Are Economic Agreements (EAs) relevant to Zambia’s trade?

The case of the Southern African Development Community (SADC)

Abstract

Economic Agreements (EAs) present various opportunities to developing countries like Zambia in the form of enhanced market access, access to lower cost imports, enhanced inflows of foreign direct investment and access to improved technologies among others. Due to these opportunities, many countries have taken keen interest in them. The study aimed at assessing the extent of Zambia’s participation in EAs, particularly the Southern African Development Community – Free Trade Area (SADC-FTA) and establishing its impact on the country’s trade.

The study employed descriptive and correlational designs. The descriptive design(trend and tariff schedule analysis) were used to assess the extent of Zambia’s participation in the EAs with a view of establishing the country’s uptake of the preferences offered in different EAs. The correlation design used the Poisson Pseudo-Maximum Likelihood (PPML) estimator in a panel data fixed effects framework to evaluate the impact of the SADC-FTA on Zambia’s trade using disaggregated Harmonized System (HS) 6-digit trade data for the period 1997–17 for Zambia and two of its major trade partners in the SADC-FTA (South Africa and Zimbabwe).

The study establishes that a large proportion of the country’s trade increasingly takes place in preferential markets and is dominated by regional trade. The Southern African Development Community (SADC) is the country’s main import source while the European Union stands as its major export destination. The study also establishes that the SADC-FTA has had a positive impact on Zambia’s trade. Results indicate that tariff reductions following the SADC trade protocol have been quite effective on the growth of Zambia’s exports. However, despite the increase in trade, the trade shares have not increased correspondingly and this could be attributed tofailure by the member states to completely eliminate tariffs due to fear of losing tariff revenue and protecting existing domestic industries among other trade bottlenecks. The country therefore needs to address these bottlenecks by pushing for the complete liberalization of trade through theremoval of all pending tariff and non-tariff barriers if it has to benefit more from the EAs.