The performance of Tanzania in international trade

There are six chief theories that govern international trade viz. ; classical trade theory, factor proportion theory, merchandise life rhythm theory, foreign direct investing theories, international production theory and internationalisation theory.

1.1 Classical trade theory

States gain if each devotes resources to the production of goods and services Ricardo ( 1817 ) in which it has an advantage Smith ( 1776 ) .

1.2 Factor proportion theory

States will be given to specialise in the production of goods and services that Hecksher and Ohlin ( 1933 ) use their most abundant resources

1.3 Product life rhythm theory

The rhythm follows that: a state ‘s export strength physiques ; foreign production Vernon ( 1971 ) starts ; foreign production becomes competitory in export markets ; and Wells ( 1968, 1969 ) import competition emerges in the state ‘s place market

1.4 Foreign direct investing theories

Market imperfectnesss theory – house ‘s determination to put overseas is explained as a scheme to capitalise on Hymer ( 1970 ) certain capablenesss non shared by rivals in foreign states

1.5 International production theory

The leaning of a house to originate foreign production will depend on the specific Dunning ( 1980 ) attractive forces of its place state compared with resource deductions and Fayerweather ( 1982 ) advantages of turn uping in another state

1.6 Internalization theory

Internalization concerns widening the direct operations of the house and conveying Buckley ( 1982, 1988 ) under common ownership and command the activities conducted by intermediate Buckley and Casson markets that link the house to clients.

2.0 THE IMPORTANCE OF INTERNATIONAL Trade

The importance of international trade to a state ‘s economic public assistance and development has been to a great extent documented in the economic sciences literature since Adam Smith ‘s ( 1776 ) enquiry into nature and causes of the wealth of states. This suggests that economic systems need to export goods and services in order to bring forth gross to finance imported goods and services which can non be produced indigenously ( Coutts and Godley, 1992 ) .

The chief indexs of a state ‘s economic strength can be gauged from its gross domestic merchandise ( GDP ) , as this step is an estimation of the value of goods and services produced by an economic system in a given period ( Tayeb, 1992 ) . The impression that international trade can act upon GDP has been explored by several economic theoreticians ( Marin, 1992 ; Meier, 1984 ) and culminated in the export-led growing thesis.

As export gross revenues addition, other things being equal, the GDP of a state will lift and supply a stimulation to improved economic wellbeing and social prosperity. The manner in which this relationship can be interpreted suggests that export public presentation has a stimulating consequence throughout a state ‘s economic system in the signifier of technological spillovers and other related favorable outwardnesss ( Marin, 1992 ) .

Export activities may exercise these influences because exposure to international markets demands improved efficiency, and supports merchandise and process invention activities, while additions in specialisation encourage profitable development of economic systems of graduated table ( Temple, 1994 ) . Therefore, the export-led growing thesis predicts export growing will do economy-wide productiveness additions in the signifier of enhanced degrees of GDP.

Another mechanism through which exports are connected with sustainable rates of economic growing is the balance of payments. The balance of payments restraint can be expressed as follows. In general, economic growing creates a assortment of demands which can non be satisfied entirely by domestic end product. The faster the rate of domestic demand, the more accelerated the growing of imports ( Abdel- Malek, 1969 ) .

However, any surplus of imports from one state to another, over and above exports requires the trade shortage to be financed by either authorities borrowing from abroad or pulling on the economic system ‘s stock of assets. If this state of affairs is sustained, it becomes critical for the place authorities to turn to the issue of such a trade instability ( de Jonquieres, 1994 ; Hornby, 1994 ) .

Classical trade theory dictates that the extent to which a state exports and imports has a direct relationship to the trading form of the state with other states. That is, states are able to derive if they devote a certain sum of their resources to the coevals of goods and services in which they have an economic advantage ( Ricardo, 1817 ) .

Therefore, classical trade theory argues that a state generates goods and services in which it has an advantage, for ingestion indigenously, and later exports the excess. It is for states to import goods and services in which they have an economic disadvantage. Economic advantages/ disadvantages may originate from state differences in factors such as resource gifts, labor, capital, engineering or entrepreneurship.

