TRADE AND GROWTH NEXUS IN ZIMBABWE: Quantifying the economic implications of joining the Tripartite Free Trade Area

Submitted by

V. Mufudza Tel +263 776 904 315E-mail: vmufudza@gmail.co.uk

February 2015

LIST OF ACRONYMSASEAN Association of South-East Asian Nations

1

CET Common External Tariff

COMESA Common Market for Eastern and Southern Africa

COMSTAT COMESA Statistics

CTN COMESA Tariff Nomenclature

CU Customs Union

DRC Democratic Republic of Congo

EAC East African Community

ERP Effective Rate of Protection

FTA Free Trade Area

GATT General Agreement on Trade and Tariffs

GDP Gross Domestic Product

ITC International Trade Centre

NRP Nominal Rate of Protection

NTP National Trade Policy

NTB Non-Trade Barriers

RTA Regional Trade Agreement

SADC Southern African Development Community

SPS Sanitary and Phytosanitary

TFTA Tripartite Free Trading Area

TMSA Trade Mark South Africa

UNCTAD United Nations Conference on Trade and Development

VAT Value Added Tax

WIR World Investment Report

WTO World Trade Organization

ZIMASSET Zimbabwe Agenda for Sustainable Socio-Economic Transformation

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ZIMRA Zimbabwe Revenue Authority

ABSTARCT

Zimbabwe, just like many other developing countries, engages and participates in various regional trade arrangements (RTAs) as a key strategy towards export-led growth.

This paper sought to establish the medium to long-range economic implication of Zimbabwe joining the Tripartite Free Trade Area (TFTA). The empirical evidence showing that a more open trade regime (under the TFTA) contribute more to aggregate economic growth, led to the conclusion that Zimbabwe has only more to gain from joining and participating in the TFTA.

KEY WORDS

National Trade Policy, productivity growth, aggregate level, disaggregated/sector specific level, Zimbabwe

1.0 INTRODUCTION

International trade is portrayed in literature as a very important catalyst for economic growth. Based on the ‘Ricardian theory’, trade facilitates more efficient production of goods and services by shifting production to countries that have comparative advantage in producing them. Several other studies have analyzed the export-led economic growth hypothesis. They argued that exports increase factor productivity because of better utilization of capacity and economies of scale. They also argue that exports are likely to alleviate foreign-exchange constraints and thereby facilitate importation of better technologies and production methods. Trade facilitates more efficient production of goods and services by shifting production to countries that have comparative advantage in producing them. It is therefore, no coincidence that Zimbabwe, just like many other developing countries, engages and participates in various regional trade groupings as a key strategy towards export-led growth.

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Zimbabwe is one of the 261 countries participating in the TFTA negotiations. Considering that the country is already a member of the Southern Africa Development Community (SADC) and Common Market for East and Southern Africa (COMESA) Free Trade Areas (FTAs), this implies that technically, benefits (or losses) to Zimbabwe will accrue from the decision to open-up trade with the TFTA member countries that have not been participating in the SADC and COMESA FTAs2.

Theoretically, there are potential benefits and costs of regional integration through trade creation and trade diversion3. Joining the TFTA creates a number of ‘adjustment impacts’ to the economy4, but, according to Mufudza et al (2014 pg 38) when trade creation arises from membership to a FTA, ‘it must result in net national welfare gains’. This study observed higher growth prospects from deeper integration which includes the TFTA than from participating in the SADC and COMESA FTAs only and concludes that the country has only more to benefit and very little to loose from joining the TFTA.

However, the study also realizes that the level of protectionism in the country is still very high regardless of its membership to the COMESA and SADC FTAs, thereby postulating that joining a FTA is not an end in itself. Zimbabwe, therefore, needs to fully utilize its existing trade agreements so as to exploit benefits of regional integration.

A wholesome assessment of the potential impact of the TFTA on Zimbabwe would require an analysis of all of the aforementioned dimensions of the trade reform impact, including employment effects but, due to unavailability of resources and scanty statistics on most of the parameters/proxies, this could not be done at this stage. Therefore, the conclusions of the study should be considered in light of this limitation.

