Page 25 - Abyssinia Business Network ABN August 2019

packaging and blending, require In contrast, tea exported from they do not require a change in
relatively smaller enhancements to Kenya is subject to a 2.5 per cent classification.
existing productive capabilities. tariff. While understandable from a
historical perspective, these kinds While the political economy
of disparity may inadvertently motives behind the more restrictive
disrupt the smooth working of regime in EAC are understandable
EAC trade integration and create in light of tea’s importance for the
incentives for trade deflection. subregion, the interplay of these
different regimes has a determining
Given the situation described effect on the market potential of the
above, it would be worthwhile region. For instance, the pivotal role
to compare the rules of origin of Kenya in the regional value chain
provisions for tea products across is not only due to its dominance in
selected regional economic terms of tea production, but is also
communities, with a view to partly facilitated by its overlapping
Second, consideration of the examining commonalities and/ membership of COMESA and
prevalence of overlapping regional or differences, in an attempt to EAC. Although blending does not
economic community membership determine how they have shaped the confer origin, the relatively looser
also points to some of the flaws of corresponding value chain and to rules of origin criteria adopted by
the existing configuration, which assess the scope for harmonization. the former imply that tea from the
could be addressed by the The summary comparison in table United Republic of Tanzania
Continental Free Trade Area. 5 suggests that even for a fairly may, for example, be exported to
Given the differential extent simple product such as tea, there is Kenya duty free under the EAC
of tariff liberalization in such a considerable degree of variability arrangement, then blended with an
communities, overlapping in the rules of origin discipline equivalent value of Kenyan tea in
membership of different regional across the regional economic Mombasa and again exported duty
economic communities has communities. Such variability is free to other COMESA countries,
important consequences in terms even greater when considering provided that the value of non-
of different tariff rates faced by some of these, such as ECCAS and originating material is less than
exporters, a situation with the ECOWAS, which have general 60 per cent. The same option,
potential to hinder the viability of rules that are formulated in terms however, would incur higher costs
regional value chains, or at the very of uniform percentages of value if blending took place in Dar-es-
least, to shape their configurations added content applied across the Salaam, as the United Republic
in a suboptimal manner. For board. In principle, among the of Tanzania is a member of EAC,
instance, tea exports from EAC regional economic communities but not of COMESA; hence the
to Egypt are subject to different considered in table 5, the degree final product would not be eligible
tariffs. This depends on whether of restrictiveness varies between for COMESA treatment. At the
the exports originate in Kenya, EAC, where all tea must be wholly same time, the differences in
which like Egypt, is a member obtained; SADC, where a more rules of origin provisions might
of COMESA, or whether they permissive regime applies to black inadvertently have contradictory
originate in the United Republic tea; and COMESA,where variable implications in practice. For
of Tanzania. As a member of EAC percentages of non-originating instance, the same blend of 70 per
and SADC, but not of COMESA, inputs can be utilized without cent Tanzanian black tea and 30 per
the United Republic of Tanzania is prejudice to preferential treatment, cent non-African black tea may be
subject to the mostfavoured nation depending on which criterion is considered an originating product
tariff. Likewise, Burundi, Rwanda, utilized to prove originating status. within SADC, but not within EAC,
Uganda and the United Republic In comparison, the rules of origin with ensuing effects on the level
of Tanzania benefit from duty-free provisions of the European Union of market access across different
treatment for African LDCs with Generalized System of Preference African countries and regional
regard to exports from Morocco. scheme are even more liberal, as economic communities.

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