Classical trade theory contends that the footing for international trade can be sourced to differences in production features and resource gifts which are founded on domestic differences in natural and acquired economic advantages. However, over and above such a general penetration into international trade, classical trade theory is unable to offer any account as to what causes differences in comparative advantages.

The factor proportion theory, in contrast to classical trade theory, is able to supply an account for the differences in advantage exhibited by trading states. Harmonizing to this theory, states will be given to bring forth and export goods and services that harness big sums of abundant production factors that they possess, and import goods that require big sums of production factors which are scarce ( Heckscher and Ohlin, 1933 ) .

Both of these theories stated supra have been shown to be lacking in explicating more recent forms of international trade. For illustration, the sixtiess witnessed important technological advancement and the rise of the transnational endeavor, which resulted in a call for new theories of international trade to reflect altering commercial worlds ( Leontief, 1966 ) .

At that clip, the merchandise life rhythm theory of international trade was found to be a utile model for explicating and foretelling international trade forms every bit good as transnational endeavor enlargement. This theory suggested that a trade rhythm emerges where a merchandise is produced by a parent house, so by its foreign subordinates and eventually anyplace in the universe where costs are at their lowest possible ( Vernon, 1966 ) .

Furthermore, it explains how a merchandise may emerge as a state ‘s export and work through the life rhythm to finally go an import. The kernel of the international merchandise life rhythm is that technological invention and market enlargement are critical issues in explicating forms of international trade. That is, engineering is a cardinal factor in making and developing new merchandises.

Market size and construction are influential in finding the extent and type of international trade. While these theories are insightful, a figure of modern international trade theories have emerged late which take history of other of import considerations such as authorities engagement and ordinance. However, these theories make premises which detract from their possible significance and part to international concern.

For case, they assume that: factors of production are immobile between states ; perfect information for international trade chances exists ; and, traditional importation and exporting are the lone mechanisms for reassigning goods and services across national boundaries ( Bradley, 1991 ) .

The market imperfectnesss theory provinces that houses invariably seek market chances and their determination to put overseas is explained as a scheme to capitalise on certain capablenesss non shared by rivals in foreign states ( Hymer, 1970 ) . The capablenesss or advantages of houses are explained by market imperfectnesss for merchandises and factors of production.

That is, the theory of perfect competition dictates that houses produce homogenous merchandises and bask the same degree of entree to factors of production. However, the world of imperfect competition, which is reflected in industrial organisation theory ( Porter, 1985 ) , determines that houses gain different types of competitory advantages and each to changing grades.

However, market imperfectnesss theory does non explicate why foreign production is considered the most desirable agencies of tackling the house ‘s advantage. Dunning ( 1980 ) and Fayerweather ( 1982 ) have addressed this issue and developed what can be described as international production theory. International production theory suggests that the leaning of a house to originate foreign production depend on the specific attractive forces of its place state compared with resource deductions and advantages of turn uping in another state.

This theory makes it explicit that non merely do resource derived functions and the advantages of the house play a portion in finding abroad investing activities, but foreign authorities actions may significantly act upon the piecemeal attraction and entry conditions for houses. This was extensively investigated by Buckley ( 1982, 1988 ) and Buckley and Casson ( 1976, 1985 ) .

Internalization theory centres on the impression that houses aspire to develop their ain internal markets whenever minutess can be made at lower cost within the house. Therefore, internalisation involves a signifier of perpendicular integrating conveying new operations and activities, once carried out by intermediate markets, under the ownership and administration of the house.

3.0 PERFORMANCE OF TANZANIA IN INTERNATIONAL Trade AFTER JOINING REGIONAL TRADE PROTOCOLS.

3.1 Factors impeding public presentation of Tanzania in International trade

Tanzania has non benefited every bit much as would be possible from the generous grants offered by regional trade protocols. There are several factors that can be attributed to Tanzania ‘s hapless public presentation in international trade one of them being domestic supply restraints. Another factor is hapless capacity to negociate in international trade meetings due to miss of consciousness.

The issue of consciousness is important because successful engagement in international trade affairs requires cognition of planetary developments in trade issues. Awareness helps to better effectivity of trade policy for Tanzania. Besides, high degree of consciousness provides a benchmark based on which the effectivity of understandings and dialogues can be measured.

