Towards a seamless regional agricultural trade environment – the case of EAC Region

Isaac TallamRegional Grain Trade Advisor

USAID East Africa Trade Hub (EATH)

5th African Grain Trade SummitSarova Whitesands Beach Resort & Spa, Mombasa

1st October, 2013

Presentation Outline

• Introduction

• EATH Scope of coverage

• The Rationale

• Regional production vs. Consumption asymmetry

• Regional trade – the reality and opportunities

• EAC Trade Policy achievements and prescriptions

o Trade policy and regulatory environment measures

o Cross border trade and transit measures

• Conclusion

EATH Scope and coverage

• Integrate national and regional markets Improve policy and regulatory

environment for trade Reduce barriers to cross-border trade

and transit Develop structured trade for selected

commodities

• Increase trade between the US and East and Central Africa (ECA) -AGOA Improve capacities of ECA firms and

countries to access U.S. and world markets

• Increase capacity of African regional partners

WHAT WE DO…….

Primary Private and Public Sector Partners

East African Grain Council

Federation of East African Freight Forwarders Associations

Kenya Transporters Association

African Fine Coffees Association

East African Community

Common Market for Eastern and Southern Africa

Alliance for Commodity Trade in Eastern and Southern Africa

African Cotton & Textile Industries Federation

The Rationale The status of EAC Grain trade

• EAC population 150 million, a GDP of US$ 84 billion of which 75% is from Agriculture.

• To tap on this is the need to create the enabling environment.

• As per the EAC Food Security Action Plan (2011 -2015) EAC countries face perennial food shortages and isolated cases of hunger

• The hope for the region lies in the exploitation of potential for increasing trade focusing on existing tradeable surpluses. The EAC has recorded tradeable surplus for Maize, Beans and Sorghum for the period 2008-2012 .

• There are however food items that the region has virtually no revealed trade potential. The main one is wheat, which during the entire period (2008 – 2012) recorded a deficit, with regional consumption requirement growing at between 5 – 10% annually.

EAC Regional trade potential in agricultural product

SubsistenceFarmers

Regional Export Markets

Commercial Seed Companies and Input Suppliers

Small-scale Posho Mills

Large-scale Transporters/ Lorry Traders

Grain Wholesalers

Small-scale Transporters

End Users

Producers

NGOs/ Ag Extension

Retailing

Product Wholesaling

Processing

Transport

Grain Wholesaling/Maize Trade

Grain Storage

Production

Input supply

Extension/

Policy//MIS/

Ag Research

Small-scale Commercial

Farmers

Rural households Internal Markets Relief Markets

Large-scale Commercial

Farmers

Grain Retailers

Flour/Processed Product Wholesaler

Processed Product Retailer

Food Processors/

Oil Mills

Large-Scale

Millers

National Strategic Grain Reserves

Maize Importer/Exporter

Gov/Private Ag Research

Animal Feed Processors

Relief Organizations

Fig. 1: Maize Value Chain

The Reality on the ground

Farm Labor

Production and Consumption asymmetry in EAC region

2008 2009 2010 2011 2012 -

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

Production vs Consumption (MT)

Production Consumtion Surplus/Deficit - Tradeable surplus

EAC Maize grain

FAOSTATS

Fig

ures

MT

2008 2009 2010 2011 2012

-500,000

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

production vs consumption (MT)

Production Consumption Surplus/Deficit - tradeable surplus

EAC Beans grains

FAOSTATS

Fig

ures

M

T

2008 2009 2010 2011 2012

-3,000,000

-2,000,000

-1,000,000

-

1,000,000

2,000,000

3,000,000

Production vs Consumption in MT

Production Consumption Surplus/Deficit - tradeable surplus

Regional Wheat demand growing at an average of 5% - 10% annually.

EAC Wheat grainF

igur

es M

T

Faostast

Market Share and business opportunities for investment in EAC region

2008 2009 2010 2011 2012 -

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

300,000,000

EAC Rice market (proxy) and EAC countries share

EAC imports from Rest of the World EAC imports from within the EAC Total market size

Fig

ures

U

S$

Faostats

2008 2009 2010 2011 2012 -

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

EAC beans market (proxy) and EAC countries share

EAC imports from Rest of the World EAC imports from within the EACTotal market size

Faostats

Fig

ures

US

$

Agricultural Trade Policy Measures Towards seamless regional agricultural trade environment

www.eatradehub.org/knowledgecenter

Improving the policy and regulatory environment for trade in EAC region by:

• Developing common regulatory standards that are

consistent with global standards

• Building technical capacity to implement mutually agreed

upon trade facilitation measures

• Introducing evidence based policies for reducing tariffs and

other formal trade restrictions

• Reducing unnecessary or cumbersome customs procedures

EATH has employed various tools to addressing the regional trade policy constraints

• Policy Harmonization• Use of ICT• Trade Negotiation

To create• Foster Regional Integration• Transparency• Efficiency• interconnectivity

EAC Harmonized Staple Foods Standards:

• Harmonized standards build a platform for intra-regional trade by creating a common language for assessing quality and grade of food products. USAID has supported the harmonization process for 22 EAC staple foods standards that were recently declared by the EAC sectoral council of ministers. The standards are now due for gazettement and subsequent implementation across the region.

