ࡱ> q ybjbjt+t+ AA]4DDDDh\DDghhX^ TW, g g g g g g g$hj/g/ghd g gY  gLO.^DD f^World Trade OrganizationRESTRICTED DOCPROPERTY "Symbol1" WT/TPR/G/106 25 September 2002 (02-4952)Trade Policy Review BodyOriginal: English TRADE POLICY REVIEW  DOCPROPERTY "Country"\* Upper ZAMBIA Report by the Government  Pursuant to the Agreement Establishing the Trade Policy Review Mechanism (Annex 3 of the Marrakesh Agreement Establishing the World Trade Organization), the policy statement by the Government of  DOCPROPERTY "Country" Zambia is attached.  ADVANCE \y 700  Note: This report is subject to restricted circulation and press embargo until the end of the meeting of the Trade Policy Review Body on DOCPROPERTY "Country"Zambia. CONTENTS Page I. introduction 5 II. ECONOMIC DEVELOPMENTS 19962001 5 2.1 Macroeconomic environment 5 2.2 Performance of Major Sectors (1996-2001) 6 (i) Agriculture 6 (ii) Mining 7 (iii) Manufacturing 8 (iv) Services 8 (a) Financial Services 8 (b) Tourism 9 (c) Transport 9 (d) Communications 10 (e) Energy 10 III. TRADE DEVELOPMENTS AND POLICY 11 3.1 Trade Policy Objectives 11 3.2 Domestic Laws and Regulations Governing Domestic Trade 12 3.3 Investment Measures 13 3.4 Trade Arrangements 13 IV. ZAMBIA AND THE MULTILATERAL TRADING SYSTEM 14 4.1 Implementation of the Uruguay Round Agreements 14 4.2 Implications of Other Trading Arrangements on Zambia 15 (i) Cotonou Agreement 15 (ii) European Union Everything But Arms Initiative (EBA) 16 (iii) The African Growth and Opportunity Act (AGOA) 16 4.3 The Doha Mandate 16 V. CONCLUSION 17 introduction Zambias Trade Policy is aimed at creating a competitive and productive economy driven by private sector initiative, which would improve living standards for Zambians. Since the last review in 1996, Zambia has continued to pursue various economic reform measures aimed at achieving positive economic growth, reducing dependence on copper and creating a solid base for poverty reduction. This has included moving towards a more open and deregulated economic and trade regime. Zambia has also continued supporting bilateral, regional and multilateral trading arrangements and has signed reciprocal, promotional and investment protection protocols with a number of countries. Despite all these efforts, Zambia has to date continued to be dependent on copper, which generates about 80 percent of her total export earnings. There are several reasons for this situation such as drought, HIV/Aids epidemics, external factors and inadequate investment and diversification efforts. Government has continued to pursue an ambitious privatisation programme, privatising well over 250 public enterprises out of a total of about 280 public enterprises by 2001. The biggest milestone since the inception of the privatisation programme was the commencement of the sale of Zambia Consolidated Copper Mines (ZCCM) and its assets in 1997. With this, the configuration of the Zambian economy tilted in favour of the private sector. At the beginning of 2002, Anglo American Corporation (AAC), the major private shareholder in the largest mining company in the country decided not to proceed with further investment in Konkola Copper Mines (KCM) (citing lack of viability due to low copper prices). This move by Anglo American Corporation (AAC), brought with it great uncertainty in the Zambian copper industry. The economic development prospects for Zambia will therefore depend on its ability to adjust to the changing economic environment, diversification efforts, to reduce the spill over effect of the recent development of the pull out of the Anglo American Corporation (AAC) from the copper industry. This and other developments both at the international and local arena have created a major challenge for Government to attain the targeted economic growth rates. In light of the uncertainties Government will be taking measures to diversify the economy in general within the shortest possible time. However, without deliberate policies by international players to assist Zambia meet the adjustment costs, it will be very difficult if not almost impossible for Zambia to meet the challenges of globalisation. ECONOMIC DEVELOPMENTS 19962001 2.1 Macroeconomic environment Since Zambia embarked on its structural adjustment programme in late 1991, the key economic objectives have been to strengthen the macroeconomic stabilisation efforts while advancing structural reforms in order to restore economic growth. Some macroeconomic stability was achieved in the short term, however, mining the driving force in the Zambian economy, continued to decline pulling down other sectors that depend on it. From 1996, the Government embarked on an Enhanced Structural Adjustment Facility (ESAF), aimed at moving towards a sustainable balance of payments position in order to achieve positive per capita growth. Real Gross Domestic Product (GDP) expanded by 6.4% in 1996 and by 3.3% in 1997. This performance was attributed mainly to the recovery in agriculture following good weather conditions in the 1995/96 farming season and the strong growth in non-traditional exports. In 1998 real Gross Domestic Product (GDP) declined by 2%. This decline in economic activities was recorded across most of the major sectors of the economy such as