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Zambia's Trade Policy

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After Zambia achieved Independence in 1964 the government of Kenneth Kaunda embarked on an inward oriented interventionist approach to economic development. It followed policies of protectionism and strict foreign exchange controls and aimed at industrial import substitution and agricultural self-sufficiency.

Some economists argued that the economic performance of the country was disappointing and characterised by inefficient production in many sectors of the economy, depressed exports and a large parallel market. International trade was heavily regulated through a system of fixed exchange rates, import and exporting license requirements, exchange controls and tariff and non-tariff barriers.

The Government of President Chiluba , elected in 1991, reversed many of these policies, adopting an outward oriented approach with a much reduced role for the state in resource allocation. Their policies of privatisation, deregulation and market liberalisation also extended to trade.

During the 1990s the government made a number of reforms. They,

• engaged in a programme of tariff reductions
• abolished the fixed exchange rate allowing the value of the kwacha to float
• expanded the number of open trade import licences on to 90% of merchandise imports thus considerable reducing restrictions on imports
• promoted regional trade liberalisation through encouraging the development of the Common Market for Eastern and Southern Africa, COMESA and SADC

The result of the removal of the many import tariffs which used to protect Zambian industry from outside competition have not been altogether favourable. Manufacturing industries, such as textiles, that used to produce import substitutes have collapsed under the weight of cheap imports from Asia and the trade in second-hand clothes from Europe. Paid employment in mining, manufacturing and agriculture fell by nearly 40% during the 1990s. The result has been some inward investment - such as the South African supermarkets - but also complaints about widespread unemployment.

It has also had a negative impact on government revenues which fell by more than 30% in real terms. With a weak tax base, tariffs were an important source of government finance before liberalisation.

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Related Glossary Items:
Import Substitution
Current Account
Trade Liberalisation
Inward Oriented Development
Outward Oriented Development
Deregulation
Privatisation

Related Issues:
Zambia's Exports and Imports
Zambia's Exports and Imports
The Structural Adjustment Policies of the IMF

Related Theories:
Fixed Exchange Rates
Floating Exchange Rates
Balance of Payments Policies
Interpreting the Balance of Payments
Trade Creation and Trade Diversion
Terms of Trade
The Formation of Trading Blocs