This study is very original and forms part of the numerous other studies that seek to evaluate the country’s membership to different RTAs. It is envisaged that this paper, by providing a quantitative analysis of the costs 1Angola, Botswana, Burundi, Comoros, Democratic Republic of Congo, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Lesotho, Libya, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Rwanda, Seychelles, South Africa, Sudan, Swaziland, Tanzania, Uganda, Zambia and Zimbabwe2 These are Angola, DRC, Eritrea, Ethiopia, Libya and Uganda3Trade is created among member states when cheaper products substitute for the more expensive locally produced goods. However, trade diversion occurs when intra-bloc imports are substituted for imports from outside the group that are cheaper when both face equal tariffs. Rules of origin are required to prevent trade deflection where goods are simply imported through the FTA member with the lowest external tariff.

4 Including customs revenue, domestic production, employment, and prices of goods and the subsequent effect on households expenditure especially by the poor as well as harmonization costs across a wide range of trade policy instruments such as customs procedures, standards, Sanitary and Phytosanitary Measures (SPS), Intellectual Property Rights (IPR), competition policies, and trade facilitation.

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and benefits of joining the TFTA, will aid in the decision making process by the government of Zimbabwe in the TFTA negotiations.

1.1 The structure of the study

The reminder of the paper proceeds as follows; Section 2 gives the overview of the National Trade Policy of Zimbabwe, the theoretical framework is presented in Section 3, Section 4 is the methodology whilst Section 5 presents and analyses the regression results and Section 6 concludes.

2.0 OVERVIEW OF ZIMBABWE’S TRADE REGIME

The country’s current trade regime seeks to buttress the function of trade as the engine for sustainable economic growth and development in the country (National Trade Policy, 20125). The policy stems on, as one of its fundamental principles, respecting the role of trade integration as the cornerstone for the creation of larger markets and increasing trade flows.

Zimbabwe collects its trade revenues in the form of customs duty, excise duty; value added tax (VAT) and surtax6. The trade revenue regime in 2011 as highlighted in the 2011 National Budget was anchored on implementing measures aimed at supporting the productive sector. The customs policy was also aimed at ensuring sustained availability of basic commodities given the low capacity utilisation of the manufacturing sector. This affected mostly the bilateral trade with South Aftica, which is the country’s biggest trading partner, contributing over 50% of the country’s total revenue collections in 2011 alone. The econometric analysis in this study excluded South Africa figures to avoid an exaggeration of the possible effect of the proposed trade regime, the TFTA, on the economic growth of the country.

In the current trade regime, imports are accorded preferential treatment under the SDC- which is extended to goods from South Africa entering Zimbabwe under the SADC trade protocol; SADC- which is the preference extended to goods coming from the rest of SADC countries; COMESA 5 National Trade Policy (2012-2016), guiding the country’s trading activities up to the year 20166Customs tariff- this is calculated on value for duty purposes which is the sum of CIF and any other charges incurred before goods arrived at the border; Excise duty- This duty is applicable to tobacco and tobacco products; alcoholic and aerated beverages; fuel and petroleum products. It is calculated based on a specific or fixed rate per unit but can also be based on an ad valorem rate; Value added tax -Value Added Tax is charged at a rate of 15% on the Value for Tax Purposes (VTP) which is Value for Duty Purposes (VDP) plus customs duty payable; Surtax – 25% of VDP

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preferences on goods coming from the COMESA region; and bilateral preferences for goods entering Zimbabwe under the South Africa, Mozambique, Botswana, Namibia and Malawi bilateral preferential trade agreements.

2.1 Zimbabwe in the SADC FTA

Zimbabwe is a signatory to the SADC Protocol on Trade that was implemented in 2000. The country’s total trade with SADC countries constitute 67% of its trade with the world. From figure 1 below, it can be noted that Zimbabwe’s total trade value with SADC countries had been on the rise from US$4.5 billion in 2007 to over US$8 billion in 2011.

Figure 1: Zimbabwe’s trade with SADC countries

2007 2008 2009 2010 2011

-4000000

-2000000

0

2000000

4000000

6000000

8000000

EXPORTSIMPORTSTRADE BALANCE

YEAR

Source: ITC Trade Map Database

However, trade balance has been plummeting with a continued surge in imports over the period.

