U.S. Statement on the Trade Policy Review of the East African Community

Statement delivered by Ambassador Michael Punke
U.S. Permanent Representative to the WTO

Geneva,
November 21, 2012

Thank you, Chair.  The United States is delighted to welcome today the East African Community (EAC) including each of its five Partner States: Burundi, Kenya, Rwanda, Tanzania and Uganda.  We thank the delegations and the Secretariat for their respective reports, which were circulated prior to the meeting.  We would also like to thank our discussant, Ambassador YI Xiaozhun (China), for his remarks on the review of these five Members.

The reports circulated for this meeting helped us to understand recent developments in the EAC and highlighted reforms that are underway.  The reports also brought to light critical areas of improvement and noted some of the challenges facing the five countries as they strive to participate more effectively in the global trading system and to use trade as a means to stimulate greater economic growth and development.

Since the last trade policy review of the EAC in 2006, the EAC has made substantial progress in a number of areas, including the admission of Burundi and Rwanda and the complete elimination of intra-EAC tariffs.  We note, however, that both Burundi and Rwanda appear to be breaching their tariff bindings on a significant number of 8-digit tariff lines.  We look forward to hearing how these Members intend to come into conformity with WTO rules on this issue.

This said, the EAC has made strides towards the establishment of an effective customs union and common market, although challenges remain with implementation in the EAC Partner States.  The EAC Partner States’ commitment to regional economic integration and their efforts to break down trade barriers to regional trade are well placed.  On their own, each of the EAC Partner States constitutes a fairly small market for international trade and investment, but combined, they represent nearly 140 million people with a GDP of over $80 billion.

The United States stands with the EAC in support of its regional economic integration, which we believe can be a model for how other regional economic organizations in sub-Saharan Africa can advance their own integration processes.  We support the EAC’s integration endeavors with the expectation that they advance and complement the multilateral trading system.  Accordingly, in 2008 we entered into a Trade and Investment Framework Agreement with the EAC to raise the level and strength of our dialogue with the EAC on trade and economic issues.  In June of this year, the United States and the EAC jointly announced that we would pursue a new trade and investment partnership, which will include the exploration of an investment treaty, a trade facilitation agreement, continued trade capacity building assistance, and a commercial dialogue.  These agreements and other activities will help to promote EAC regional integration, economic growth, and expand and diversify U.S.-EAC trade and investment.  They could also serve as building blocks towards a more comprehensive trade agreement over the long term.

We have long provided financial support to the EAC Secretariat to continue its critical work of bringing the region’s economies together, and recently announced the extension of an assistance agreement to provide up to an additional $10 million to the EAC Secretariat over the next five years.  This assistance will focus on supporting the EAC towards achieving a more fully-fledged Customs Union and Common Market and address harmonization on issues related to agriculture, particularly the development of a regional CAADP (Comprehensive Africa Agriculture Development Program) Compact, climate change, and natural resource management.

The United States notes the progress that the governments of Burundi, Kenya, Rwanda, Tanzania, and Uganda have made towards regional economic integration.  We particularly appreciate these efforts in the face of the region’s limited financial resources.  We note, for example, the governments’ implementation of reforms to improve the business environment and to promote investment.  Both Burundi and Rwanda, for example, have been highlighted as significant reformers in the World Banks’ Doing Business Reports in recent years.  These measures have contributed to steady growth in the national economies over the past several years.  As the five governments undertake efforts to further improve the business environment in their countries, it will help them to take advantage of transformative potential of trade and investment.  We note each government’s continued efforts to reduce macroeconomic imbalances, to diversify and broaden their economies, and to create a more favorable investment environment for private sector development.  In our view, broad-based private sector participation in a competitive economy is another mechanism that fosters growth, so we are encouraged that the five Members plan to continue to modernize and to open their economies.

While acknowledging these governments’ advances, we also believe that much work remains to be done to foster a more open trading and economic environment that promotes greater competitiveness, export diversification and, perhaps most importantly, much-needed investment.  Future success in these countries will depend on continued improvement of the business climate, attacking corruption, buttressing judicial independence and capacity, and implementing and enforcing transparent rules and regulations in critical sectors of the economy.  We also encourage each country to accelerate reform efforts and privatization programs to help improve the commercial environment and encourage investment in these countries.

We encourage the five EAC Partner States to keep regional integration as a central focus moving forward.

Most of the exports from the EAC to the United States enter the U.S. market duty-free either on a MFN or a preferential basis (i.e., through GSP or AGOA).  Since its launch in 2000, AGOA has provided opportunities for people and businesses in sub-Saharan Africa, including EAC countries, and contributed to the growth of African economies through expanded and diversified trade.  We are encouraged by AGOA’s positive trends.  EAC exports to the United States have increased to over half a billion dollars last year, including in value-added products such as apparel and processed agricultural goods.  Beyond market access, we know there is much more that we can do together with our African partners.  In recognition ofo these countries’ need for trade capacity building assistance to maximize the benefits of trade preference programs, diversify their economies, and improve their respective trade environments, the United States offers trade capacity building programs and trade-related technical assistance through a range of U.S. government agencies including U.S. Agency for International Development (USAID), the U.S. Trade and Development Agency, the Overseas Private Investment Corporation, the U.S. Department of Transportation, and others.  In particular, the USG’s East Africa Trade Hub in Nairobi, Kenya provides specialized support for businesses in the EAC, and helps EAC Partner States to take advantage of trade opportunities provided under AGOA.

As noted in the Secretariat Report, there are significant obstacles and costs for traders in each of these countries as they go about their daily business of moving goods to market and participating in the international trading system.  We look forward to constructive engagement on trade facilitation issues, including in the WTO trade facilitation negotiations, to promote measures to reduce red tape and customs and cross-border inefficiencies, which can significantly impact each EAC Partner State’s—and Africa’s—regional and global trade competitiveness.

We submitted questions for each of the Members under review in areas such as tariff bindings, import licensing, customs procedures and valuation, intellectual property rights, and export subsidies and notifications.  We would also be interested in more fully understanding how the EAC develops regional standards to facilitate trade, and how EAC Partner States adopt and apply these regional standards.  We look forward to reviewing the responses.

In closing, Mr. Chairman, while we recognize the capacity constraints that may confront each government’s participation in the multilateral trading system, we are also mindful of the critical, positive role that increased trade openness can play in their economies.  Making pro-trade domestic reforms consistent with the WTO framework, combined with trade liberalization efforts, is a proven strategy for garnering foreign investment and generating economic growth.  We look forward to continued work with all five EAC Partner States and the EAC Secretariat, and we wish all five a successful review.

Thank you.