EAC integration strong amid trade rows

It provides for the free movement of people, capital, goods and services, as well as grants the freedoms of establishment and residence.

Because of such high level integration, the platforms to resolve trade disputes in EAC are robust.

Though frequent, disputes are quietly sorted out. Now resolved, Kenya and Tanzania had long-standing disputes over cooking gas, wheat, milk products and cigarettes. Kenya and Uganda quarrel about eggs, milk powder and petroleum from time to time. These disputes are usually resolved amicably.

A trade war on the other hand is an economic conflict involving high or extreme levels of protectionism. States impose tariffs and other trade barriers against each other. These beggar-thy-neighbour policies have a long history.

Through several centuries, European countries have fought many trade wars. Every so often, the trade wars escalated to armed conflict.

In antiquity, countries aspired to economic self-sufficiency and limited trade, in an effort to grow jobs and wealth at home. These varying levels of autarky meant countries strove to produce everything within their own borders, minimising reliance on imports and exports. In this connected world of the Gen Z, it may sound strange, but many countries have been down that road.

Consider the Navigation Act of 1651. In it, the UK restricted colonial trade by requiring that all trade between England and the colonies be carried in English vessels, and no vessel could dock in an English controlled port with foreign manufactures. Not surprising, the UK and Netherlands were at war the following year.

Three Anglo-Dutch wars were fought in the second half of the 17th century. A fourth conflict came a century later. These naval battles were on trade and colonial expansion. The UK and other western powers later fought China in the Opium wars of the 1800s.

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The first (1839-1842) was between China and Britain, triggered when China prohibited opium and destroyed stocks owned by the British East India Company. The second, waged by Britain and France, was fought in 1856-60, to force China to legalise opium.

When the world economy tanked during the great depression (1929-1939), many countries turned to protectionist policies, raising tariffs to over 40 percent.

These tariffs made the global problem worse, creating the conditions that sparked the World War II. In the immediate aftermath of the war, 23 nations signed a treaty to lower many barriers to trade. The General Agreement on Trade and Tariffs (GATT), grew its membership to 100 countries by 1973.

While a multilateral treaty, the GATT became an organisation for managing trade issues among members, the International Trade Organisation having failed. With successive rounds of negotiations, GATT increased beneficial global trade amongst member states.

The 8th round of negotiations was dubbed the Uruguay Round, lasted from 1986 to 1994, and created the World Trade Organisation (WTO).

The WTO became the modern forum for enforcing and changing the provisions of the GATT. The Doha Round (2001-2017) was the latest negotiation effort. It was supposed, but did not succeed, to bring low income countries into centre stage. Trade over aid! ministers of the global south declared in Cancun, Mexico in 2003.

They were led by late President Mwai Kibaki’s then trade minister, Mukhisa Kituyi.

The Doha Round collapsed over agricultural subsidies. Farmers are a strong political force in Europe and America. Their respective governments cannot dare remove subsidies least they lose electoral support.

The current trade war is a far cry from the free trade and globalisation of the last 30 years. After imposing a 10 percent universal tariff, the US paused further action for 90 days, except for China, against whom tariffs went up 125-145 percent.

China responded in kind with a 125 percent retaliatory tariff, signaling an all-out trade war. Many observers, including myself believe China is not eager to negotiate because it has more leverage.

Even before the war began, the US was already a declining market for China, accounting for 12.8 percent of exports in 2023, down from 19.8 percent, five years earlier. While it may suffer some damage, China is likely to inflict as much to the US, while enhancing her global position.

Ndiritu Muriithi is an economist and partner at Ecocapp Capital.  He is also the chairman of KRA and former governor of Laikipia County. Email: [email protected]