The main objective of the SADC trade protocol was to liberalise trade in goods and services and ultimately establishing a FTA in this region. The Protocol had a trade liberalisation programme in which 85% of all intra-SADC trade would be duty free by 2008 leaving the remaining 15% of imports that were classified as sensitive products to be fully liberalised by 20127 and for this purpose goods were classified into four categories, (A,

7TMSA Training Module on Tariff Liberalization, page 5A report on the State of the Manufacturing Sector for Zimbabwe

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B, C and E)8 depending on the degree of sensitivity of the sectors in terms of revenue generation, employment creation and strategic importance of a sector.

By 2008, Zimbabwe had complied with the phasing down of tariffs for products in categories A and B, with 87% of the tariff lines for both offers being zero rated. However, the country could not meet its obligations with respect to category C due to a number of challenges9 facing the economy which led to the country seeking derogation from the phasing-down of tariffs for Category C products which was supposed to begin in 2009.

Out of SADC’s current membership of fifteen10 , twelve11 countries established a FTA in 2008, including Zimbabwe, which is a step in the path towards deeper regional integration.

8Category A- tariff rates were to be reduced to zero upon the Protocol coming into force, during the year 2000;Category B- tariff reduction over an eight year period(2000-2008);Category C- tariffs to go down over twelve years period. Category E-Exclusion List – Goods such as firearms and ammunition to be excluded from the phase down process.

9 including antiquated technology, lack of lines of credit, low capacity utilization and continued sanctions among other factors that continued to cripple the operations visa vis productivity of the local industry10 Angola, Botswana, Lesotho, Malawi, Mauritius, Mozambique, Madagascar, Namibia, Swaziland, South Africa, Tanzania, Zambia and Zimbabwe. DRC, and Seychelles 11Botswana, Lesotho, Malawi, Mauritius, Mozambique, Madagascar, Namibia, Swaziland, South Africa, Tanzania, Zambia and Zimbabwe

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2.2 Zimbabwe in the COMESA FTA

Zimbabwe is also a founding member of COMESA since its formation as a Preferential Trade Area (PTA)12. It is already participating in the COMESA FTA and is already offering 100% COMESA FTA regime to FTA member states.

Currently COMESA membership stands at nineteen13, fourteen of which are participating in the Free Trade Area (FTA) which was launched in October 2000. Non-FTA member states (including Eritrea, Ethiopia, Uganda and DRC) are currently trading duty free, subject to compliance with COMESA Rules of Origin. There are no sensitive or exclusion lists.

In terms of its liberalisation agenda, COMESA is now at the Customs Union (CU) stage where the main issue is on the consolidation of programmes for the implementation of the Customs Union. Work towards this consolidation has been on-going in Zimbabwe and provisional schedules of sensitive products and tariff alignment have been completed. However, the proposal of the 5% tariff band is posing a challenge to the country due to its impacts on revenue and competiveness of locally produced goods. Reduction of tariff rates for raw materials which are at 5% to the 0% would result in revenue loss. Similarly, raising the country’s tariff rate for intermediate goods which are at 5% to the proposed 10% Common External Tariff (CET), might negatively affect the cost of production for the local industry and hence reduces its competitiveness. Zimbabwe’s top five COMESA Partners are Zambia, Malawi, DRC, Swaziland and Mauritius14.

12COMESA Official Reports, www. comesa.int13Burundi, Egypt, Eritrea, Ethiopia, DRC, Kenya, Libya, Malawi, Mauritius, Mozambique, Madagascar, Namibia, Swaziland, South Africa, Rwanda, Tanzania, Zambia, Zimbabwe and Uganda

14 COMSTAT Database

8

Figure 2: Zimbabwe trade with COMESA

2007 2008 2009 2010 2011

-400000

-300000

-200000

-100000

0

100000

200000

300000

400000

500000

600000

EXPORTS IMPORTS TRADE BALANCE

YEARS

Billi

ons U

S$

Source: COMSTAT Database

3.0 LITERATURE REVIEW

3.1 Theoretical Background

International trade is portrayed in literature as a very important catalyst for economic growth. Several studies which have analyzed the export-led growth hypothesis argued that exports increase factor productivity because of better utilization of capacity and economies of scale. They also argued that exports are likely to alleviate foreign-exchange constraints thereby facilitating importation of better technologies and production methods.

