Tanzania : Trade Policy Making

1. Fostering Equity and Accountability in the Trading System (FEATS) Tanzania National Dialogue – 22 May 2009 Presentation by Clement Onyango, Centre Manager, CUTS Africa Resource Centre, Nairobi Tanzania: Trade Policy Making

2. Structure of Presentation • Economic background • Explanation of Tanzanian trade policy • Trade policy process • Key government institutions • Consultative mechanisms • Stakeholder views • MITM, other government institutions, private sector, CSOs • Inclusive Trade Policy Making (ITPM) index

3. Brief Economic Outlook • 2007: population of 40.454 million and nominal GDP of 15.148 billion US$, 75.36% of population in rural areas for 2006 • Consistent growth in real GDP per capita over the last 15 years with an average annual growth rate of 1.9% between 1990 and 2005 • Particularly strong real GDP growth rate for 2000-2005 at 4.2%, levelled off at 3.3% in 2006 • the nominal GDP per capita almost doubled between 1990 and 2005, from US$ 189 to US$ 346$ • 35.6% of the population under the national poverty line in 2000/2001 • 2000-01, international poverty rates report 88.5% of the population living below $1.25 US dollars per day and 96.6% living below $2.00 US dollars per day • Agriculture provides bulk of the employment opportunities and is the major contributor to Tanzania's GDP • 2006, agricultural sector makes up 44.5% of total GDP • 2006, 73.1% of labor force employed in agricultural sector • 2000-2001, 16% of labor force employed in informal sector

4. Trade Profile • The balance of payments deficit has increased • In 1999 imports and exports were valued at 13.2% and 6.2% of GDP respectively • Trade Deficit increased and in 2007 imports and exports were valued at 28.6% and 12.2% of GDP respectively • Recent Developments • Improved macroeconomic stability: export diversification measures are having some success • shares of traditional exports have decreased from about 60% in 1998 to about 14% in 2007 and the share of non-traditional exports has increased from about 40% to 86% in the same period • Despite little progress in areas of export product and market diversification, integration in global economy is substantial and has been increasing • Trade as a percentage of GDP was 48.2% in 1995-99 which has climbed to 70.4% in 2008 • Trade Shares in regional agreements • 2007, 19.3% and 17.2% of total exports to COMESA and SADC member countries respectively • 2007, 3.7% and 19.3% of total imports from COMESA and SADC member countries respectively

5. Trading Partners • China is Tanzania's major trading partner in both imports and exports, contributing 10.8% of total imports and receiving 9.6% of total exports

6. Trade Relationships – Agreements and Partners • Tanzania involved in several regional and international trade agreements, these help to inform trade policy measures • Tanzania signed an interim EPA with the EU and is part of negotiations with the EU to conclude final regional EPAs as part of the Eastern and Southern Africa (ESA) and EAC • Benefits from AGOA, EBA, Cotonou, Lomé, SADC FTA, and bilateral agreements • Tanzania is an active member of the AU and a founding member of the EAC • committed to the goal of continent-wide, comprehensive African integration • EAC Secretariat and Parliament are housed in Arusha, Tanzania, demonstrating Tanzanian commitment to the goals of EAC regional integration agenda.

7. History of Trade Policy Making • Post independence (1961-1971) fairly liberal trade policy: encouraged commercial activities based on export of commodities but discouraged commercialization in production of food-crops • Policy of Confinement (1972-1983): increasing public sector control and direct government intervention (e.g. resource allocation, price controls, controls on movements of goods and services). • Initiation of liberalization policies: (1984-1994)1986 Economic Reform Program (ERP) - gradual introduction of market economy based on free trade. • 1995 – present: Joined WTO. Efforts to build a more competitive market economy and more effective participation in international and regional trading agreements • World Bank TTRI data for Tanzania reveals a more restrictive trade regime than the average sub-Saharan Africa country • Overall Trade Restrictiveness Index (including applied tariffs, preferential tariffs and non-tariff barriers) was recorded at 52.2% for 2008, 20% higher on average than other nations of the region • Tanzania participation in IF processes • While not directly related to the formulation of NTP 2003, the development and implementation of Tanzanian DTIS under the Integrated Framework (IF) has been a key influence on the evolution of Tanzanian trade policy since 2004 • IF process for Tanzania started in July 2004 and the first DTIS draft was completed by mid-2005 • Tanzania currently preparing a indicative five-year implementation plan for the (EIF)

