Trade with in and outside East Africa

Trade within and outside East Africa

Introduction
You have ever gone to a market, super market, shop or any other shopping centre Remember the items you found there. Discuss them with your neighbour. Did you buy any items? What did you use to buy the items?
When purchasing commodities, there is exchange of goods for goods, goods for services and goods for money. In this chapter you will know the types of trade carried out with in East Africa and between East Africa and Africa and the rest of the world and the importance and difficulties of each type of trade.
Patterns of trade in East Africa
Trade involves buying and selling of goods and services for money. People of East Africa carry out both internal and external trade. Some of the products you use in everyday life are not produced within Uganda. Mention those products and note them in your books. No country in the world is self-sufficient in all its needs. This implies that every country relies on certain goods and services brought in from other countries. After doing tasks in activity 18.1, you will understand more about trade in East Africa.

Activity 18.1
Understanding trade in East Africa
In groups, move to the nearby local market or trading centre around your school
and do the following tasks:
1. Identify the goods sold in the market.
2.Draw a table showing the type of goods identified in (1) and their origin.
3.Who buys these goods?
4.Find out how the prices of these goods are set.
5. Ask the traders if they sell the same type of goods season after season.
6.find out the problems faced by the traders in the market.
7.Write a report for presentation to the rest class.

Different goods are sold in markets for example, fruits and vegetables. The prices of these goods are in most cases determined by the demand of the consumers in different seasons. After doing tasks in activity 18.2, you will understand trade patterns in Uganda
Activity 18.2
Exploring trade patterns in Uganda
Carry out a textbook or internet research and do the following tasks.
1 What kind of goods are exported from Uganda?
2 What kind of goods are imported to Uganda? Give reasons to support
your answers in (1).

3 In your opinion, compare the volume of Uganda’s imports to her exports.
4 What do you think can happen to Uganda if her exports are less compared
to imports?
5 Present your work to the rest of the class through a discussion.
You have learnt that Uganda carries out both internal and international trade. Internal trade is carried out among the different communities with in the same country. On the other hand, international trade is carried out between Uganda and other countries. International trade involves the import and export of goods and services whereby imports are goods that Uganda buys from other countries and exports are goods that Uganda sells to other countries. After doing tasks in activity 18.3, you will understand
more about the types of trade in East Africa.

Types of Trade in East Africa
Trade can be classified into various types in relation to the way goods move from one destination to another and how they are exchanged.

Finding out different types of trade in East Africa
Activity 18.3
In groups; read the text below and do the tasks that follow.
Mr Odeke is a farmer who used to grow crops and rear rabbits on a large scale. One day it rained heavily to the extent that wind blew off some iron sheets from his main house. The next morning Mr Odeke collected his old iron sheets from the neighbouring village and carried them to his home. His worry was to get money to pay someone to fix the iron sheets. When he discussed with the wife, she remembered that one of their neighbors Mr John is a good builder and had all along wished to buy rabbits for his children to rear. Mr. Odeke therefore, decided to trade rabbits with John the builder so that he fixes his roof. Fortunately Mr. John agreed to fix the roof and Mr Odeke’s problem was solved.
1 Identify the kind of trade Mr Odeke and John carried out?
2.What are the advantages of the kind of trade carried out by Mr John and Mr Odeke?
3.Discuss the disadvantages of this kind of trade.
4.Present your work to the rest of the class through a discussion.

Can you imagine what the situation would be if there was no money? How would we get the things we need? The only option would be to exchange goods for goods. This was the system which was followed in the ancient times when there was no money. This type of trade is called Barter.

Through this kind of trade, people got food and clothing by trading different items for items. Even today, we still use barter trade. You might have observed your friends exchanging items for example a chocolate for a cookie or a banana for a pancake. This is a form of trade because you are exchanging something you have for something you need.
Visible and Invisible Trade
Trade can also be categorized into visible and invisible trade. After doing tasks in activity 18.4, you will understand the meaning of visible and invisible trade.
Activity 18.4
Understanding visible and invisible trade
In groups, study photographs A-D in Figure 18.1 and do the tasks that follow.

1. Describe what is taking place in each of the photographs A-D in figure 18.1.
2.What kind of trade is shown in each of the photographs A-D in figure 18.1? Give reasons for your answer.
3.Discuss the advantages and disadvantages of the type(s) of trade identified in (2).
4.Present your findings to the rest of the class through a discussion.
You have learnt that East Africa has visible and invisible trade. Visible trade consists of the imports and exports of physical goods whereas invisible trade consists of the importation and exportation of services. Tourism is a very good example of invisible trade while coffee export and petroleum imports are good examples of visible trade.

e Imports and exports of East Africa
In some cases, countries or regions carry out trade amongst themselves or trade with other partners outside or beyond their boundaries. When East African countries carry out trade amongst themselves without exporting goods to overseas countries this is called regional trade. For regional trade to take place, countries and regions involved always sign agreements. Such agreements are called Trade agreements. East African countries formed a common trade agreement. This is called the East
African Community.
After doing tasks in activity 18.5, you will understand the main exports of Uganda to
the members of the East African Community.