It has been revealed that many functionaries who represent Tanzania in international trade dialogues are non cognizant of some of import regional trade protocol issues and therefore neglect to take advantage of penchants and chances that can increase the public presentation of Tanzania in international trade. Lack of consciousness on regional trade protocols leads to hapless public presentation of Tanzania in international trade.

The tabular array below shows the extent of consciousness on regional trade protocols.

Degree of consciousness among stakeholders on regional trade protocols

Type of regional trade protocol

Percentage of consciousness

SADC

18.3 %

AGOA

14.3 %

World trade organization

2.0 %

COMESA

9.9 %

EAC

2.0 %

EU-ACP

7.9 %

Beginning: Economic and Social Research Foundation ( ESRF, 2008 ) .

The information above shows that the degree of consciousness on regional trade protocols among stakeholders is highest at 18.3 % for SADC and lowest for WTO and EAC at 2.0 % . These findings show that the degree of consciousness on regional trade protocols among stakeholders in Tanzania is really low and this hinders the public presentation of Tanzania in international trade and FDI.

In most instances, the readyings for dialogues are ill made, including hapless audience and coordination. Negotiators go in the dialogue tabular array with a pre-determined place, a inclination that limits their flexibleness to maximise additions from such dialogues. Another job relates to insufficient analytical work before go toing the dialogues.

Another ground for hapless public presentation of Tanzania in international trade dialogues is that the coordination of international trade is non centralized. For case, dialogues and understandings for EAC are handled by the Ministry of Foreign Affairs and International Cooperation while those of SADC are handled by under the Ministry of Industry and Trade that is besides responsible for all many-sided trade issues.

Another ground for hapless public presentation of Tanzania in international trade is that the private sector in Tanzania has limited engagement in international trade dialogues. Besides, the private sector in Tanzania is non involved in preparation of international trade policies, therefore restricting their experience and degree of consciousness on international trade issues compared to other states which involve their private sectors.

For case, Tanzania Chamber of Commerce and Agriculture ( TCCIA ) , Chamber of Industry and Trade ( CTI ) and Tanzania Private Sector Foundation ( TPSF ) are non involved in international trade dialogues, therefore restricting the public presentation of Tanzania in international trade. Due to hapless readying with respect to international trade, Tanzania fails to profit from international trade understandings.

The hapless engagement of the private sector in Tanzania in regional trade protocols is chiefly caused by deficiency of fiscal and human resources. To cover with the issue of deficiency of fiscal resources among the private sector, the authorities sometimes includes delegates from the private sector in trade missions particularly when the deputations involve high-ranking authorities functionaries.

Recently, the authorities has started to affect the private sector in regional trade dialogues. For case, the private sector was involved in the EAC dialogues from the really get downing. Besides, although CTI was partly involved in the EAC policy preparation, their engagement was limited due to miss of consciousness and willingness on portion of the authorities.

3.2 Performance of Tanzania in FDI after fall ining regional trade protocols

Among the aims of Tanzania in fall ining regional trade protocols is easing Foreign Direct Investment ( FDI ) . Along with enlargement of market chances, regional trade protocols encourage FDI because investors are attracted to larger market and may therefore expect basking larger economic system of graduated table. Investors take advantage of wider market and expect their investings to spread out.

The East African Community for illustration has put in topographic point a shared investing policy among member provinces with consonant investing inducements for investors. The public presentation of Tanzania with respect to FDI has been much effectual particularly during the 1990S when the state underwent denationalization after Structural Adjustment Programs. The tabular array below shows the public presentation of FDI after regional trade protocols ;

FDI inflows to Tanzania from assorted regional trade protocols in US $ Millions

2004

2005

2006

2007

2008

2009

EAC

54.1

22.9

6.9

12.5

94.4

3.3

SADC

122.1

70.5

139.3

181

513

17.6

AGOA

325

151.4

31.6

52.1

560

19.3

EU-ACP

677

86.7

95.8

183

106

36.7

Beginning: Tanzania Investment Centre ( TIC, 2008 )

The findings above show that Tanzania has attracted FDI largely through EU-ACP states followed by FDI from AGOA and SADC. Therefore, it can be generalized that EE-ACP and AGOA have been the chief beginning of FDI to Tanzania compared to other regional trade protocols that Tanzania has joined viz. ; EAC and SADC. This can be explained due to the fact that the African states have low capital formation.

