Jump-Starting Regional Trade in East Africa
East Africa has some of the fastest-growing economies in the world. Besides being the source of some of the world’s best coffee, East Africa has growing industries in agriculture, financial services, medicine, textiles and apparel. Despite the region’s wealth of natural resources, USAID reports that more than 27 million East Africans go to bed hungry and 46 million live in poverty. This is partially due to the lack of regional trade in East Africa.

Three Things to Know About Regional Trade in East Africa

  1. East Africa’s trade infrastructure was built toward exporting natural resources abroad rather than moving goods within the region. Similar to the rest of Africa, East Africa was colonized, primarily by the British, for a long time. Colonization was partially driven by European countries’ scramble for power, but Europeans were also fighting for resources and trading posts. Most of the countries in the region gained independence in the 1960s, but intercontinental trade was already well established and took precedence over regional trade.
  2. Regional trade in East Africa makes up only 13 percent of the region’s total trade. This means that 87 percent of East Africa’s tradeable resources and products are exported out of the region. In other continents, the percentage of regional trade is much higher. For example, 60 percent of trade in the European Union and 40 percent of trade in Asia is regional.
  3. National policies in East African countries substantially slow trade across East African borders and prohibitively increase costs. Most goods traded within the region cost about 40 percent more than retail because the cost of simply getting the goods to East African consumers is so high.

How Can Regional Trade Be Increased?

The best way to increase regional trade is to boost trade and investment opportunities within East Africa and make regional trade freer and fairer. USAID’s East Africa Trade and Investment Hub (also known as The Hub) works to do just that. The Hub also works to make East African agricultural value chains more competitive, particularly the grain trade.

The Hub’s regulatory reform activities have increased regional trade in East Africa by 39 percent over the past two years. USAID reports that The Hub has facilitated $59.3 million in private sector investments since its founding in 2014. As of 2018, The Hub has already helped create 38,682 jobs and had given 1,402 firms capacity building assistance. The Hub has also supported 829 food security producers and organizations and has contributed to the food security of more than 14.9 million East Africans.

USAID works with and in Burundi, Kenya, Rwanda, Tanzania, Uganda, Ethiopia, Madagascar and Mauritius. The Hub partners with these countries’ governments as well as civil societies and private regional institutions to remove trade barriers in East Africa. Certain regional institutions include the Common Market for East and Southern Africa, TradeMark East Africa, the East Africa Grain Council and the East African Community (EAC).

The EAC promotes the Common Market, a regional integration milestone that accelerates economic growth and development in East Africa. The EAC maintains a liberal stance toward the economic market and specifically works to ensure five freedoms of movement in East Africa:

  • Free movement of goods
  • Free movement of persons
  • Free movement of labor/workers
  • Free movement of services
  • Free movement of capital

East Africa grows enough food to feed its entire population. Freeing trade in the region and making it fairer will help East Africans keep the food they grow and get it to those in need. Free-flowing goods will reduce East Africa’s need for food and financial aid and make the region more self-reliant.

– Kathryn Quelle
Photo: Flickr

The Millennium Compacts for Regional Economic Integration Act (M-CORE Act), introduced by Rep. Karen Bass in May 2015, would allow the Millennium Challenge Corporation (MCC) to engage in multiple projects in an eligible country at any given time.

The MCC was established in January 2004 thanks to bipartisan efforts in passing the 2003 Millennium Challenge Act.

However, the law currently prohibits the MCC from entering into more than one concurrent assistance agreement – or compact – in any country at any given time.

  1. The M-CORE Act will allow the MCC to develop multiple compacts with a country at any given time.
  2. Multiple compacts in a country, particularly in Africa, will promote regional economic integration and cross-border collaborations.
  3. An eligible country that already has a Millennium Challenge Compact in effect can enter into another compact if one or both compacts are or will be for regional economic integration, increased regional trade or cross-border collaborations.
  4. This act establishes new assistance criteria for a low-income or a lower middle-income candidate country to enter into a Millennium Challenge Compact with the U.S.
  5. Candidate countries must meet the International Bank for Reconstruction and Development’s (IBRD) threshold.
  6. If the per capita income of a low-income candidate country changes during the fiscal year to that of a lower middle-income country, then the country will need to meet the per capita income requirement for that fiscal year and the two subsequent fiscal years.
  7. Eligible countries that already have a Millennium Challenge Compact in effect can enter into another compact if the country is making considerable and demonstrable progress in implementing the terms of the existing compact.
  8. The MCC’s board must notify Congress 15 days prior to providing assistance to an eligible country, commencing negotiations with an eligible country, signing a compact and terminating a compact or agreement.
  9. In addition to the notification requirement, the MCC is required to provide detailed information on economic rates of return.
  10. The MCC’s board is required to disclose information on their website and provide notice of the information’s availability in the Federal Register.

The Millennium Challenge Corporation has signed 29 compacts with 25 different countries since its inception — and the M-CORE Act has the potential to increase their impact.

According to a March 2015 Congressional Research Service (CRS) report, concurrent regional compacts could provide higher rates of return on investments, benefiting from economies of scale and supporting trade between nations.

Summer Jackson

Sources: The United States House of Representatives, Congress, FAS
Photo: Google Images