1Identify the main exports of Uganda.
2.Make a list of agricultural and non-agricultural exports of Uganda.
3.What are the contributions of Uganda’s exports to;
(a) Intra-regional trade.
(b) International trade.
4.Swap your work with another group and make comments.
5.Present your work to the rest of the class through a discussion.

You have realized that Uganda mostly exports agricultural products, that is, 80 percent of her total exports. The most important export is coffee, followed by tea, cotton and fish. Uganda’s main export partners are Sudan, Kenya, DR Congo, Netherlands Germany, South Africa and United Arab Emirates. After doing tasks in activity 18.6′ you will understand the main imports and exports of East African countries,

Exploring the main imports and exports of East African
countries
In groups, study photographs A-H in Figure 18.3 and do the tasks that follow.

1 Identify the main imports and exports of East African countries shown in photographs A-H in Figure 18.3.
2 What other imports and exports of East African countries are not
shown in Figure 18.3?

Activity 18.6 (b) Use table 18.1 to do the tasks that follow.
Table 18.1: Main imports and exports of East Africa

1.Copy table 18.1 showing main imports and exports of East Africa, countries
Of origin and destination of main imports and exports in your note books and fill it accordingly.
2.Describe the trade pattern indicated in table 18.1 .
3.Give your opinion on the trade patterns described in (2).
4.Swap your work with another group and make comments on each other’s work.
5.Present your work to the rest of the class through a discussion.

You have learnt that Countries of East Africa mainly export unprocessed products You can name some of them. This is because the colonial masters wanted raw, materials for their home industries. This is the reason why they introduced crops such as coffee and cotton. These were traditionally called cash crops. After doing tasks in activity 18.7, you will find out the imports and exports Of Tanzania.

Activity 18.7
Finding out imports and exports of Tanzania
In groups; study the statistics in table 18.1 and do the tasks that follow.
Table 18.2: Tanzania’s main exports and imports

Source: Economist Intelligence Unit. 1997. Country Profile, Tanzania. The Unit: London.
1.Draw a graph to represent the information shown in table 18.1.
2.Identify the type of good which is;
(a) exported most
(b) imported most
3.What kind of goods are usually more expensive and why? In which ways can East Africans improve on the value of the goods that they export?
4.Present your work to the rest of the class through a discussion for groups to critique each other’s work.

You have realized that when you export commodities in their raw form, they fetch little revenue as compared to when exporting processed products. The process of improving on commodities to have more quality is called value addition. Countries of East Africa are making efforts to add value onto their products so that they fetch high revenue when they are exported.
Countries of East Africa always struggle to boost their exports. This is why they are trying to set-up manufacturing industries. When countries export more than they import, they save a lot of foreign exchange After doing tasks in activity 18.8, you will understand the different terms used in trade

Understanding the terms used in trade
In pairs; carry out a textbook or internet research on terms used in trade and do the
tasks that follow.
1.What do you understand by the following;
(i) Terms of trade
(ii) Balance of trade
(iii) Balance of payments
(iv) Favourable and unfavourable balance of payments
(v) Favourable and unfavourable balance of trade
2.What benefits is a country likely to get when it exports more goods than it imports?
3.Discuss the dangers a country is likely to face when it imports more goods
and services than it exports.
4.In which other ways can a country earn foreign exchange if it does not export goods and services overseas?
5.Present your findings to the rest of the class through a discussion.

You have learnt that different terms are used in trade for example balance of payments, terms of trade and balance of trade. If a country has been importing more goods than exporting for a long period, it could be going into debt.
On the other hand, if its imports are less than it exports, it earns more money than it spends on goods from other countries. This is called favourable balance of trade. When a country imports more than it exports, this means it must borrow from other countries to pay for the extra imports. This situation is called unfavourable balance of trade. Therefore, it is better for countries to export more than they import.
Importance of trade in development of East Africa

Trade is an important activity and brings in revenue which is used for development. You can share with your friends the facilities that have been constructed by your government. Some of the money used to put up these facilities was got from trade. After doing tasks in activity 18.9, you will understand how trade has contributed to development of East Africa.

Finding out the importance of trade in the development of
Activity 18.9
East Africa
In pairs, carry out a text book or internet research and do the tasks that follow.
1 What is the percentage of foreign exchange that East Africa earns from;
(b) Manufactured goods. (c) Tourism.
(a) Agricultural products.
2 How has East Africa benefited from international trade?
3 Exchange your work with another pair and make comments.
4 Present your work to the rest of the class through a discussion.

You have learnt that trade brings in foreign exchange. Foreign exchange is used in the construction of transport and communication networks like roads and railways. Revenue from trade is invested in local industrialisation, in the building of schools and colleges, hospitals and barracks. Further more trade increases competition and lowers world commodity prices.

