Reported by
Faridah N Kulumba
The government of Tanzania is to Ratify Free Trade Area Agreement between June and October this year. Mr Emmanuel Buhohela ,Tanzania’s director of government communication at the Ministry of Foreign Affairs and East African Cooperation told The Citizens that the document will be taken to Parliament for endorsement of the cabinet first.
Buhohela said preparations have already been completed. “We have taken a long time to reach this point with all the stakeholders including experts, business people being on board before heads of state approved it and for now we are waiting for the parliament to finalize,” he said.
About the Free trade area
A free trade area is a region in which a group of countries have signed a free trade agreement and have maintained little or no barriers or quotas between each other.
It tend to promote free trade and the international division of labor, though the provisions of the agreement and the resulting scope of free trade is subjected to politics and international relations.
However, free trade has been criticised both for costs that are associated with increasing economic integration and for artificially restraining free trade.
The African Continental Free Trade Area
The African Continental Free Trade Area (ACTFA) presents a major opportunity for African countries to bring about 30 million people out of extreme poverty and to raise the income of 68 million others who live on less than $5.5 per day.
The World Bank report, The African Continental Free Trade Area: Economic and Distributional Effects, is designed to guide policymakers in implementing policies that can maximize the agreement’s potential gains while minimizing risks by creating a continent-wide market to reduce all trade costs.
Why it took long for Tanzania to ratify the Free Trade Area Agreement
37 African countries so far have already ratified the treaty. Tanzania is in the final stages of ratifying the agreement which will enable all African countries including Tanzania to do business without restriction.
And in this year, African countries officially started trading under the African Continental Free Trade area, but Tanzania did not start with them due to the fact that the government had categorically stated that it was still evaluating the benefits of the agreement before ratifying.
The deal, is signed by 54 of the African Union’s (AU) 55 members state commits countries to 90 percent tariff cuts within a five year period.
Tanzania’s Minister for Foreign Affairs and East African Cooperation Liberata Mulamula explained that they were waiting for the parliament to approve the agreement during the commemoration of the African Day.
“So far 54 countries out 55 African countries have signed the agreement, including Tanzania,” Mulamula said.
She said that they have been negotiating on excise duty and they have reached 75 percent and discussions on the origin of goods have reached 86 percent.
Ms Mulamula added that Tanzania has continued to participate in the talks through the East African Community and has already submitted its recommendations.
What will Tanzania gain or lose after joining free trade?
According to the United Nations Economic Commission for Africa, Tanzania may lose 1.3 percent of total government revenue on removal of some tariffs but at the same time will benefit more from trade pact.
The Economic Commission for Africa’s director for the Eastern Africa sub-region office Mama Keita said Tanzania is expected to experience a large tariff revenue loss, equivalent to 1.3 percent of total government revenue but will also benefit the most.
“But our estimate also indicate that it is one of the countries which will benefit most from the ACFTA, through higher levels of trade and economic activity,” Ms Keita said.
Going by the current figure on revenue collections, hundreds of billions will be lost in the revenue but that will be offset by gains.
The gains
The gains include increased economic growth of four percent and that Tanzanian exports to Africa will increase by between 23 and 32 percent, according to Economic Commission for Africa.
The ACFTA will also lead to net welfare gains over $1.8 billion for consumers in East Africa, with the bulk of the gains accruing to Tanzania, Uganda and Ethiopia.
Liberata Mulamula Tanzania’s Minister for Foreign Affairs and East African Cooperation noted that after the ratification process goes through parliament, Tanzania will be able to promote trade across the continent because all barriers will be removed.
“This will be good for our countries, because there will also be a joint procedure for determining the tax to be applied on the goods traded,” she said.
Mulamula also said that when Tanzania ratifies the Free Trade Area deal, it will be an opportunity to develop the country’s industries and sell value added products across Africa instead of solely relying on import.
The ACFTA will also boost production in the pharmaceutical sector in Tanzania, the country has embarked on sh 1.189 trillion ($517 million) pharmaceutical project that will see establishment of three medicine manufacturing plants through partnership with the private investors.
But during President John Pombe Magufuli’s administration it was states that even in a free trade a area, goods crossing borders must be checked by multiple agencies including the tax authorities, plant health inspectorate, departments of human health, livestock control and forestry.
