The East African Community (EAC) Partner States are together implementing an Integration programme founded on the objective of deepening economic, social and political cooperation. The EAC Partner States seek to achieve balanced growth and development across the region. Many positive strides have been made in the integration process with achievements of the Customs Union (2005), Common Market (2010) and the signing of the Monetary Union Protocol in November, 2013. In addition, the process of laying down the foundation of the Political Federation is ongoing.
Cooperating and integrating as one region has various advantages which include:
- reducing transaction costs;
- creation of larger markets;
- stimulating investment and industrialization; and
- social development resulting from addressing issues of peace and political stability.
The Protocol on the Establishment of the East African Community Common Market (CMP) was signed and entered into force in 2010. It was projected that by December 2015, the common market would be fully implemented. The deadline was not met but there have been progressive steps towards the implementation of single market.
The Common Market is the second Regional Integration milestone of the East African Community (EAC), which has been in force since 2010, in line with the provisions of the EAC Treaty. It follows the Customs Union, which became fully-fledged in January 2010.
To accelerate economic growth and development, it means that the EAC Partner States maintain a liberal stance towards the four Freedoms of movement for all the factors of production and two Rights between themselves. These Freedoms and Rights include:
- Free Movement of Goods
- Free Movement of Persons
- Free Movement of Labour / Workers
- Right of Establishment
- Right of Residence
- Free Movement of Services
- Free Movement of Capital
Underlying the EAC Common Market are operational principles of the Community, namely:
- Non-discrimination of nationals of other Partner States on grounds of nationality;
- Equal treatment to nationals of other Partner States;
- Ensure transparency in matters concerning the other Partner States; and
- Share information for the smooth implementation of the Protocol.
What is a common market?
The concept of a common market involves the elimination of all obstacles to intra-community trade in order to merge the national markets into a single market bringing about the conditions as close as possible to those of a genuine internal market.
A Common Market can be defined as a merger/union of two or more territories to form one common territory in which there is free movement of persons, goods, labour, services and capital, and the rights of establishment and residence.
Article 1 of the EAC Treaty defines a Common market as: “The Partner States’ markets integrated into a single market in which there is free movement of capital, labor, goods and services.”
Salient Provisions of the EAC Common Market Protocol:
Free Movement of Persons
Free movement of persons is provided for under the CMP and the East African Community Common Market (Free Movement of Persons) Regulations (Annex I to the CMP).
Article 7 of the CMP provides for the Partner States commitment to guarantee the free movement of persons who are citizens of the other Partner States, within their territories. Partner States are required to ensure non‐discrimination of thecitizens of the other Partner States based on their nationalities by ensuring:
- the entry of citizens of the other Partner States into the territory of the Partner State without a visa;
- free movement of persons who are citizens of the other Partner States within the territory of the Partner State;
- that the citizens of the other Partner States are allowed to stay in the territory of the Partner State; and
- that the citizens of the other Partner States are allowed to exit the territory of the Partner State without restrictions.
The guarantee of free movement of persons is however not an absolute right as it is subject to limitations imposed by the host Partner State on grounds of public policy, public security or public health.
Any such imposition of limitation must be notified to the other Partner States.
The movement of refugees within the Community is however governed by the relevant international conventions.
Free Movement of Labour
Article 10 of the CMP and the East African Community Common Market (Free Movement of Workers) Regulations specified in Annex II to the CMP provide for the free movement of workers in the Community.
Article 10 requires Partner States to guarantee the free movement of workers, who are citizens of the other Partner States, within their territories and ensure non-discrimination of the workers of the other Partner States, based on their nationalities, in relation to employment, remuneration and other conditions of work and employment.
The free movement of workers entitles a worker to:
- apply for employment and accept offers of employment actually made;
- move freely within the territories of the Partner States for the purpose of employment;
- conclude contracts and take up employment in accordance with the contracts, national laws and administrative actions, without any discrimination;
- stay in the territory of a Partner State for the purpose of employment in accordance with the national laws and administrative procedures governing the employment of workers of that Partner State;
- enjoy the freedom of association and collective bargaining for better working conditions in accordance with the national laws of the host Partner State; and
- enjoy the rights and benefits of social security as accorded to the workers of the host Partner State.
Article 10 also stipulates that a worker has the right to be accompanied by a child and spouse who is also entitled to be employed as a worker or to engage in any economic activity as a self-employed person in the territory of that Partner State.
National laws and administrative procedures of a Partner State are rendered nugatory where the principal aim or effect is to deny citizens of other Partner States the employment that has been offered.
However, Article 10 does not apply to employment in the public service unless the national laws and regulations of a host Partner State so permit.
The free movement of workers is not absolute; it is subject to limitations imposed by the host Partner State on grounds of public policy, public security or public health.
Free Movement of Capital
Article 24 of the CMP requires Partner States to:
- Remove restrictions regarding movement of capital belonging to persons resident in the Community;
- Remove any discrimination based on the nationality or on the place of residence of the persons or on the place where the capital is invested;
- not to introduce any new restrictions or apply more restrictive regulations; and
- Remove restrictions relating to current payments connected with the movement of goods, persons, services or capital.