3.3 Performance of Tanzania under AGOA Regime

The public presentation of Tanzania in AGOA is hapless compared to the public presentation of other states. For case, during the first twelvemonth of AGOA, Tanzania exported goods deserving $ 899,000, largely agricultural and forestry, handcrafts, gardening and fish merchandises. On the other manus, Kenya exported goods deserving $ 57.1 million largely fabrics and dress. The chief ground for this hapless public presentation is because Tanzania delayed to register for AGOA.

On the issue of investings from USA which is besides portion of the AGOA trade protocol, Tanzania has failed to register meaningful investings from the United States due to several factors such as ; corruptness, hapless substructures, high electricity cost and

bureaucratism. Another ground is complicated Torahs sing land ownership environing investing undertakings.

The tabular array below shows the public presentation of Tanzania under AGOA compared to other states that participate in AGOA viz. ; Uganda, Kenya, Nigeria, South Africa and Lesotho. The information shows that, besides Uganda, Tanzania has had the worst public presentation in AGOA. This shows that regional trade protocols have had small impact on engagement of Tanzania in international trade.

Trade under AGOA for selected states ‘000 US $ ( 2000-2008 )

State

Entire exports to US

AGOA export

Tanzania

16594

716

Uganda

7282

22

Kenya

120,421

74963

Nigeria

3636192

3366165

South Africa

2646359

831805

Basutoland

208756

206349

Entire

8927183

5723216

Beginning: BOT ( 2008 ) .

3.4 Market Access and Technical Assistance

Tanzania ‘s engagement in the WTO issues is through the Least Developed Countries ( LDC ) group. The states organizing the LDCs group are eligible to have the particular intervention under the WTO regulations so as to heighten market entree. However, Tanzania ‘s engagement in WTO has had small impact on the volume of their trade due to low export volume.

On the other manus, Tanzania has benefited from proficient aid through assorted enterprises such as ; Joint Integrated Technical Assistance Program ( JITAP ) , which involves UNCTAD, WTO and ITC. The aims of such aid were to better the public presentation and capacity stakeholders to understand regional trade protocols. Particular and differential intervention has been utile for hapless states such as Tanzania.

3.5 Performance of Tanzania in international trade after fall ining regional trade protocols.

The tabular arraies below show the public presentation of Tanzania in international trade after four regional trade protocols viz. EU-ACP, SADC, EAC and AGOA. The findings are shown in footings of exports made by Tanzania to other states and imports made by Tanzania as shown below ;

Tanzania exports to different states in US $ Millions

2003

2004

2005

2006

2007

2008

EU-ACP

226

241

214

362

432

474

SADC

22.3

15.1

13.8

18.4

21

51.3

EAC

22.4

32.8

28.7

40.7

43.6

40.8

USA

21.4

12.8

18

15.2

15.1

13.5

Beginning: Bank of Tanzania ( BOT, 2008 ) .

The findings above show that exports from Tanzania to other states have been chiefly to EU-ACP states followed by exports to EAC states, SADC states and to a small extent to the United States of America. This shows that regional trade protocols have had small impact on international trade in Tanzania because exports to EU states have been at that place even before Tanzania joined regional trade protocols.

Tanzania imports from different states in US $ Millions

2003

2004

2005

2006

2007

2008

EU-ACP

367.1

514

413

344

389

391

SADC

139

179

196

194

221

211

EAC

87.8

108

101

98.9

107

97.8

USA

52.6

81.3

99.2

58.9

65

91

Beginning: Bank of Tanzania ( BOT, 2008 ) .

The findings shown in the tabular array above show that imports from Tanzania to other states have been largely to EU-ACP states ; followed by those from SADC states, EAC states and the United States. These findings once more show that regional trade protocols have had small impact on international trade because imports from EU states were at that place even before Tanzania joined regional trade protocols.

