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The Protectionist Policies of Zambia

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After Independence the government of Zambia operated an inward oriented development strategy behind a number of barriers to free trade. Given the advantages of free trade and the principles of absolute and comparative advantage why adopt a policy of protectionism?

There are a number of reasons why countries erect barriers to trade and many were applicable to Zambia during the period after Independence:

• The infant industry argument.
• To protect their comparative advantage in an industry where there is over-dependence. The decline in the copper industry would lead to major balance of payments problems and a worsening of the debt situation of the country.
• To prevent structural unemployment in declining yet strategically important industries.
• To prevent dumping by foreign countries selling goods into the country at below the cost that the good would be produced at home.
• To prevent importing of harmful demerit goods. The European Union for example dump outdated and obsolete refrigerators containing dangerous ozone depleting gases in Zambia.
• To raise much needed foreign exchange revenue.
• To achieve self-sufficiency in the production of food.

The government of President Chiluba in line with the stabilisation policies and the structural adjustment programmes of the IMF, World Bank and the WTO have adopted a strategy of trade liberalisation. They are pursuing significant tariff policy changes intended to encourage the private sector development. The hope is that this will stimulate the export sector.

The country has reduced its tariff structure from a maximum of 100% down to 25% in an attempt to strengthen export competitiveness. The lowering of tariffs on imported raw materials ensures that Zambian business and multinational firms located in Zambia can obtain their inputs at near-world market prices.

0 to 5 % for most basic raw materials,
15 % for intermediate goods,
25 % for final products and capital goods.

About 60% of all tariffs imposed bear rates of 15 or 25%, while some 20% of lines have zero rates. Categories of imports to which the zero per cent rate applies are:

• raw materials, including natural rubber, sulphur, gypsum
• items of productive machinery, such as agricultural, horticultural and forest machinery for soil preparation
• certain merit goods including books, fertilizers and surgical instruments

Other raw materials and industrial machinery are subject to an import tariff of 5%.

By liberalising its trade and lowering and removing barriers to imports the government hopes to stimulate the private exporting sector of the economy provide the engine for growth of export earnings and economic growth.

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Related Glossary Items:
Protectionism
Demerit Goods
Merit Goods
Tariff
Inward Oriented Development
Structural Unemployment
Dumping
Trade Liberalisation

Related Issues:
The Structural Adjustment Policies of the IMF

Related Theories:
Protection:
The Imposition of Quotas
The Imposition of Tariffs and Welfare Loss
The Principle of Absolute and Comparative Advantage
Balance of Payments Policies
Infant Industries