Trade Across Borders
The reconstruction and liberalization efforts made by Rwanda after the 1994 genocide have been considerable. The country joined the World Trade Organization (WTO) in 1996, undertook the liberalization of its trade regime, reduced its border taxes, and further adjusted its customs tariff to that of the common external tariff (CET) of the Common Market for Eastern and Southern Africa (COMESA), of which it became member in 2004. In addition, Rwanda joined the EAC in 2007.
Rwanda’s liberalization and privatization measures have been designed with a clear distribution of roles: the private sector is to be empowered as an engine of growth, while the government is to foster an enabling environment. Together with accompanying sector reforms, such measures seek to create stable macroeconomic conditions, suitable for trade, investment, and greater competition.
Rwanda's competitiveness in the international markets is marked by the continuous decline in the price of its main export commodities (tea, coffee, and minerals) and poor diversification. Both coffee and coltan (colombo-tantalite) experienced a particularly sharp decline in world commodity prices during 2000, 2002, and 2003, translating into a 28 percent fall in export revenue and a trade deficit of US $127 million in 2003. Furthermore, weather conditions determine harvests and, thus, export volume of crops. With 90 percent of the population dedicated to agriculture (mainly subsistence farming) contributing to roughly 40 percent of the GDP, Rwanda's economy clearly needs to diversify in order to reduce exposure to commodity prices and weather uncertainty, and to fight the current account deficit caused by continuously growing imports demands (mostly capital and intermediate goods such as machinery and transport equipment, followed by oil). In 2006, imports totaled US $488 million and exports totaled US $145 million, rendering a current account deficit of US $180 million.
Despite several important advances, further measures are needed to eliminate the many impediments to economic development in general, and those which cause poverty and impede trade in particular. The continuation of macroeconomic and structural reforms is essential to provide Rwanda with the necessary competitiveness dynamism to reap the benefits of joining the multilateral trading system, the COMESA, and the EAC. Further, Rwanda will also need support to improve compliance with its multilateral commitments. The international community has contributed generous funding, but technical assistance is still necessary under the IF. Such assistance should focus on building capacity in trade negotiations, integrating trade into Rwanda’s development strategy, transcribing the country’s pre-Uruguay Round tariff commitments into the harmonized system, and effectively implementing the WTO Agreements, in particular with regard to customs valuation, sanitary and phytosanitary measures, technical barriers to trade, and intellectual property rights.
In addition to technical assistance, the country will require financial support to eliminate physical constraints affecting the supply side and to build the required capacity in trade. This will ensure a more inclusive and stable market access for Rwandan products and a broader participation in the world economy. A concerted approach and assistance to the reforms in Rwanda will enable the achievement of its multilateral commitments, improve the transparency and predictability of its trade regime, attract the necessary capital for diversification, reduce its vulnerability to external shocks, and lift its population out of poverty.