Given the market clearance principle equation; Y= C+I+G+(X-M) where ‘Y’ is the output level, ‘C’ is total consumption, G is government expenditure and ‘I’ represents domestic investment; the trade policy regime, besides directly affecting output through X-M in the equation above, could also indirectly influence growth through influencing the location and internalisation of the potential gains from Foreign Direct Investment (FDI). In literature, differences in the potential gain from FDI under the different trade policy regimes, (as noted by Kokkoet. al., 2001; Kohpaiboon, 2006), are consistent with the ‘eclectic theory’ postulated by Dunning [1993] supported by Khopaiboon (2010) who observed that restrictive import-substitution (IS) regime is likely to induce ‘local market

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seeking FDI’ to be located in the country, whereas the efficiency-seeking investors are likely to gravitate toward a country with an export promotion (EP) policy. Whilst UNCTAD WIR (2013) postulated that trade policy and FDI strategies can be used to complement each other for the greater good of the country, Mufudza (2015) also contented that national trade policy of a country enhances the direct and indirect impact of FDI on domestic firms' productivity and subsequently, overall growth rate of the country.

3.2 Motivation for Deeper Integration in RTAs

Article 24 of the General Agreement on Trade and Tariffs (GATT) allows member states to form a regional trade agreement provided they eliminate within the union trade barriers on substantially all trade and they do not raise trade barriers on goods produced outside their union15.Regional trade agreements have become a critical tool for trade policy for virtually all the member states of the WTO, with many belonging to more than one arrangement. Of note in the recent years, is the proliferation of these arrangements and increased share of the world trade is actually taking place through the regional arrangements.

Bilateral or regional integration can be an important engine of trade competitiveness, both for small, very poor, landlocked countries and for less regionally integrated or diversified middle-income countries (Chauffour and Maur, 2011). According to Schiff and Winters (1998), the need for regional integration has been reinforced by the effects of globalization. RTAs are believed to be a channel through which developing countries of the world can be integrated into the world economy given a meager share of their contribution to the global trade. These agreements also act as a stepping stone to increased integration within the global economy. Developing countries have also embraced the option of trade liberalization through regional trade arrangements as a means to foster their countries’ economic growth and poverty reduction. Countries are also motivated into regional agreements to bind themselves to better policies thereby attracting foreign direct investment, obtain more secure access to major markets, enhance security and democracy amongst member states, deepen integration, and foster growth and development for their economies.

One intended effect of a RTA is, through the reduction and removal of tariffs, that it enables more efficient producers in a region by expanding production (and reap economies of scale and scope) to the advantage of 15https://www.wto.org/english/res_e/booksp_e/analytic_index_e/gatt1994_09_e.htm

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consumers and the detriment of less competitive producers (Keane et al, 2010). Market access conditions are not only determined by tariffs but rules of origin, customs procedures and other domestic policies such as standards (Chauffour and Maur, 2011). However, rules of origin are at the core of regional integration as they set the eligibility of products to enjoy the preferential access. They basically prevent trade deflection but can in themselves be a non-tariff barrier if too restrictive to prevent market access to eligible products. Restrictive rules of origin have the effect of increasing the administrative costs to the country that is to conform to the rules of origin hence reducing the competitiveness of the traded goods thereof. Complex rules of origin increase the burden to customs procedures and may compromise progress on trade facilitation. They therefore need to be simplified, consistent and predictable in order to foster growth of trade and development.

Standards provisions in regional integration agreements are likely to have welfare enhancing effects and focus on environmental protection, consumer safety, and animal health. They however can impede trade as compliance costs are often too high hence prevent goods from the member states to enter new markets.

Kemal (2004) argues that there are dynamic effects of regional integration where regional grouping results in specialization in accordance with comparative advantage and the scale economies would result in reduction in costs of production and that is welfare improving. World Bank (2000) highlights that membership in a regional integration agreement has implications on a member country’s whole economy with some sectors facing opportunities while others contract. Such changes are caused by competition and scale effects as well as trade and location effects. As national markets become more integrated, producers enjoy economies of scale and are exposed to more competition as monopoly tendencies in the member states are eroded. This competition stimulates production efficiencies at the industry levels.

