trading standards and reduced non-tariff barriers to trade

Poorly designed and implemented standards and non-tariff barriers to trade (NTBs) are barriers which increase production and trade costs through red tape and delays. TMA attempts to tackle this through investing in awareness raising, improving systems for reporting of NTBs by the private sector and advocating for removal of the most pernicious NTBs. Higher trade standards lead to greater opportunities for Eastern African business to export their products, particularly to lucrative markets in Europe, North America and Asia. Within Eastern Africa, greater harmonisation of standards within the East African Community (EAC) reduces the friction of trade between member states. TMA supports National Bureaux of Standards to develop their technical capacity and supports EAC Governments to move towards mutual recognition, simplification and adoption of harmonised standards. The key assumptions in this pathway’s logic are:

International and consumer pressure leads to increased private sector demand for standards.
The private sector is aware and able to comply with standards.

IO 1.3 – Effective trade systems and procedures

Greater automation and simplification of trade procedures improves harmonisation, efficiency and transparency of service provision. TMA’s information and communication technology for trade (ICT4T) programme invests in improving trade-related IT systems ranging from customs management to tea auctions across East Africa. Through development of portals such as the single windows for trade (SWIFTs) TMA works to increase the predictability of time, costs and administration associated with trade procedures which in turn reduces trade costs. This contributes to efficient trade facilitation and utilisation of hard infrastructure. This logic is predicated on the assumption that:

Officials have the right incentives to improve governance, service provision and compliance with trade procedures and regulation.
The private sector is aware and able to comply with trade procedures.

IO 1.4 – Improved trade regulatory environment

TMA’s activity in this area cuts across all its intermediate outcomes. The theory asserts that implementation, harmonisation and enforcement of EAC trade-related laws, regulations and policies leads to more efficient trade procedures, reducing trading time and costs, and increased intra-regional trade. As well as working at the EAC Secretariat to support harmonisation, TMA also delivers projects which strengthen the technical capacity of Business Membership Organisations (BMOs) and improve coordination of issue-based coalitions. This leads to more effective public-private dialogue for trade and improvements in the business and trade environment. Within this pathway there are several important contextual assumptions, namely:

Partner state parliaments, public sector, private sector and civil society organisations are committed to advancing the regional economic agenda as agreed by the EAC – implementing the customs union, common market and SCT, etc.
Partner states prioritise regional over national trade policies.
Informal rules and norms governing trade are addressed.
Active partnership between government and the private sector.