The EAC common external tariff — smallholder farmers and the East African industrialization bet

<p>The East African Community&#x27;s Common External Tariff (CET), revised in 2022 to introduce a fourth tariff band at 35% for finished goods, is the most consequential trade-policy instrument the region has produced. It is also, for smallholder farmers in Uganda, Tanzania, Kenya, Rwanda, and Burundi, a mixed bag whose effects are still being measured.</p> <p>The intended logic of the 35% band is import substitution at the finished-goods stage. Cotton, rice, sugar, edible oils, leather goods, textiles — products where EAC member states have raw materials but limited processing capacity — face a 35% duty when imported as finished products. The intended effect is to make domestic processing competitive enough to attract investment, which then pulls smallholder raw materials into local value chains rather than exporting them raw.</p> <p>The empirical results, three years in, are uneven. Kenyan-made textiles have gained shelf space in EAC retail, though the supply chain still pulls a lot of cotton from outside the region. Ugandan and Tanzanian rice production has expanded under tariff protection, but consumer-side prices have risen — visible in the urban household budgets that the Uganda Bureau of Statistics tracks in its Consumer Price Index data. The political cost of higher rice prices in Kampala has fed into recurring disputes over the CET&#x27;s pesa-side calibration.</p> <p>For smallholder farmers, the CET is a double-edged instrument. Cotton growers in Uganda&#x27;s Lango and Acholi sub-regions have benefited from increased Kenyan demand for raw cotton now that Kenyan textile mills face tariff protection. But sugar smallholders in western Kenya — who supply mills that compete against cheaper Brazilian and Indian sugar — have seen mixed effects, with farmgate prices rising only modestly while the spread captured by the mills has widened.</p> <p>The Brookings Africa Growth Initiative has tracked the CET&#x27;s effects in a series of working papers, with the overall conclusion that intra-EAC trade has grown but the smallholder income transmission is weak. The bottleneck is processing efficiency: when domestic mills operate at 60% capacity utilization, they capture rents from tariff protection without passing meaningful price signals down to the farmer. The CET works at the level of trade statistics. Whether it works at the level of household income is a more difficult question, and the honest answer for now is: in some sectors yes, in others no.</p>