8. Current Vision and Goals of Trade Policy • Tanzania developed a single, comprehensive trade policy in 2003, the National Trade Policy of 2003 • The NTP states “To enhance income generation and people’s earning power at the grass-roots level [is] the key to poverty reduction in fulfilment of the fundamental human right of equal opportunity as enshrined in the constitution of the United Republic of Tanzania.” • The NTP works to achieve the goals of National Development Vision for 2025 • General objective of NTP is to transform a supply-constrained economy into an export-led one with enhanced domestic integration and wider participation in the global economy • national trade liberalization programme of the NTP to be employed to achieve this • Tanzania Trade Integration Strategy (TTIS) 2009-2013 Framework Programme was adopted in early 2008 to implement NTP 2003 • TTIS component A: focuses on strengthening the capacity of the by enhancing its capacity to manage Trade Policy, Trade Strategy, and Aid-for-Trade formulation and implementation processes. • TTIS component B: focuses on developing the capacity of support institutions and assisting producers to meet international competitiveness standards to increase the competitive export supply of goods and services.

9. Trade Policy Making Process • MITM draft a Plan Of Work to start policy process to ensure that all stages in policy formulation are appropriately outlined • Steering Committee chaired by president of MITM is then created and includes all identified stakeholders • If funds are available, Steering Comm. Commissions background studies to consulting firms or national experts • MITM staff undertakes a literature review, field research and consultative meetings • Steering Committee often constitutes a team of experts that prepares the first draft based on various inputs and establishes a Technical Committee to examine the draft if needed • Once approved by the Technical Committee, the draft is presented to the Steering Committee • The Steering Committee may hold a National Workshop of more stakeholders if needed before finalizing the draft. • final draft policy is submitted to Inter-Ministerial Technical Committee (IMTC) for approval and then forwarded to the Cabinet • After Cabinet approval, the policy may be sent to the parliament if it requires a legislative action. • Once approved by the Cabinet or parliament, policy is implemented by MITM.

10. Governmental Trade Policy Making Institutions • Ministry of Industry, Trade and Marketing (MITM) • the official coordinator of all matters related to trade policy including trade policy formulation, international trade negotiations, and trade policy implementation • MITM has five core operational divisions, two of which are dealing with trade issues • Trade Promotion and Marketing Division • Trade Integration Division. • MITM activities include internal / external trade and marketing, market research, research in multilateral / bilateral integration, and bilateral cooperation. • Other Government Bodies: • Lead role of MITM in all matters of trade policy formulation and implementation is now well recognized • Yet several other government ministries and agencies are also involved in trade policy formulation and implementation. • Key Actors: Presidents Office, Planning, and Privatization (POPP), Ministry of Planning, Economy and Empowerment (MPEE), Ministry of Finance, Ministry of Foreign Affairs and International Cooperation (MFAIC), Ministry of Agriculture and Cooperatives, Ministry of Livestock Development, Ministry of Energy and Minerals, Ministry of Natural Resources and Tourism, Ministry of Infrastructure Development • other govt. bodies support MITM with additional research, policy guidance in specialized areas, financial analysis and support, etc.

11. Stakeholder Involvement • Civil Society Organisations (CSOs): • four broad categories of CSO activities: social services delivery; capacity building; advocacy and lobbying; and research and analysis • Unique to Tanzania, CSOs have come together to form networks to increase their reach and influence • networks try to advocate and lobby for specific actions and policies at the district and regional levels, sometimes coordinating with national advocacy CSOs to penetrate parliament / ministries with their concerns • Network example, Tanzania Association of NGOs (TANGO) • Capacity building CSOs in Tanzania work to strengthen the knowledge and skills of local CSOs to better contribute to policy processes (i.e. TRACE, EASUN, TANGO, Tanzania Gender Networking Programme) • Research and policy analysis CSOs have a mandate to undertake and produce analytical information • information is then used by capacity building, social services delivery, and advocacy CSOs, the government, and the private sector in trade policy processes

12. Stakeholder Involvement Private sector • Still at in an early stage of development due to the history of earlier policies that centred on socialism and public sector development. • With the changes in policy direction in the 1980s and 1990s, several private sector organizations emerged • Tanzanian Chamber of Commerce, Industry, and Agriculture (TCCIA) and the Confederation of Tanzanian Industry (CIT) • TCCIA is apex private sector umbrella organization • Membership of about 17,000, most are SMEs • Govt. almost always invites TCCIA to provide inputs on trade policy issues • Private Sector Foundation (PSF) • Most important for institutional dialogue with the government • an umbrella organization of other private sector and business organizations • government encourages the PSF to be its interlocutor with the private sector

