Linkages between trade, development and poverty reduction (TDP)

Zambia must re-assess gains from trade agreements – Prof Seshamani

September, 2006

Zambia must be careful when signing International trade protocols since her industries cannot absorb the shocks of having to compete with foreign counterparts, Professor Venkatesh Seshamani has observed.

rof. Seshamani, who is the University of Zambia (UNZA) head of the department of economics, said this implies that Zambia does not seem to have the supply side capacity to exploit the opportunities that would be given under any international trade agreement.

Presenting a paper entitled Trade Liberalisation and its Impacts in Zambia yesterday, Prof. Seshamani said foreign products have led to the closure of a number of local industries and Zambia has a good lesson to prevent further adverse effects.

“Zambia must re-assess the gains from the trade agreements that have already been signed under COMESA andSADC because the benefits have not been overwhelming. For example, Kenya does not pay duty on cooking oil but Zambia pays 15 percent, hence the need to delay those agreements that have not yet come into effect ,” Prof Seshamani said, “We should realize the danger of 100 percent removal of duty on wheat under SADC trade protocol and once this agreement if effected in 2008 Zambia’s market will be dominated by foreign industries from giant economies like South Africa. So these protocols have introduced unfair trade practices that have in turn killed local productions hence the need for a more strategic approach.

He noted that the business community has also taken too long to adjust to the liberalised environment.

“This slow process if adjustment is largely attributable to government’s failure to provide necessary direction like has been the case with several sectors, for instance, had over the years remained widely underdeveloped but has in the recent years improved and is able to harness local savings to support investment although the cost of borrowing is still high.”. Prof. Seshamani said, “And it must be realised that trade liberalisation is just one necessary condition for economic growth and not a sufficient condition to reduce poverty especially given the unbalanced relationship between economic growth and poverty reduction and generally the objective function of most business is to maximize profits and thus in order for trade liberalisation to benefit the poor there has to be coherence between trade policies and national development policies.”

Prof. Seshamani together with Felix Simco, presented a paper at the consultative dialogue on linkages between trade, development and poverty reduction, organised by the Organisational Development Community Management Trust (ODCMT) and the Consumer Unity and Trust Society (CUTS).