Further regional integration agreements have welfare implications on both producers and consumers through what is known as trade creation and trade diversion as postulated by Viner (1950)16. Trade is created when cheaper products from other member states are allowed to substitute for more expensive domestic production. In other words, this results in consumer welfare gain as consumers can now buy goods at cheaper prices hence an increase in their real income. On the other hand trade is 16http://www.academia.edu/4845633/Perspectives_of_Regional_Integration_in_the_East_African_Community

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diverted by substituting intra-bloc imports for imports from outside the group that were cheaper when both faced equal tariffs (Schiff and Winters, 2003). Thus there is welfare loss when trade is diverted as consumers will be buying more expensive goods from less efficient and high cost producers, further the government will experience a reduction in tariff revenue. The concept of trade creation and trade diversion as developed by Jacob Viner however, relate to world welfare. In the case of an individual country trade diversion may mean the price of the goods go down so the consumer within the importing country benefits but the government would not collect any tariff revenue.

In a bid to reap benefits of economic growth through openness, African countries have formed eight RECs recognised by the AU as the building blocks of the African Economic Community, (UNECA, 2010)17.

This study employs a quantitative methodology based on an econometric expression of the market clearance principle to answer to basic questions that seek to evaluate the possible participation of Zimbabwe in the TFTA, establishing the costs and benefits associated with such a decision.

4.0 METHODOLOGY

The analysis of the possible impact on output at both aggregate and disaggregated levels was done by running econometric regressions (using the STATA package) applied on a four-year period data18, from 2009- 20012. The econometric estimation employed in this study modifies the Cobb- Douglas production function to include trade and other growth control variables19 which have always been omitted by researchers. Controlling for other ancillary variables ensures that the coefficient of the observed variables, in this case trade, is not exaggerated and therefore plausible inferences can be made about the variable’s effect on growth.

The following regression equation was estimated to test the null hypothesis that a more open trade regime contributes more to aggregate economic growth versus the alternative that more openness under the TFTA does not contribute significantly to growth;

17 These are SADC, EAC, COMESA, ECCAS, UMA, IGAD, CENSAD and ECOWAS18 Obtained from the UNCTAD and ZIMRA databases19 Such as the government size (measured by government expenditure), official development assistance, terms of trade, the rate of inflation (as a proxy for macroeconomic instability) and institutional quality (representing political and institutional stability)

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gy= a0 + a1ERP+ a2Ω+ε (model 1)

Where,

gyi represents GDP levels expressed as logarithms, ERP is the effective rate of protection used to proxy the level of openness to trade (measured as the sum of customs duty, excise duty, surtax, and VAT) expressed in logarithm form, Ω is the control variable for other growth ancillary variables, a0 is the constant term, and ε is the error term.

The regression was run twice, first with ERP for all the 25 countries and then for only 19 Tripartite countries, excluding the six non SADC or COMESA FTA countries.

gy= a0 + a1ERP*+ a2Ω+ε (model 2)

Where ERP* in this case represents the level of protection Zimbabwe applies to the Tripartite region net of the duties originally charged to the six non-FTA member states.

For the sector-specific analysis, this study disintegrates the growth factors at sector level in order to establish the impact of openness in each sector. The hypothesis was;

H0: openness to trade result in higher productivity at sector level H1: openness to trade does not affect productivity at sector level

The following model was employed for sectors i, and t years

gyit = β0 +β1ERPit+ β3Ωit + εit (model 3)

Where the output level gy in the current year depends on the level of trade openness and other sector specific variables such as employment and capacity utilisation, among others

This study chooses to make use of level equations, rather than growth rates or first difference equations. This approach was used by Hall and Jones (1999) when they focused on institutions as the determinant factors of country differences in TFP levels.

Abdelhak (2000) also used levels of GDP in a growth accounting methodology to study the contribution of TFP in the ‘ASEAN miracle’. The major difference with Abdelhak’s approach is that this study uses econometric estimations instead of growth accounting. Econometric

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estimations were used recently by Ndulu and O’Connell (2008), Atardi and Sala-i-Martin (2004) when they studied drivers of economic growth in different regions of Africa. However, even these researchers’ methodology differs from the one this study employs because they used percentages rather than levels of GDP. The use of level equations expressed in logarithms allows for the results to be interpreted as elasticities.