The exceptions to these obligations are guided by Article 25 of the CMP which requires that where a new restriction has been introduced by a Partner State, it has to notify the Secretariat and other Partner States as well.
New restrictions to the free movement of capital may be introduced if a Partner State justifies that they are related to:
- public policy considerations;
- money laundering;
- where the restriction is prudential supervision;
- Financial sanctions agreed to by Partner States; and
- Safeguard measures.
Commitments with respect to movement capital
EAC Partner States agreed to remove all restrictions on the movement, sale, investment and payments of capital and accord nationals from other Partner States similar treatment as nationals.
Further, Partner States committed not to introduce new restrictions to capital unless under the exceptions recognized in the Protocol and adhere to the requirement of notifying the Secretariat and other EAC Partner States.
Partner States committed to remove restrictions in the following 20 capital operation areas:
- Purchase by residents of foreign shares or other securities of a participating nature;
- Local purchase by non-residents of shares or other securities of a participating nature;
- Participation of residents in initial public offers (IPOs) in foreign capital markets;
- Local sale by non-residents of foreign shares or other securities of a participating nature;
- Foreign sale by residents of shares or other securities of a participating nature;
- Local purchase of bonds and other debt instruments by non-residents;
- Sale of bonds and other debt securities abroad by residents;
- Local sale of bonds and other debt instruments by non-residents;
- Local purchase or sale of money market instruments by non-residents;
- Foreign purchase or sale of money market instruments by residents;
- Local purchase by non-residents of collective investment schemes;
- Local sale or issue by non-residents of collective investment schemes;
- Sale or issue of derivative product locally by non-residents;
- Sale or issue of derivative products abroad by residents;
- External borrowing by residents;
- Lending abroad by residents;
- Inward direct investments;
- Outward direct investments;
- Repatriation of proceeds from the sale of assets; and
- Personal capital transactions.
Free Movement of Services
Part F of the CMP provides the key obligations concerning trade in services liberalization in the Community. This includes the “Schedule of Commitments on the Progressive Liberalization of Services” contained in Annex V which specifies the sectors that Partner States agreed to liberalize.
Article 16 of the Protocol guarantees free movement of services and services suppliers under the four modes of supply (cross border, consumption abroad, commercial presence and presence of natural persons). Just like the GATS provided a structure that allowed members to adjust the conditions to their commitments to reflect sector-specific constraints and to accommodate their national regulatory regimes, the EAC CMP allowed Partner States to determine the degree to which they wished to liberalize their services sectors.
Partner States made commitments to liberalize the following sectors as seen in Annex V of the CMP:
- tourism, and
- transport services.
EAC Common Market Scorecard 2016 reveals that the Partner States adopted a total number 136 sub-sectors in the seven sectors during negotiations on the Protocol. They are broken down as follows: business (46); communications (24); distribution (5); education (5); financial (17); tourism and travel (4); and transport (35).
Partner States committed to liberalize different sub-sectors across the modes of supply by December 31, 2015, with Burundi scheduling 74 commitments, Kenya 63, Rwanda 101, Tanzania 59, and Uganda 98. In the transport sector, the following sub-sectors were committed: Burundi (17), Kenya (9), Rwanda (20), Tanzania (9) and Uganda (20). All the scheduled commitments in Annex V were expected to attain full implementation by 31 December 2015. This was the date that all restrictions in the Schedule were to be eliminated.
Article 17 requires Partner States to accord to services and service suppliers of any other Partner State treatment no less favorable than it accords to services and service suppliers of the Partner State.
This means that a Partner State cannot discriminate against natural or legal entities based on nationality, and hence should provide same treatment extended to national services and service suppliers, to services and service suppliers from other Partner States.
Under Article 18 Partner States committed to unconditionally accord services and service suppliers of other Partner States treatment no less favorable than they accord to other Partner States, any third party or a customs territory. This means that a Partner State cannot extend favorable treatment to a particular Partner State without extending the same treatment to the other Partner States.
On the other hand, a Partner State that extends favorable treatment to a country The CMP allows Partner States to introduce new measures under special circumstances provided such measures are not arbitrary, discriminative against nationals of other EAC Partner States and not disguised restrictions to free trade in services.
The special circumstances under Article 21 of the CMP which states may introduce new measures are necessary:
- to protect public morals or maintain public order;
- to protect human, animal or plant life or health;
- to secure compliance with the laws and regulations which are not inconsistent with:
a) the prevention of deceptive and fraudulent practices or which deal with the effects of a default on services contracts;
b) the protection of the privacy of individuals in relation to the processing and dissemination of personal data and the protection of confidentiality of individual records and accounts; and
- to ensure equitable imposition or collection of direct taxes in respect of services, or
- to comply with an international agreement on avoidance of double taxation.
In addition, once the Partner State has satisfied the above conditions and special circumstances, it is under obligation to notify the EAC Council of Ministers regarding the new restrictive measures introduced in accordance with Article 19 of the CMP.