13. Consultation Mechanisms • NBC - National Business Council • need for regular dialogue between the public sector institutions and the private sector is crucial to policy processes, dialogue should include all policy-related issues • NBC established in 2001 as highest level body for this dialogue purpose • 40 members, twenty representing various government agencies and twenty representing the private sector • PSF coordinates the private sector representation in the NBC. • Consists of five Working Committees including one on investment and trade issues • work of these Committees is facilitated by the PSF who coordinates analysis of specific policy areas for discussion • has encouraged close dialogue between the government and the private sector on various issues including trade and investment. • IMTC - Inter-Ministerial Technical Committee • standing body that consists of all Permanent Ministry Secretaries • primary objective of this is to provide a forum for collaboration and coordination among all government ministries • all policy issues requiring inputs and feedback from more than one ministry are taken to the IMTC • Policy issues approved by IMTC can then be forwarded to Cabinet for final approval

14. Consultation Mechanisms (cont’d) • NETT - National EPA Technical Team • MITM formed NETT to provide a forum to coordinate the development of Tanzanian participation in EPA negotiations with the EU • includes representatives from all the key stakeholders: other related government ministries and departments, the civil society, research institutions and academics, and the private sector • sets up Technical Working Groups to prepare position papers on key issues of interest to Tanzania in EPA negotiations, such as agriculture and services. • Establishment of NETT has been welcomed by the private sector and the CSOs as the only regular consultative mechanism on trade issues that brings together representatives of all key stakeholders. However, its mandate is limited to EPA negotiations.

15. Policy Direction President’s Office Planning and Privatization Ministry of Planning, Economy & Employment Ministry of Foreign Affairs & International Cooperation Policy Preparation MITM Ministry of Finance Board of External Trade Ministry of Agriculture & Cooperatives Policy Implementation Tanzania Revenue Authority Other Specialized Government Agencies Other Line Ministries

16. Trade Policy Making Map: Consultative Mechanisms’ Involvement

17. Stakeholder Views – MITM • MITM is at the centre of three sets of demands and expectations: EAC integration process, WTO agreements and negotiations, and domestic trade issues • MITM focuses mainly on the implementation of Tanzania Trade Integration Strategy (TTIS) that will ensure that objectives of NTP 2003 are achieved • To ensure effective implementation of TTIS, a Coordination Unit is being established in MITM • coordination unit to include representatives of all the relevant government ministries/departments as well as of TCI and TCCIA, but there is no representation of consumers and civil society. • MITM has improved but still lacks adequate human and financial resources to undertake all activities expected of it in relation to all trade issues • specific concern is the capacity of MITM to establish and manage formal mechanisms for stakeholder consultations. • Challenges: • Institutionalizing consultation and coordination mechanisms with all stakeholders – both in the government, the private sector and civil society; • Publicizing trade policy extensively to raise public awareness • Completing a capacity needs assessment of itself and other stakeholders to design and implement capacity building programs accordingly • Ensuring implementation of trade policy in a coordinated manner through regular reviewing and monitoring.

18. Stakeholder Views– Other Relevant Government Bodies • Three broad categories for other government ministries involved in trade related issues • providing policy directions to MITM, providing inputs and feedback to MITM, and undertaking implementation of trade policy measures • With regular interaction with MITM, three categories of other govt. Ministries • Those providing policy guidance to MITM (Ministry of Planning, Economy and Empowerment; Ministry of Finance; and Ministry of Foreign Affairs and International Cooperation) have good interaction with MITM, interaction is not limited to coordination through the IMTC • Those that should provide inputs and feedback to MITM. They interact mainly through the IMTC, which may not be sufficient. • Those ministries and agencies that are mainly concerned with implementation of trade measures, interaction with MITM is the weakest • the Ministry of Agriculture and Cooperatives should be more closely involved given the importance of agriculture in Tanzanian economy and trade • Recommendations for Improving other relevant Govt. Ministries: • Establish consultative mechanisms on trade that include all governmental stakeholders • Build the capacity of relevant ministries and agencies on trade issues within their respective mandates • Ensure a more regular interaction at the level of technical staff of MITM on the one hand and the technical staff of other relevant ministries on the other.