5.0 RESEARCH FINGINGS

The medium to long-term impact of the trade reform was estimated econometrically using GDP and trade data for the period 2009 to 2012. Annexes 1 & 2 show the regression results from estimation of the models 1 and 2.

Model 1: Impact of the trade regime with respect to the 25 tripartite countries on GDP

The coefficient of the proxy for Zimbabwe’s openness to products from the tripartite region (ERPtfta) was negative and statistically significant at 5% level of significance.The R-squared of 0.0026 was also very low implying that plausible inferences could be made about this statistic. This agrees with literature that postulates an inverse relationship between economic growth and protectionism. The results show a -0.133% growth elasticity of protection.This implies that in the case of Zimbabwe, a percentage drop in tariff charges in the TFTA region will result in an increase in growth of more than 0.1%.

Model 2: Impact of the trade regime with respect to only 19 tripartite countries on GDP

Assuming that Zimbabwe signs a preferential agreement with the six countries out of the COMESA and SADC FTAs with everything else remaining constant, the equation sought to establish the magnitude of change in protectionism with the exclusion of these countries from model one and running the regression again to identify the resultant impact on growth.

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After running the regression model 2, which excludes the contribution of the six non-FTA countries to the level of protectionism, the level of the elasticity of growth improves significantly from 0.0133% to 2.233%. The study could not reject the null hypothesis that a more open trade regime contributes more to aggregate economic growth in the case of Zimbabwe.

Zimbabwe has had very minimal trade with these countries, most probably due to the lack of favorable trading arrangements, therefore, liberalizing most of its tariff lines in trade with these countries will have very minimal revenue implications in the economy. From the statistics, this study observed that the exclusion of the six countries from the tripartite group results in an average revenue loss of 21.2% over the four year period from 2009 to 201220.This is very minute compared to the resultant increase in the output elasticity which is over 100% (from 0.0133% to 2.233%). This implies that the revenue loss from joining the TFTA will be more than compensated for by the revenues generated from the taxes resulting from more jobs and more business created by the TFTA. However, the effective rate of protection remains high and the coefficient of -.0223292 is statistically significant implying that, with a growth elasticity of over 2%, Zimbabwe will benefit more from full implementation of the SADC and COMESA FTAs other than simply negotiating additional preferences with the other six countries making up the TFTA.

The major policy inference from this result is that joining the TFTA is not an end in itself for Zimbabwe but efforts should be made to fully implementing the commitments under the SADC and COMESA FTAs in order to maximize the country’s benefits.

Model 3: Impact of the trade regime on productivity at sector level21

(i) Agricultural Sector

Considering the possible sectoral effects of the trade regime on the Agriculture sector, the regression results also show a negative relationship between protectionism and the rate of productivity growth of the sector. The growth elasticity of protection at -0.25% with respect to all tripartite countries and -1.1% with the implementation of the TFTA, implies that the implementation of the TFTA agreement under the Acquis principle22 on its

20Appendix 4 show the tables with the revenue figures for the four year period inclusively and then exclusive of the non COMESA and SADC FTA member countries.21Considering the three key sectors classified according to ISIC Revision 322 Draft Report Establishing the Tripartite Free Trade Area, 2009 Roadmap for Negotiating and Establishing the COMESA-SADC-EAC Tripartite Free Trade Area (2011)

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own will have a positive but dampened effect on growth of the sector. Complete removal of tariffs in full implementation of both the SADC and COMESA FTAs will benefit the sector more.

(ii) Services sector

Although trade in services is mainly affected by measures other than tariffs, the regression results in this model helps to quantify the extend of the effect of duties charged on key enablers of expansion of the sector. It was also notable that with the sector will benefit significantly from the removal of tariffs, based on the Acquis principle, in the TFTA. The realized coefficient of ERP -.0213049 is statistically significant.

iv) Industrial sector

With a coefficient of -.0306915 which is significant at 5% level, growth in the industrial sector is the most sensitive of the three sectors to changes in the trade regime. This implies that with the successful implementation of the industrialization thrust under the Value Addition and Beneficiation Cluster of the ZIMASSET, this sector will benefit significantly from the country’s membership to the TFTA.

6.0 CONCLUSION

This study sought to establish the magnitude of the impact on Zimbabwe of joining the proposed TFTA using quantitative techniques.

