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What it is

In the theory of economic integration, a Customs Union is supposed to be the third stage of integration after a Preferential Trade Area (a trading bloc that gives preferential access to certain products from the participating countries by reducing tariffs but not by abolishing them completely. A Preferential Trade Area can be established through a trade pact) and a Free Trade Area ( a region encompassing a trade bloc whose member countries have signed a free trade agreement (FTA). Such agreements involve cooperation between at least two countries to reduce trade barriers—import quotas and tariffs— and to increase trade of goods and services with each other).

However, the Treaty for the Establishment of the East African Community provides that a Customs Union shall be the first stage in the process of economic integration. Therefore, real economic integration in the region commenced with the coming into being of the Customs Union.

The Treaty provides that the Customs Union shall be followed by a Common Market, then a Monetary Union and subsequently a Political Federation. These stages of economic integration and their salient features are illustrated in the table below:

Integration Elements
Integration Stage

Reduced Tariffs and Quotas

No Tariffs, No Quotas

Common External Tariff

Free Factor Movement (including Labor)

Harmonization of Economic Policies and Single Currency

Unification of Policies and Setting up Common Political Institutions

PTA

X






FTA


X





Customs Union


X

X




Common Market


X

X

X



Monetary Union


X

X

X

X


Political Federation


X

X

X

X

X

 

Main features of a Customs Union

The main features of a Customs Union include the following:

1. A common set of import duty rates applied on goods from third countries (Common External Tariff, CET);

2. Duty-free and quota-free movement of tradable goods among its constituent customs territories;

3. Common safety measures for regulating the importation of goods from third parties such as phyto-sanitary requirements and food standards.

4. A common set of customs rules and procedures including documentation;

5. A common coding and description of tradable goods (common tariff nomenclature, CTN);

6. A common valuation method for tradable goods for tax (duty) purposes (common valuation system);

7. A structure for collective administration of the Customs Union.

8. A common trade policy that guides the trading relationships with third countries/trading blocs outside the Customs Union i.e. guidelines for entering into preferential trading arrangements such as Free Trade Area’s etc with third parties.

Such main features of the EAC Customs Union are embodied in the Customs Union Protocol and its annexures, Common Customs Law (and regulations) and the Treaty.