4.0 THE STATUS OF TANZANIA ‘S IMPLEMENTATION OF REGIONAL TRADE PROTOCOLS

Below is a description of the position for Tanzania in the undermentioned key issues sing regional trade protocols.

4.1 Conformity to the WTO regulations:

Tanzania needs good and timely information about WTO determinations ( and their reading ) and a capacity to act upon the new docket of the WTO at an early phase. The WTO is “ member-driven ” and reacts merely to member enterprises.

4.2 Import liberalisation issues:

This is a demand that the state should follow with the WTO understanding on remotion of trade barriers by cutting down duties and other non-tariff barriers. Tanzania has already complied with most of the Uruguay Round ( UR ) demand on its imports licensing and duty governments. The staying challenge is to transform such reforms into establishments by outlining statute law to back up them.

4.3 Agriculture trade:

Tanzania is in conformity with the dialogues and understandings on agribusiness ( subsidies and market entree ) . However, the state needs to closely supervise the extroverted dialogues on agribusiness as the demands could be tightened.

4.4 Treatment of Non-Tariff Barriers:

Since Non Tariff Barriers ( NTB ) are varied by state ain economic steps to command trade, an of import issue is whether the NTBs contradict WTO regulations. Another one is the extent through which NTB are beginning of trade differences between states.

4.5 Subsidies:

As with NTBs, United Republic of Tanzania needs to re-examine all Government steps to see if they are in struggle with the new commissariats on subsidies.

4.6 Anti-dumping regulations, offseting actions and precautions:

For formal conformity with the WTO, United Republic of Tanzania must see that the national and regional ( EAC and SADC ) regulations and processs on anti-dumping, countervailing, and precautions are reformed to suit the WTO regulations, and this appears to be underway.

4.7 Customss rating and other usage regulations:

United Republic of Tanzania is fast booming to finish its imposts rating reforms that should do it conformable to the WTO regulation on imposts rating. Harmonizing to the interview with the functionaries in the MIT, it is hoped that this exercising will be complete by July 2004. This besides includes steps to take the Pre-shipment review process to heighten efficiency in custom disposal.

4.8 Trade Related Investment Measures ( TRIMS ) :

Under GATT 1947, investing jurisprudence had non been cardinal to its regulations, and states have been able to disregard the regulations. Tanzania needs at least to be cognizant of the regulations and its exposures if it does non accommodate to them, given the broad assortment of types of investing government that are used by different states.

4.9 Standards:

International criterions are going more common, and for states, which have non yet set their ain, following these at an early phase may be a peculiarly efficient measure. An alternate for United Republic of Tanzania in a part like the EAC or SADC is to switch to regional criterions. However ; while this may be cost economy, it still leaves the hereafter costs of accommodating such criterions when an international criterion is finally set.

Presentments of regional criterions have been made for the EAC. These demand to be made by Tanzania because EAC is non yet a recognized part in the WTO.

4.10 Servicess:

As there were efficaciously no lower limit demands for services offers in the Uruguay Round, Tanzania officially complied. But there will be much more force per unit area in the following unit of ammunition to do substantial offers. The WTO has made proviso for proficient aid to be availed to the LDCs regarding services liberalisation, but for Tanzania has non yet been a clear indicant of the type of aid to be requested.

Yet, in future demands for more offers for service trade liberalisation, Tanzania, among other states, may non hold a benchmark upon which to do offers. Even where the WTO may offer one, it may non needfully be suited for Tanzania as least developed state.

4.11 Trade Related Intellectual Property ( TRIPS ) :

Tanzania must follow with the TRIPS regulations within the 2003-2010 period. Tanzania has legal systems that are likely to be adaptable to the criterion signifiers and so the costs of acceptance to the TRIPS will non be significant.

4.12 Government Procurement:

There is no duty to fall in understanding on Government Procurement, and a few developing states have. Whether Tanzania should fall in depends on whether it wants to export to authorities buyers who have joined the understanding, and whether it wants to give penchant to any local providers who would be in competition with possible foreign providers. If a significant proportion of a state ‘s authorities outgo is financed by assistance, there may be other restraints on its buying.