The econometric analysis indicates that the elasticity of productivity with respect to trade liberalisation following the establishment of the TFTA exceeds that of prior arrangements, that is, the SADC and COMESA FTAs only, which implies that the TFTA is important to Zimbabwe regardless of the country being a member of other regional FTAs already.

This study concludes that, by joining the TFTA, Zimbabwe will benefit from increased trade and trade related cooperation. This includes enhanced market access, the harmonisation of trade related policies, including customs procedures, standards, SPS, intellectual property rights and competition policy. However, the study focused on market access issues only because of their quantifiable nature and availability of statistics. This

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study emphasizes that other non-tariff measures that constitute a great pillar of the trade policy should not be ignored if Zimbabwe is to maximize her benefits from participating in the TFTA23.

References

1. Abdelhak Senhadji, “Sources of Economic Growth: An Extensive Growth Accounting Exercise”, International Monetary Fund Vol. 47, No. 1, 2000

2. African Union Commission (2013) Status of Integration in Africa (SIA IV) 2013

3. Atardi, E. V. and X. Sala-i-Martin, 2004, ‘Economic tragedy of the XXth century: growth in Africa’, NBER Working Paper No. 9865.

4. Chauffour J. and Maur J (2011) Preferential Trade Agreement Policies for Development: A Handbook, Washington, DC: The World Bank, 2011

5. COMESA-EAC-SADC (2011) “Tripartite FTA Negotiating, Principles, Processes and Institutional Framework”. Guidelines for Negotiating the Tripartite Free Trade Area among the Member/Partner States of COMESA, EAC and SADC

6. GoZ. (2013). GoZ (2013) Constitution of Zimbabwe Amendment (No. 20) ACT . Harare: Fidelity Printers and Refiners.

7. GoZ. (2013). Zimbabwe Agenda for Sustainable Socio-Economic Transformation. Harare: Fidelity Printers .

8. Hall, R., and C. Jones, 1999, “Why Do Some Countries Produce So Much More Output per Worker than Others?” Quarterly Journal of Economics, Vol.114 (Feb.), pp. 83-116.

9. Keane, J., Calì M., & Kennan J., (2010) Impediments to Intra-Regional Trade in Sub-Saharan Africa, Overseas Development Institute

23 cumbersome customs procedures, roadblocks and multiple documentation, unnecessary SPS and technical regulations on imports, infrastructural development and as well adoption of measures to promote industrialization

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10. Kemal A. R., (2004) Exploring Pakistan’s Regional Economic Cooperation Potential, The Pakistan Development Review 43 : 4 Part I (Winter 2004) pp. 313–334

11. Mufudza V., Ngwaru K. and Zebron S. (2014). Opportunities and challenges of regionalism: Zimbabwe in the COMESA customs union. Developing Country Studies, ISSN 2224-607X, Vol. 4, No. 26, 37-41

12. Mufudza, V. (2015). Analysing the role of the trade policy in hanerssing the gains from foreign direct investment in Zimbabwe. Zimbabwe International Research Symposium 10th Edition, Book of Abstracts (p. 17). Harare: Research Council of Zimbabwe.

13. Ndulu, B., S. O’Connell, J-P Azam, R. H. Bates, A. K. Fosu, J. W. Gunning, D. Njinkeu, (2008). “The Political Economy of Economic Growth in Africa 1960-2000”, Vol. 2.

14. Schiff M. and Winters L.A., (1998) “Regional Integration as Diplomacy”. World Bank Economic Review 12 (2, May): 271–95

15. Schiff M. and Winters L.A., (2003) Regional Integration and Development, The World Bank Washington, DC

16. UNCTAD. (2013). World Investment Report: Global Value Chains: Investment and Trade for Development. New York and Geneva: United Nations.

17. UNECA (2010), “Promoting high-level sustainable growth to reduce unemployment in Africa”, Economic Commission for Africa.

