Market Size and Access
The EAC is currently home to 174 million people with a surface area of 2,467,202 sq. km. The combined GDP of the region is about US$163.4 billion (at purchasing power parity, about US$473 billion) and the average GDP per capita is about US$941 (at purchasing power parity, $2,722).
In addition to the EAC market, investors in the Partner States have access to other African markets (e.g. COMESA, SADC and AfCFTA) as well as to international markets through preferential trade arrangements.
The Common Market for Eastern and Southern Africa (COMESA) comprises 21 Member States with a surface area of 11.8 million sq. km, a population of 560 million, and a total GDP of US$768 billion. This is one of the largest trading arrangements in Africa. Kenya, Rwanda, Uganda, Burundi and South Sudan are members of COMESA, whereas Tanzania withdrew from the organization in 2000.
The Southern African Development Community (SADC) was established in 1992 and comprises 16 Member States with a surface area of 9,885,197 sq. km, a population of 344 million and a total GDP of US$720 billion. Tanzania is the only member of SADC amongst the EAC Partner States. The other EAC Partner States may access SADC market through Tanzania. Whereas Tanzania may access the COMESA Market through any of the other EAC Partner States, DRC, Zambia, Malawi or Mozambique.
Below is a brief summary about EAC, COMESA and SADC:
|Surface Area/ million sq. km:
The African Continental Free Trade Area (AfCFTA) currently comprises of 54 out of the 55 member states of the African Union (AU) that have already signed the agreement. Following the ratification and entry into force of the AfCFTA, five (5) supporting Operational Instruments were launched during the AU Summit held in Niamey, Niger in July 2019.
These instruments are:
(1) The rules of origin
(2) The tariff concessions
(3) The Continental Online Tool/ Mechanism for monitoring, reporting and elimination of Non-Tariff Barriers (NTBs)
(4) The Pan-African Payments and Settlement System (PAPSS) and
(5) The African Trade Observatory.
These instruments are the key tools that will support the launch of the operational phase of the AfCFTA with start of the trading scheduled for July 2020.
AfCFTA will be the largest trading block since the formation of the World Trade Organisation (WTO). Establishing a continental market compliments regional integration efforts. For example, exports from the East African Community (EAC) face much higher tariffs in other parts of Africa than outside the continent. So, the AfCFTA’s elimination of tariffs and non-tariff barriers will improve development prospects for EAC, allowing the region’s firms to tap into rapidly growing markets elsewhere in Africa.
The AfCFTA is not only about trade, but also about creating access and free movement of people, goods, and services. Liberalizing intra-Africa services trade could bring great benefits for the East African Community. Tourism is one area of growing Intra-Africa trade in services. With intra-Africa migration on the rise, the Agreement on Free Movement of Persons, which was signed by more than half of African Union member states, is particularly important. A more open continental labor market would go far in addressing the skill shortages that constrain growth in strategic sectors.
In the developed world, the European Union (EU) is the largest trading partner of the EAC countries. Exports from EAC countries have had preferential access to the EU market under the Cotonou Agreement between the EU and the African, Caribbean and Pacific States (ACP). The Cotonou agreement (The ACP-EU Partnership Agreement), signed in Cotonou on 23 June, 2000 was concluded for a 20-year period from 2000 to 2020. It is the most comprehensive partnership agreement between developing countries and the EU. Since 2000, it has been the framework for EU's relations with 79 countries from Africa, the Caribbean and the Pacific (ACP). In 2010, ACP-EU cooperation was adapted to new challenges such as climate change, food security, regional integration, State fragility and aid effectiveness. Under the Cotonou Agreement, valid until 2020, the EU offers duty-free access to a wide range of agricultural products as well as some industrial products. Other products can access the EU market under the “commodity protocols”, which offer duty-free access on a quota basis to a number of products, including bananas, sugar, beef and veal, and rum.
As least developed countries (LDCs), Burundi, Rwanda, Tanzania and Uganda are also covered by the EU’s Everything But Arms (EBA) initiative, under which all products from LDCs except arms and ammunitions have preferential access to the EU market.
Together with other sub-Saharan African countries, the EAC States also qualify for duty-free access to the US market under the African Growth and Opportunity Act (AGOA), which has been extended until 2025. The legislation significantly enhances market access to the US for qualifying Sub-Saharan African (SSA) countries. Qualification for AGOA preferences is based on a set of conditions contained in the AGOA legislation. In order to qualify and remain eligible for AGOA, each country must be working to improve its rule of law, human rights, and respect for core labor standards.
Th EAC Partner States may also access the US market under the Generalized System of Preferences (GSP) scheme. Together, AGOA and the GSP offer US market access to nearly 60% of EAC product lines. Most African countries are currently taking advantage mainly of the textile and apparels provisions, but various agricultural products and manufactured goods are also eligible under these schemes. Products from EAC countries can access various markets in the developed world through the Generalized System of Preferences (GSP), which offers preferential treatment to a wide range of products originating in developing countries. No quantitative restrictions accompany these GSP schemes, although other non-tariff barriers to trade have in the past acted as a constraint on intended beneficiaries’ taking full advantage of these schemes. Markets accessible through GSP schemes include those of Australia, Canada, Japan, New Zealand, Switzerland and the United States.