4.13 Labour and the Environment:

There is no demand for immediate action on labor or environmental issues to run into international criterions ( except for the bing environmental protocols and duties under ILO Conventions ) . But there will be chances for Tanzania to utilize environmental statements in trade dialogues, particularly when such statements are utile for some merchandises.

5.0 MEASURES TAKEN TO IMPROVE INTERNATIONAL Trade

Several steps have been taken to better the public presentation of Tanzania in international trade with respect to regional trade protocols. Such steps include seeking aid from givers to ease international trade. Donors support regional integrating plans and activities under COMESA and SADC and this has benefited members States including Tanzania.

Among such givers include ; United States Agency for International Development ( USAID ) , GTZ, UNCTAD, UNDP and UNIDO. Besides, the European Union is funding a figure of undertakings aimed at bettering international trade. Within EAC, undertakings aimed at bettering international trade include ; cooperation with UNCTAD, of ASYCUDA ( machine-controlled system for imposts informations ) and Euro hint.

The European Union besides supports international trade by offering EAC latest computing machine hardware, puting up internet webs and offering adept advice in fixing the part for Common External Tariff. EU besides provides EAC staff with preparation sing WTO affairs for member. Support has besides been offered to help in developing the finance and Investment Protocol of EAC.

On the other manus, USAID has besides assisted SADC in the confirmation and execution procedure for the SADC trade Protocol. UNCTAD has provided proficient aid for the Trade Negotiation Forum procedure devoted to the readying of the SADC trade liberalisation plan taking to the formation of the coveted free trade country. Aid has besides been given to SADC by the Commonwealth Secretariat in such countries

as development of a regional industrial policy.

6.0 Decision

This survey has analysed features and position of Tanzania ‘s engagement in regional trade protocols and its impact on international trade. It besides explains the principle for Tanzania to fall in regional trade protocols, degree of engagement and public presentation in international trade. The survey besides highlighted issues impacting the public presentation of Tanzania in international trade.

The survey found that although Tanzania participates in many regional trade protocols, they have had small impact on Tanzania ‘s engagement in international trade. For illustration, bulk of regional trade protocols in which Tanzania is involved had small engagement of cardinal histrions because of hapless engagement of the private sector. Another factor is deficiency of proper trade policy.

Other factors that affect the impact of regional trade protocols on the public presentation of Tanzania in international trade include ; hapless disposal of trade dialogues and understandings, deficiency of a centralised mechanism to supervise, follow-up nor measure the public presentation of Tanzania in regional trade protocols, and multiple handling of international trade issues by different departments/ministries which make it hard.

Another factor that hinder effectual engagement of Tanzania in regional trade protocols and hence, hapless public presentation in international trade is deficiency of capacity and consciousness of dialogue accomplishments among representatives of Tanzania is regional trade protocols. Due to hapless dialogue accomplishments, Tanzania has failed to take advantage of chances that arise from international trade.

Despite the fact that Tanzania is interested in regional trade protocols, pursuits of such involvements are non linked to the aim of widening market entree. Often, negotiants adopt a preemptive attack to dialogue doing the whole scheme less flexible. In add-on, the involvements of Tanzania are actively negotiated but non actively realized on the land during dialogues.

From the findings above, this survey concludes that engagement and public presentation of Tanzania is regional trade protocols has been hapless due to assorted hinderances particularly due to hapless export capacity and deficiency of market entree due to quality issues Hence, most of the regional trade protocols in which Tanzania has participated have had small or small impact on international trade.

7.0 RECOMMENDATIONS

From the findings of the survey, the following are recommendations made ;

i‚·iˆ Tanzanian authorities should centralise issues related to regional trade protocols so as to heighten the positive impact of the trade protocols on international trade.

i‚·iˆ The authorities should advance public argument and treatment in the country of international

trade protocols.

i‚·iˆ The authorities should step in by offering preparation on dialogue accomplishments so as to better the public presentation of Tanzania in international trade.

i‚·iˆ The authorities in coaction with stakeholders should take steps to increase production so as to increase the volume of exports and hence, more engagement in international trade.

i‚·iˆ Regional trade protocols have high impact on pulling FDI, therefore, the authorities should follow up on regional trade protocols for investing chances.