18. UNECA (2010) “Assessing Regional Integration in Africa IV: Enhancing Intra- African Trade”, United Nations Economic Commission for Africa

19. Viner Jacob (1950) The Customs Union Issue, Carnegie Endowment for International Peace, New York.

20. World Bank (2000). “Trade Blocs”. Policy Research Report. New York: Oxford

University Press.21. Government of Zimbabwe Statutory Instrument 156 of 2011.22. www. comesa.int23. http://www.trademarksa.org/sites/default/files/publications/

Negotiating%20Principles%20%20-%2012.06.2011%20-%20English.pdf. Accessed on 24 June 2014

24. http://wto.org/english/tratop_e/tbt_infoe.htm25. www.wto.org26. http://www.academia.edu/4845633/

Perspectives_of_Regional_Integration_in_the_East_African_Community

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Annexes

Annex 1: Impact of the trade regime on GDP without the TFTA (25 countries’ tariff charges)

(i) Summary statistics

Variable | Obs Mean Std. Dev. Min Max

-------------+--------------------------------------------------------

lGy | 3 8.908373 .1842763 8.721478 9.089914

ERPtfta | 4 68.19448 7.996274 57.32948 76.60223

(ii) Regression output

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_cons 8.995789 1.729589 5.20 0.121 -12.98072 30.9723 ERPtfta -.0013368 .0263496 -0.05 0.968 -.3361399 .3334663 lGy Coef. Std. Err. t P>|t| [95% Conf. Interval]

Total .067915483 2 .033957742 Root MSE = .26027 Adj R-squared = -0.9949 Residual .067741128 1 .067741128 R-squared = 0.0026 Model .000174355 1 .000174355 Prob > F = 0.9677 F( 1, 1) = 0.00 Source SS df MS Number of obs = 3

. reg lGy ERPtfta

Annex 2: Impact of the trade regime on GDP with the TFTA (19 countries’ tariff charges)

(i) Summary statistics

Variable | Obs Mean Std. Dev. Min Max

-------------+--------------------------------------------------------

lGy | 3 8.908373 .1842763 8.721478 9.089914

ERP | 4 64.84616 7.970567 57.2612 73.55696

(ii) Regression output

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_cons 10.2915 1.004445 10.25 0.062 -2.47118 23.05419 ERP -.0223292 .0161531 -1.38 0.399 -.2275742 .1829157 lGy Coef. Std. Err. t P>|t| [95% Conf. Interval]

Total .067915483 2 .033957742 Root MSE = .15275 Adj R-squared = 0.3129 Residual .023331558 1 .023331558 R-squared = 0.6565 Model .044583925 1 .044583925 Prob > F = 0.3987 F( 1, 1) = 1.91 Source SS df MS Number of obs = 3

. reg lGy ERP

Annex 3: Potential effects of the TFTA at sector level

(i) Regression output for Agriculture

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_cons 7.723079 .3443679 22.43 0.028 3.34747 12.09869 ERP -.0110953 .005538 -2.00 0.295 -.0814623 .0592717 lAgric Coef. Std. Err. t P>|t| [95% Conf. Interval]

Total .013750425 2 .006875213 Root MSE = .05237 Adj R-squared = 0.6011 Residual .002742438 1 .002742438 R-squared = 0.8006 Model .011007987 1 .011007987 Prob > F = 0.2947 F( 1, 1) = 4.01 Source SS df MS Number of obs = 3

. reg lAgric ERP

(ii) Regression output for Services

_cons 9.370742 1.15426 8.12 0.078 -5.295528 24.03701 ERP -.0213049 .0185624 -1.15 0.456 -.2571626 .2145529 lServices Coef. Std. Err. t P>|t| [95% Conf. Interval]

Total .071397677 2 .035698839 Root MSE = .17553 Adj R-squared = 0.1369 Residual .030810526 1 .030810526 R-squared = 0.5685 Model .040587151 1 .040587151 Prob > F = 0.4563 F( 1, 1) = 1.32 Source SS df MS Number of obs = 3

. reg lServices ERP

(iii) Regression output for the industrial sector

_cons 9.629476 1.230539 7.83 0.081 -6.006005 25.26496 ERP -.0308915 .0197891 -1.56 0.363 -.2823357 .2205527 lIndustry Coef. Std. Err. t P>|t| [95% Conf. Interval]

Total .120348645 2 .060174322 Root MSE = .18713 Adj R-squared = 0.4181 Residual .035017266 1 .035017266 R-squared = 0.7090 Model .085331379 1 .085331379 Prob > F = 0.3627 F( 1, 1) = 2.44 Source SS df MS Number of obs = 3

. reg lIndustry ERP

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