The EAC’s trade disputes between Uganda and Kenya

The latest trade battle in the East African Community (EAC) is here, from milk to maize to poultry prohibitions, in the now award-winning latest episode of the T.V. series, “Keeping Up with Deepening and Widening Regional Integration in the EAC.”

Liberalization of trade under these preferential trade agreements, encased in Free Trade Areas and Customs Unions, comes at a price.

Domestic industries, particularly in developing and least developed countries, suffer as a result of increased competition and pressure from items imported from other countries. These unavoidable realities exist outside of the theoretical concepts of deeper and wider integration.

Trading defense measures were developed by the multilateral trade system under the World Trade Organization (WTO) and even before that under the General Agreement on Tariffs and Trade 1947 (GATT 1947) in order to protect the integrity of international trade and guard against unfair trade practices.

Trade remedies, such as anti-dumping, countervailing, and safeguard actions, are examples of trade defense instruments.

Safeguards aid a state in dealing with the negative effects of increasing importation of goods into its territory, while Trade Remedies are tasked with dealing with unfair trade practices stemming from imports. As WTO members, Kenya and Uganda are obliged by certain Trade Remedies and Safeguard measures.

Because these Trade Remedies and Safeguards are prone to abuse by nations and can take the form of protectionism, the World Trade Organization (WTO) sets guidelines on how they should be administered.

Under the Uruguay Round of discussions, WTO members reached agreements on anti-dumping, subsidies, countervailing duties, and safeguards.

What the WTO refers to as “Disciplines.” The most disputed issues under the WTO’s Dispute Settlement Understanding are Trade Remedies and Safeguards.

It is important to emphasize that the multilateral trading system is “rules-based.”

In a word, “dumping” occurs when a company exports its goods/products at a lower price than their regular value. Anti-dumping measures are thus intended to prevent dumping. Governments have the authority to take action against dumping if it causes “material injury” to a domestic competitor.

A “subsidy” is defined as government assistance to a trader in the form of financial help, tax breaks, and other export incentives, among other things.

Subsidies and countervailing measures, which might take the form of countervailing duties on subsidized items, are used to curb the trade distortionist and harmful impacts of these subsidies.

The key criterion is that in order for a subsidy to be withdrawn or countervailing duties to be imposed, the complaining government must demonstrate that the subsidy has harmed its domestic competitors.

On the other hand, safeguards were created to provide emergency protection against a surge in imports that causes or threatens “severe injury” to a similar domestic business.

In terms of safeguards, it is “severe injury,” as opposed to anti-dumping, which requires “material injury.” These safeguards are intended to be transitory in order to allow domestic industries to adjust to the new market environment.

Tariff rises and quotas, to name a few examples, are two examples. As this author describes later in this piece, their use cannot be arbitrary because it follows rules-based principles. Their application is methodical.

In contrast to their prior embargo on maize imports from Uganda, the Kenyan authorities have not issued any public announcement regarding this chicken imports prohibition, thus it is unclear what trade policy tool, if any, they could have used.

Because this involves import bans, this author assumes that the Kenyan authorities have implemented Safeguards in an irregular and illegal manner.

Aside from the condition of “severe injury,” safeguard measures must only be used in unforeseeable situations, the increase in imports must be rapid, sharp, and significant enough, and they must be time-limited, normally not exceeding four years or provisionally two hundred days.

More crucially, safeguards are implemented “irrespective of source” on a “Most Favoured Nation (MFN)” basis, which means that the Kenya prohibition should have applied to all chicken imports from any other country that sells poultry products to Kenya.

Away from the WTO’s global trade regulations, countries frequently establish their own preferred Trade Remedies and Safeguards frameworks.

It has also been argued that because Uganda is in a Customs Union with Kenya, it cannot use the WTO’s effective multilateral Trade Remedies and Safeguards rules against Madagascar, as Zambia did in a dispute over an increase in iron and steel products that was deemed to be causing serious injury to Zambia’s local industry.

According to the East African Community Customs Union Protocol and the East African Community Customs Union (Dispute Settlement Mechanism) Regulations (‘The Regulations,’ the East African Community (EAC) as a Customs Union has its own unique Trade Remedies and Safeguards legal regime.

The stated Regulations’ dispute resolution procedure is comparable to that of the World Trade Organization, particularly the Safeguards Agreement. According to the Regulations, the process begins with consultations, and if those fail, the problem is referred to the East African Community Committee on Trade Remedies, and if that fails, the matter is referred to arbitration.

It is crucial to stress that all of these proceedings follow due process, with all parties involved receiving a fair hearing.

When it comes to Trade Remedies and Safeguards issues between the Partner States, the regulations in accordance with the view that the EAC is a Customs Union prohibit the EAC Partner States from utilizing the WTO Trade Remedies and Safeguards dispute settlement mechanisms.

