Effect Of East African Community-Common External Tariff For Selected Agro-Food Sensitive Products On Burundi’s Trade, Welfare And Tariff Revenue

ABSTRACT

The effects of the customs union are ambiguous and depend on different factors. The

theoretical ambiguities raise a need for empirical studies to generate information for a

particular case. This study looks on the effect of EAC-CET for selected agro-food

sensitive products of Burundi’s trade, welfare and tariff revenue using the partial

equilibrium model; specifically, the SMART model at HS-6 level. The analysis makes use

of trade data of 2010-2016 from WITS database, and the EAC-CET schedule was obtained

from EAC-CET document version 2017. The study defined 2 tariff scenarios. The first is a

CET on selected sensitive products imported by Burundi from the rest of the world, and

the second scenario assessed the variation of CET in tariff revenue. Results indicate that

the implementation of EAC-CET led to a decrease of imports from the rest of the world,

which created losses in a trade estimated to be 6 124 and 3 3782 (thousands US$) in rice

and wheat, respectively. This also led to a diversion of imports of rice and wheat to its

EAC partners estimated to be 1 626 and 831 (thousands US$), respectively. Further results

indicate that gains of tariff revenue for the Burundian government due to high tariff on rice

and wheat, are respectively estimated to be 9 277 and 6 627 (thousands US$), but Burundi

would gain extra 231 and 363 (thousands US$) and these losses are due to the variation of

CET. In terms of welfare, Burundi loses in terms of consumption of rice and wheat 1 258

and 6 051 (thousands US$) but gains in maize. The study recommends removal of rice and

wheat among sensitive products and suggests that the addition and removal of products in

the list of sensitive should be based on their welfare implications and needs of local

consumers.

Keywords: Sensitive Products, CET, Trade, Welfare, Tariff Revenue, Smart model.