This provides benefits to consumers by raising the purchasing power of their own income, and leads to a rise in consumer surplus. Trade also breaks down domestic monopolies, as companies face competition from more efficient foreign firms. It provides employment opportunities to the people of a country. It also allows access to goods and services that might be of higher quality and lower cost than the locally manufactured. Trade avails a variety of goods on the market for consumption and promotes agricultural development.

Problems Affecting trade in East Africa
Most countries have problems which limit their trade activities. East Africa similarly as challenges affecting its trade activities within and with other countries. After doing activity 18.10, you will understand the problems affecting trade in East Africa.
Activity 18.10Understanding problems affecting trade in East Africa
In groups, carry out a text book or internet research on problems affecting trade in East Africa and do the tasks that follow.
1 Explain the problems affecting the development of trade within East Africa.
2 Suggest ways through which problems affecting trade in East Africa can be overcome.
3 Discuss other problems affecting trade in East Africa.
4 Exchange your workwith your neighbour and comment on each other’s work.
5 Present your work to the rest of the class through a discussion.

You have learnt that there are a number of challenges which limit the development Of trade in East Africa. You might have noted limited infrastructure, including connectivity in rural areas, although the government has been investing heavily in infrastructure. East Africds road and rail systems are in poor condition, and access to electricity is limited. Taxes also affect trade especially if trade agreements are not adhered to. Similarity in goods produced which results into flooding of goods and stiff competition on the market, Trade embargo where some products are being banned from some East African coutries. High tarrifs imposed on the exporting and importing of goods within East Africa With such problems therefore, East African countries have come up with different stategies to solve the problems as you will find out after doing activities 18.11 and 18

Development of Import substitution industries in East Africa
You have learnt that East Africa has for long depended on the importation of manufactured goods from other countries. Do you do remember the countries from which Uganda imports most of her products?
When countries set up manufacturing industries to make similar products like those they import, they save a lot of revenue. Entrepreneurship can play an important role in this process. After doing tasks in activity 18.11, you will understand why it is important for East African countries to set up manufacturing industries.

Activity 18.11
Describing import substitution industries
Individually carry out a text book or intemet research, on import substitution and do the
tasks that follow.
1 Explain what you understand by import substitution industries?
2 Why should East Africa develop import substitution industries?
3 What are the problems hindering the development of import substitution
industries in East Africa?
4 Exchange your work with your neighbour and make comments.
5 Present your work to the teacher for further guidance.
You have realised that import substitution is an idea of blocking imports of manufactured goods that can be easily manufactured by the importing countries. This is basically done by setting up industries that manufacture similar commodities. By doing this, the country will have substituted imports and this is called import substitution. Countries of East Africa like Uganda have started on the process by setting
up local industries. Uganda is encouraging Ugandans to buy Ugandan manufactured goods. This policy of buying Ugandan goods is called Buy Uganda Build Uganda.

Trade Agreements

You might have entered an agreement or witnessed your friends entering an agreement when trying to exchange an item for another for example a ball for a calculator Further more you could have heard or watched different heads of state signing trade agreements on television. These agreements are usually signed so that certain rules and regulations concerning trade among countries are observed.
Countries also sign trade agreements so as to reduce or remove taxes concerning trade. You can recall some countries that have signed such agreements. Have you ever heard about trade agreements in East Africa? After doing tasks in activity 18.12 you will understand more about trade agreements in East Africa.

Activity 18.12Understanding trade agreements in East Africa

In groups, study figure 18.4 and do the tasks that follow.

1(a) Identify the symbol shown in figure 18.4.
(b) What does the symbol identified in (1) represent?
2.How important is the symbol in signing trade agreements?
3.Why is it easier for countries to sign trade agreements with groups of
countries that have joined together?
4.What are the likely challenges faced by countries which trade with each
other without signing trade agreements into a block?
5.Exchange your work with another group and make comments.
6.Present your work to the rest of the class through a discussion.
You have learnt that the East African Community is a regional grouping of Kenya Uganda, Tanzania, Burundi, Rwanda, South Sudan and Democratic Republic Of Congo. Its headquarter is in Arusha, in the United Republic of Tanzania.

It was created to promote trade through removing trade restrictions such as taxes and to provide a wider market for goods and services and regional cooperation between the member countries.

Chapter Summary
In this chapter you have learnt that;
Trade involves the transfer of goods and services from one person or entity t another often in exchange for money.
There are different types of trade which include, barter trade, visible and invisible trade, regional trade, foreign trade and international trade.
The main export of East African countries are cut flower, coffee, cotton and cash nuts, the main import include; machinery, vehicles and pharmaceutical equipment East African Countries signed agreements to allow free trade without paying custom duties and therefore formed the East African Community
The East African Community is a regional intergovernmental organization of the Republics of Kenya, Uganda, the United Republic of Tanzania, Republic of Burundi and Republic of Rwanda with its headquarters in Arusha, Tanzania.

Trade increases competition and lowers world prices, this provides benefits to consumers by raising the purchasing power of their own income, and leads to a rise in consumer surplus.