East Africa requires a fair trade regime

Business Daily Africa, March 24, 2011

By Fredrick Njehu

Free or fair trade has always been subject of debate in global economics for many decades with proponents and opponents of both ideologies arguing their cases strongly.

It’s essential that in an EAC common market, players ensure that fair trading is allowed to subsist if they are to reap maximum benefits.

In the near future, there will be a case scenario where more resources will move across borders (capital, labour, goods and services) in terms of cross-border investments and establishment.

The big question is who will regulate these businesses, and what laws are in place to ensure fairness in such a growing market?

There is bound to be heated competition in the business sector in the coming years now that free movement within the region will be permitted.

The major and minor players in regional trade will compete for markets within EAC, while multinationals and foreign firms will strive to have a footing in these countries having already established their presence.

Therefore, it is significant for the EAC governments to establish the extent to which these cross-border investments have on both the economy and the consumers at large.

Sector regulators and competition authorities will be tasked with a duty to ensure that there are no anticompetitive trading practices being experienced by these traders and most importantly, they have to take bold actions against these practices by enforcing their existing laws evenly without discrimination.

One of the most interesting things to see is how the state monopolies are going to fair within the EAC markets given that they are permitted to operate at a national jurisdiction.

With privatisation having taken toll under the structural adjustment programme of the early 1990s, most of the state-owned monopolies has had a reduction in government subsidies and incentives availed to them.

There have now been more entrants in the sectors where they used to dominate, though most of them within the EAC still have a grip of the market control as the major suppliers of services.

So, are the EAC governments capable of sustaining the subsidies to these firms, and if so, for how long?

This is an important component since subsidies are deemed to distort markets and limit competition.

The private entities have also been accused of engaging in anti competitive business practices, which could eventually negate the whole rationale of establishing an EAC common market.

Unfortunately, consumers are the most likely culprits on this occasion because they will have to dig more from their pockets to afford the goods and services.

Nevertheless, the regional governments have been on track to establish autonomous competition authorities mandated to tackle such anticompetitive actions.

Njehu is a trade analyst, CUTS International, Nairobi.

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