Debate intensifies around East African Community rice tariff
29 October 2014
FAO’s July 2014 Rice Market Monitor reported on improved prospects for rice production in East Africa. Compared to average production from 2009 to 2011, rice production is projected to be 17% higher in 2014. Despite initial fears over 2014 production levels, the Tanzanian rice production is forecast to be 200,000 tonnes higher than in 2013, with a harvest of 2.1 million tonnes (1.4 million tonnes, milled basis), representing a 4% increase.
This expansion in production was attributed to an increase in the area under rice and achieving yields of 2 tonnes per ha, contrasting to the 1.7 tonnes per ha in 2005. The government has been supporting irrigation schemes, the adoption of improved seed varieties and subsidised input programmes. This is projected to see Tanzanian rice imports fall to 95,000 tonnes from 121,000 tonnes in 2013.
Rice production in Kenya is expected to stabilise at the record harvest level attained in 2013 of 147,000 tonnes (95,000 tonnes milled basis). Despite this production trend, “Kenya is expected to increase imports by 4% in 2014 to 420,000 tonnes.”
Production prospects have been less favourable in Rwanda where output has been depressed by “erratic rains and shortages of inputs”. Even with these production challenges, imports of rice into Rwanda are forecast to be stable.
In terms of rice trading, government policy measures play an important role. Although the EAC Common External Tariff (CET) on rice imports is nominally 75%, member states have made use of a range of national exemptions approved on a year-by-year basis.
In June 2014 EAC ministers agreed to increase the applied tariff from 25 to 35%, in the face of protests from farmers over the market impact of cheap rice imports. However, Uganda declined to commit to the new 35% rate, preferring to maintain a 75% duty in order to promote domestic rice production.
This broad agreement meant that the government of Tanzania allowed tariff waivers introduced in 2013 to lapse, “in order to quell inflationary pressure”.
In the case of Rwanda for 2014, FAO reports that “less favorable duty concessions have also been announced”. Imported rice “will attract a 45 percent tariff rate (or USD 200 per tonne, whichever is higher) until June 2015”.
For its part Kenya, while applying the 35% tariff, has raised the minimum tariff per tonne to US$200 compared to US$100 per tonne in 2013.
Rice farmers welcomed the increased protection introduced, with Kenyan farmers also calling for more investment in irrigation and more support for input supplies.
Kenyan rice importers, meanwhile, have complained that the increased tariff could drive small-scale importers out of business. For their part, Pakistani rice exporters maintain that the new charges will cause total fees collected on Kenya’s annual rice imports of 400,000 tonnes to increase from US$ 180 million to US$260 million.
To date the Kenyan moves to increase tariff protection in the rice sector have not led to any countervailing moves by the Pakistani authorities with regard to Kenyan tea exports, where tariff concessions had earlier been bilaterally exchanged.
Editorial comment
There is flexibility within the EAC CET for member governments to make exceptions to meet specific national needs. Recently efforts are taking place to harmonise the application of tariffs in the rice sector, in part to deter rice ‘smuggling’ within the EAC. This is a difficult process because the relative weight to be accorded consumer and producer interests varies between member states, with rice consumption carrying less weight in food security terms in Uganda than elsewhere in the EAC. The policymaking context is further complicated by processes of urbanisation and income growth, which are changing patterns of consumption and fuelling a rapid increase in consumer demand for rice.
Although Uganda’s adherence to the highest levels of tariff protection has allowed a consolidation of the expansion of production which has taken place since 2000 (more than double, with production increasing 25% between 2009/10 and 2014/15), growth of consumer demand of an estimated 9.5% per annum, means that the objective of self-sufficiency is still a long way off.
This combination of a rapid expansion of consumer demand alongside efforts to stimulate and sustain domestic production in the face of increased global price volatility, would appear to account for the flexibility allowed individual EAC governments in setting what are deemed to be nationally appropriate tariff levels. It also suggests a need for a more nuanced approach to self-sufficiency objectives, given the recent rapid expansion of demand.