The Regulations require that the aforementioned procedures be kept confidential due to the sensitivity of Trade Remedies and Safeguards problems, particularly when it comes to international trade and regional integration.

Unfortunately, the East African Community Committee on Trade Remedies is not yet operational, therefore an aggrieved Partner State cannot currently invoke the East African Community’s Trade Remedies legal structure.

 

The failure of East Africa to completely activate its trade remedies legislative system should not be viewed in isolation, as it appears to be widespread in Africa, with only Egypt, South Africa, Morocco, and Tunisia standing out. This justification is that this is a very technical field that requires further capacity building.

It has been stated that local Trade Remedies and Safeguards legal systems in individual East African countries are required in order to activate the East African Community’s Trade Remedies and Safeguards legal regime.

Kenya is the only country with a Trade Remedies Act, as well as a “Investigating Authority” called the Kenya Trade Remedies Agency.

A “trade mind” may assume that, similar to what South Africa does in the Southern African Customs Union (SACU), Kenya would have attempted to implement its Trade Remedies and Safeguards through local legislation, but there is no evidence to support this.

For example, there is no indication of a “probe” into an increase in poultry imports into Kenya that has caused “severe injury” to the native Kenyan poultry business, as required by the Kenya Trade Remedies Act.

Because there is no Trade Remedies and Safeguards legal regime at the Customs Union level in the SACU region, which includes South Africa, Namibia, Botswana, Lesotho, and Eswatini, the member states have agreed to and frequently use South Africa’s Trade Remedies and Safeguards legal framework through its International Trade Administration Commission Act, 2002.

When it comes to Trade Remedies and Safeguards, these “investigations” conducted by “Investigating Authorities” are frequently subject to scrutiny by a domestic court.

On January 1, 2021, Africa began trading under the African Continental Free Trade Area (AfCFTA), but there are still pending issues over Rules of Origin and tariff reductions.

As a result, the Trade Remedies and Safeguards legal structure established under it is currently unavailable as a solution.

Under the AfCFTA, the African Union created an online facility for reporting non-tariff trade barriers, and this author used it to submit Kenya’s prohibition on Ugandan poultry imports: https://tradebarriers.africa/active complaints. To make the AfCFTA function, we must use every tool at our disposal.

Alternatively, one could argue that the Kenyan government would be better off protecting its poultry business through competition law.

Despite the fact that the East African Community’s competition law framework has not taken off with the Partner States, with the exception of two of them failing to enact competition laws and the EAC’s Competition Authority remaining largely non-existent, Kenya has a thriving competition legal regime. Uganda and Kenya are also members of the Common Market for East and Southern Africa’s (COMESA) competition legal regime, which is Africa’s most advanced (COMESA). The Kenyan government would have been better off using these competition law channels, according to this author.

The answers appear to be a bit strained for Ugandan traders based on the preceding. However, I believe that the East African Court of Justice is the obvious solution in the interim, as the East African Community works on its Trade Remedies and Safeguards legal framework.

http://nilepost.co.ug/2021/03/10/maize-ban-ugandan-traders-must-embrace-east-african-court-of-justice/ I have pushed for the benefits of using this Court here. https://www.newvision.co.ug/articledetails/93804.

The fact that it offers private parties standing before it is the most appealing aspect of using that Court as a remedy. For example, an individual trader can sue Kenya’s government, as in this case, as long as the matter is filed within two months of the day the cause of action arose.

The WTO’s Trade Remedies and Safeguards legal systems, as well as the EAC Customs Union’s dispute resolution processes, are state to state.

This court has recently stated that it has jurisdiction over problems relating to the EAC Customs Union and that it is not restricted to deciding other issues relating to the EAC’s integration.

For lack of a better term, trade governance in Africa is still a work in progress. This does not, however, imply that Africa will continue to lag behind in terms of comprehensive trade governance.

In terms of resolving any stalemates that may develop during their implementation, trade agreements are usually self-contained. There is no need for political solutions; there are plenty of legal options available if they are investigated.

When trade battles erupt in the East African Community, politicians will always take a stand and, if necessary, find interim solutions. The same trade issues reared their ugly head once more.

There is no reason why institutions such as the EAC Committee on Trade Remedies, which are critical in ensuring trade predictability and assurance, should not be fully operational twenty years after the EAC was established.

This is especially important given the importance of Regional Economic Communities (RECs) like the EAC as building blocks for the AfCFTA.

Arguments about capacity are simply insufficient. There is a way when there is a will, and that will is referred to as “Political Will” in the EAC to set up and establish properly functional, effective, and efficient trade institutions.