• Drive awareness promotion and train traders and other grain handlers on the EAC Harmonized staple foods standards

Fully Discounted Price

Discount

Market Price

Farmer Price

Loss Attributed to Poor Quality

Discount

Market Price

Improved Price

Reduced Loss

Price Increase

Current State – Poor Quality Future State – Improved Quality

Adopted

Standards

Standards Impact: Reduced Price DiscountsQuality Improvements will Increase Farmer Revenue

2012B: ~$2 million discount (lost revenue) applied to farmer’s maize for insect damage

Incremental quality improvements could reduce the discount by ~$260K (14%)

Base Case (Rwanda Insect Damage)

One Country, One Crop, One Season One Parameter. Driving adoption of standards across the region will provide farmers with a guide to closing the discount gap

Incremental Quality Improvements

Sanitary Phytosanitary Standards Measures

• EAC SPS Act and Regulation to facilitate implementation of enabling SPS measures such as Pest Risk Analysis, which allows free flow of agricultural produce that has a shared pest list.

• EATH has worked closely with the Centre for Phytosanitary Excellence (COPE) to improve phytosanitary capacity among NPPOs, border inspectors, Private Sector quality inspectors and cross border traders.

• EATH is supporting EAPIC to

develop a functional and dynamic Pest Information Management System to facilitate the creation of pest risk assessments, aimed increasing trade and food security in the region www.eapic.org

EAC Simplified Certificate of Origin (SCO)

• The SCO is a customs documents used to clear goods duty free, whose value is up to US$2,000.00. It contains only 8 fields which cross border traders are able to fill with minimal assistance from customs officials.

• The document is easily accessible at all the EAC border points.

• EATH is enhancing access, creating awareness and promoting utilization of EAC Simplified Certificate of origin (SCO).

1) Exporter (name, full address, country) Msafirishaji (Jina na Anwani)

Reference Number ……………Kumb Na

2) Importer (Names & address)Mwingizaji Bidhaa,( Jina na anuan yakei)

3)Country of Origin Uthibitisho wa Uasili wa Bidhaa

4)Description of goods (Maelezo ya Bidhaa)

5)No. and type of packagesNamba na aina ya kifurushi

6)Value Thamani

7)Declaration by Exporter/ImporterTamko la Msafirishaji/Mzalishaji/MgaviI, the undersigned Mr/Mrs/Ms………………………….. declare that the goods described above have been produced (country) …………………………in accordance with the EAC Rules of Origin. Signature……………………….………………………(Saini)Place…………………………..…..…………………….(Mahali)Date………………………………………………….…..(Tarehe)Official stamp(Mhuri)

8)Customs Endorsement (Uthibitisho wa Forodha)I, the undersigned, hereby endorse the exporters’ declaration and certify that the goods qualify under the EAC Rules of Origin.Signature………………………………………………(Saini)Place………………………………………..………(Mahali)Date…………………………………………………(TareheOfficial stamp(Mhuri)

EAC Regional Food Balance Sheet (RFBS)• The EAC RFBS is a policy tool to guide policy makers made informed

decisions and a trade facilitation platform . It shows tradeable surplus/deficits in a snapshot including where the surplus is lying in the region. Therefore the perfect tool for managing restrictive trade policies such as export bans/import restriction. It triggers deal making among the private sector, based on the revealed tradeable surplus. For more info

visit: www.rfbs.in

EAC Trade Helpdesk portal:

• EATH has supported the East African Community (EAC) in the development of EAC Trade Helpdesk. www.tradehelpdesk.ea.int.

• This website is a tool for users to query EAC trade statistics (imports and exports) by country of origin and destination, applicable tariff and trade regulatory requirements (applicable rules of origin and non tariff requirements). The time series starts 2004 and the data is updated on monthly and annual basis based on submission from EAC Partner States.

East African Community

Trade Helpdesk

Regional Digital Data Exchange (RADDEx)

• This is a Software platform that enables customs connectivity among revenue authorities in East Africa to facilitate cross border customs data exchange in order to:

o Provide for Customs risk assessment and management, o Enhance customs revenue collection and o Promote cross border trade facilitation

• The system provides near real time transmission of customs data from the point of origin to the final destination and through all affected transit points. The system was launched on Nov 28th , 2012 and is housed in Arusha within the EAC.

Reducing barriers to cross border trade & transit time

Joint Border Committees

• This is a multi-sectoral collaboration comprising key Government agencies and Private Sector players responsible for clearing goods at one side of the border. Their goals are to solve issues that impede efficient border operations and the clearance of goods across the border. EATH has established 14 JBCs at ten border crossings along the three main corridors of the EAC region. (namely; Northern, Central and Southern corridors).

Enhancing efficiency of cargo clearance at key EAC ports and borders:

• Automating clearance processes

• Reducing redundancy• Reducing Paper work• Collecting data• Changing culture• Defusing tensions• Promote best practices• Eliminating border/HQ

disconnection

Reducing barriers to cross border trade & transit time

“The future belongs to those who believe in the beauty of their dreams”

By Eleanor Roosevelt (1884 – 1962) U.S. First Lady, Diplomat and Human Rights activist.

Conclusion

Thank you