Does the East African Community Common External Tariff have Implication on Burundi’s Trade, Welfare and Tariff Revenue for Selected Agro-Food Sensitive Products?

Abstract

Using the 2010 – 2016 trade data from World Integration Trade Solution (WITS) and the 2017 version of the East African Community-Common External Tariff (EAC-CET) document, this study employed SMART model at HS-6 level, to assess the effect of EAC-CET on selected agro-food sensitive products and their implication on Burundi’s trade, welfare and tariff revenue. Two tariff scenarios were defined–the CET on selected sensitive products imported by Burundi from the rest of the world (RoW), and the variation of CET on tariff revenue. The results indicates that implementation of EAC-CET lead to a decrease in imports from RoW resulting into trade loss equivalent to 6 124 and 33 782 thousand USD for rice and wheat, respectively. The diversion of rice and wheat imports to its EAC partners is estimated to be 1626 and 831 thousand USD, respectively. Government revenue from high tariff on rice and wheat, are respectively estimated to be 9277 and 6627 thousand USD. If it were not for the CET variation, Burundi would be gaining extra 231 and 363 thousand USD tariff revenue from both rice and wheat, respectively. On welfare, Burundi loses in terms of rice and wheat consumption 1258 and 6051 thousand USD, respectively but gains in maize. It is therefore, recommended that rice and wheat should be removed from the list of sensitive products, and criteria for products inclusion or exclusion in the list of sensitive products be based on the products’ welfare implications and needs of local consumers.