19. Stakeholder Views – Private Sector • Main umbrella private sector and businesses organization, TCCIA, has a good relationship with the government • The normal procedure for consultation is for the government to request inputs from TCCIA through its Federal office • At time, the government did not take into account the concerns of the private sector while making a major decision. • Example, both the TCCIA and CTI had strongly opposed the decision by Tanzania to leave COMESA • Suggestions to improve Private Sector involvement in trade policy • Further capacity development of umbrella organizations like TCCIA and TCI on trade policy issues • Transforming NETT into a Standing Consultative Committee on Trade and broadening its remit from just EPA to trade policy in general.

20. Stakeholder Views - CSOs • Tanzania Association of NGOs (TANGO) has been quite active on trade issues, undertaking lobbying and capacity building activities, particularly on EPAs • Unlike their counterparts in the private sector, CSOs were not invited to participate in regional or global EPA negotiations as part of the official Tanzanian delegation within NETT. • This experience of NETT indicates serious problems that CSOs face in participating in stakeholder consultations on trade policy issues in Tanzania

21. Stakeholder Views – CSOscont. • Challenges: • Limited understanding of trade issues among CSOs, • Inadequate funding for advocacy and research activities, • Fear among most CSOs of the consequences of engaging aggressively in policy advocacy which may not sit well with governmental authorities, • Lack of CSO focus on trade issues (e.g., most of them are working on multiple issues at the same time), • Inadequate advocacy skills, • Failure of CSOs to provide alternatives, e.g., their Stop EPA campaign could have been more effective had they provided ideas regarding viable alternatives to the form of EPA they were criticising, • Lack of engagement between private sector organizations and CSOs, • Poor coordination between advocacy CSOs and research institutions, • Lack of legal framework for NSAs engagement/participation in decision making processes, and • Lack of government interest and sustained commitment to involve CSOs in policy making processes as watchdogs

22. Additional Feedback • Tanzania needs to bring its National Trade Policy in line with its National Strategy for Growth and Reduction of Poverty (NSGRP) • Trade policy dimensions of the five year national development strategy should be addressed (NSGRP) and the NTP should be adapted to the new national development paradigm where needed. • A standing mechanism for stakeholder consultation on all trade issues should be established to engage civil society, farmers, and consumers, and private sector representatives • The EPA process had initiated the process for establishing systematic and regular mechanisms for consultations on trade policy issues with the private sector and civil society • There is a need for thorough feedback and evaluation, from the inception of a trade policy making measure till its final implementation

23. Good Trade Policy? • No one-size-fits-all policy • Economists generally agree that open trade policy is good for development • features of good policy include: • Coherence with national development policy • Supportive of and be supported by other government policies • Balance the interests of all key stakeholders • Conform with the commitments of the country under the WTO and other regional and bilateral agreements • Accompanied by an appropriate implementation plan

24. Process is Important • Determines whether the key features of good policy are attained which in turn determines the contents of policy. • May not result in best policy • but context and country specific • But widest possible buy-in and support from all key stakeholders • Support and ownership ensure policy’s relevance and proper implementation. • Outlining the key elements of the process also leads to the identification of the relevant stakeholders. • Important assumption: key stakeholders are an active part of the process with opportunities for equal participation and proportionate influence.

25. Analytical Tool – Linking Stakeholders with Essential Features of a Good Trade Policy through Trade Policy Making Process

26. Constructing ITPM • all the key stakeholders have been identified • they have equal opportunity to participate in the process • none of them is allowed to disproportionately influence the process nor the outcome in favor of its own interests. • Seven action variables, applied in two different groups • Variables 1-4 require action of primary government ministry in trade policy • Variables 5-7 require action of all other stakeholders • Three distinct indices are calculated for other relevant government agencies, private sector, and CSO categories of stakeholders respectively • maximum value of 1 (when the appropriate action has been taken by the concerned actor) • intermediate value of .5 (when some action has been taken by the actor concerned but such is not sufficient). • minimum value of zero (when the action has not been taken at all by the concerned actor) • Overall ITPM rating out of 13, index includes 4 distinct parts

27. Purpose: Tanzania ITPM • Increase the awareness regarding the political economy aspects of trade policy making in Tanzania • Assess in qualitatively terms the inclusiveness of trade policy making process in Tanzania in terms of the capacities, actions, and participation of main groups of stakeholders • Illustrate the areas where further efforts and action is required to facilitate capacity building initiatives for all those concerned • Facilitate the development of a more inclusive trade policy making process in Tanzania that will create local buy-in for the resulting policy. • Only such a buy-in can ensure a successful and sustained implementation of the trade policy to achieve the objectives of Vision 2025, NSGRP, and the TTIS.

28. Tanzania ITPM Index: Parts I and II

29. Tanzania IPTM: Parts III and IV