Another key principle in the liberalization of services under the Protocol is in Article 20. This recognizes the Partner States right to regulate their services sectors in accordance with their national policy objectives. It provides that “the measures are consistent with the provisions of this Protocol and do not constitute barriers to trade in services”.
Partner States are to ensure that all measures of general application affecting trade in services are administered in a reasonable, objective and impartial manner.
On the commitment of national treatment, Article 17 provides:-
- In the sectors inscribed in its Schedule, and subject to any conditions and qualifications set out therein, each Member shall accord to services and service suppliers of any other Member, in respect of all measures affecting the supply of services, treatment no less favourable than that it accords to its own like services and service suppliers.
- A Member may meet the requirement of paragraph 1 by according to services and service suppliers of any other Member, either formally identical treatment or formally different treatment to that it accords to its own like services and service suppliers.
- Formally identical or formally different treatment shall be considered to be less favourable if it modifies the conditions of competition in favour of services or service suppliers of the Member compared to like services or service suppliers of any other Member.”
Free Movement of Goods
Free movement of goods within and between the Partner States of the EAC region is provided for by Article 6 of the CMP and is governed by the Customs Law of the Community as specified in Article 39 of the Protocol on the Establishment of the East African Community Customs Union. It allows intra-trade in goods locally produced within the region.
Article 5(2)(a) of the CMP provides for:
- Elimination of Tariffs & Equivalent measures;
- Elimination of Non-Tariff Barriers (NTBs) and technical barriers to trade;
- Implementation of a Common External Tariff (CET);
- Harmonization and Mutual Recognition of SPS & TBT Standards.
The Partner States committed to remove tariffs, non-Tariff barriers (NTBs) and measures of equivalent effect. They also committed to implement a Common External Tariff (CET), EAC standards and product assurance, harmonize sanitary and phytosanitary measures and other customs laws.
Elimination of tariffs on intra-regional trade
Article 14 of the Protocol on the establishment of the East African Community Customs Union provides that, goods shall be accepted as eligible for the community tariff treatment if they originate in the Partner States.
Rule 4 of the East African Community Customs Union (Rules of Origin) Rules, 2015 ("EAC Rules of Origin”) provide for the origin criteria whereby goods are to be considered to have originated in the partner state if they are (a) wholly produced in the Partner State; or (b) produced in the Partner State incorporating materials which have not been wholly obtained there, provided that such materials have undergone sufficient working or processing in the Partner State.
The rules of origin are the criteria used to determine the nationality of a product. Rules of Origin ascertain the country of origin or nationalities of imports, the production processes involved and ascertain trade relationships between countries in either a Preferential Area or Customs Union. Once the origin of goods is ascertained, a Certificate of Origin (CO) is issued by the respective revenue authorities or a designated relevant agency in the EAC Partner State.
By virtue of Article 13 of the Protocol on the Establishment of the East African Community Customs Union, Partner States committed to remove, with immediate effect, all the existing non-tariff barriers to the importation into their respective territories of goods originating in the other Partner States and, thereafter, not to impose any new non-tariff barriers.
The Customs Union Protocol defines non-tariff barriers as “laws, regulations, administrative and technical requirements other than tariffs imposed by a Partner State whose effect is to impede trade.”
Article 5 (2) (a) of the CMP identifies the elimination of non‐tariff barriers to trade as one of the key obligations to facilitate the free movement of goods across the region.
The EAC Non-Tariff Barriers (NTBs) Monitoring Mechanism was developed as a joint initiative of the East African Business Council (EABC) and the East African Community Secretariat. Its objective is to facilitate the process of identifying, reporting and monitoring the elimination of current and future NTBs within the EAC Partner States, so as to consolidate the economic integration process under the EAC Customs Union.
The NTB monitoring mechanism is based on two key principles, namely:
- goodwill and commitment at both the political and technical levels to implement aspirations of the EAC Treaty; and
- enshrinement of the Legal and Regulatory Framework governing the integration process.
Protocol on Sanitary and Phytosanitary (SPS) Measures
Article 108 of the EAC Treaty stipulates that States shall harmonize and strengthen sanitary and phytosanitary services inspection and certification. Article 38 of the Protocol on the Establishment of the EAC Customs Union provide for the Partner States to harmonize Sanitary and Phytosanitary (SPS) measures in order to facilitate trade within the Community and other trading partners.
The SPS Protocol, which was adopted in July 2013, proposes a common and improved framework in EAC to promote trade in food and agricultural commodities and strengthen the application of a harmonized approach for implementation of SPS measures and activities.
It provides the legal basis for further reforms that are expected to guarantee better food safety measures, plant protection and animal health. The primary objective of the SPS Protocol is to adopt and enforce SPS measures that minimize negative effects on trade. The Protocol harmonizes regional standards that align the EAC Partner States with each other and with global markets, ensuring easier trade.
Aims of SPS Regime
- To safeguard the public, provide clear standards for producers and traders, and facilitate the smooth transit of safe goods between countries;
- Improve mitigation of risks arising from pests, diseases and food safety concerns; improve competitiveness of produce originating from EAC in external markets; and help the region effectively contain major threats.