agriculture and mining. This was attributed to adverse weather conditions, the sharp decline in copper exports and the weakening of the financial position of the Zambia Consolidated Copper Mines (ZCCM). In 1999, Gross Domestic Product (GDP) increased by 2.4% due to the continued recovery of agricultural production. The economy however continued to be hampered by difficulties of Zambia Consolidated Copper Mines (ZCCM) and the delays in privatising it. Macroeconomic conditions were generally favourable in 2001. The economy registered a growth of 5.2% in 2001 compared to 3.6% in 2000. This was attributed to a strong growth in value added, especially in the larger sectors of wholesale and retail trade, manufacturing and mining. Some encouraging signs emerged in 2001 with the rate of inflation falling below 20%. In 1996 inflation increased to 43.5% from the 34.9% registered the previous year. Prices in1997 were relatively stable and inflation declined to 18.6%. There was an upswing of inflation to an average of 30.6% in 1998 and by the end of January 1999 inflation was 37.5%. A general downward trend in annual inflation was however registered in 1999 with an average of 20.6%. The rate of inflation accelerated to 30% in 2000. This was as a result of a sharp depreciation of the Kwacha vis--vis the US dollar by 37%, a steep rise in the cost of fuel, transport and other services. During this period fiscal stance weakened causing domestic fiscal deficit to be 3.4% of GDP. To address the monetary pressures on the exchange rate and prices in 2000, Bank of Zambia (BOZ) undertook to tighten monetary policy and began to pursue more aggressive open market operations. Macroeconomic conditions were generally favourable in 2001 with the rate of inflation at 18.7%. Money supply growth in 2001, fell from 74% to around 11% and the Kwacha appreciated in value by 8% against the US$ compared to a depreciation of 58% in 2000. In late 2000, Zambia obtained debt relief through the Highly Indebted Poor Country (HIPC) Initiative. This is expected to help minimise the countrys external debt commitments, standing at $6.5 billion at the end of 1999. By having reached the HIPC decision point in December 2000, Zambia would reduce its debt servicing payments during 2001 2003 from roughly $600 million to $165 million per year. At completion point, which is targeted for 2003, Zambias creditors would write off some $3.8 billion of debt in nominal terms. However, domestic debt, including arrears, has also risen to very high levels and the latter threatens the viability of small firms that supply food and services to Government. Although macroeconomic conditions were generally favourable in 2001, major challenges still remain, some of which are factors outside the countrys macroeconomic policy framework. From 2002 to 2004, Government envisages to attain broad strong sustainable growth by promoting increased investments and exports, managing national debt and rehabilitating infrastructure. With regard to financial developments, Government will aim to achieve the monetary policy objectives, which include limiting money supply so as to achieve low inflation, complimented by the lowering of the budget deficit as a percentage of Gross Domestic Product (GDP) and stability in energy and food prices. 2.2 Performance of Major Sectors (19962001) Agriculture Enhanced agricultural productivity is being given the highest priority in promoting economic growth, poverty reduction and food security. In the last decade the sectors contribution to GDP averaged 19 percent. In 2001, the sectors contribution to Gross Domestic Product (GDP) declined from 17.2 percent in 2000 to 15.9 percent. The real growth rate in the sector has been fluctuating significantly mainly due to the sectors high dependence on seasonal rainfall, reduced investment and the failure to strategically position this sector according to its comparative advantage. Trends over the last few years have also indicated that the agricultural sector has somewhat accelerated its diversification mainly due to the increase in the number of out-grower schemes in the country. In the period under review, the Government has attempted to create a positive policy environment within which agricultural market liberalisation can be consolidated. Policy and institutional improvements have focused in the last years on outstanding reforms in the key areas of consolidating the liberalisation of agricultural marketing, strengthening the liberalisation of agricultural trade and pricing policy; and streamlining the land tenure system to make it receptive to the policy of liberalisation. The Government in June 1998 reviewed the Agricultural Sector Investment Programme (ASIP) so as to make it more responsive in attaining its goals and objectives by taking into consideration the needs of different farmers in the sector. It was expected that the next stage of ASIPI, ASIP II would reinforce the progress made in ASIP I particularly in the development of public-private sector partnership and in the decentralisation of support to small-scale farmers in other groups at the local level. Government also sought to encourage the expansion of rural finance with a view to developing effective and demand driven financial intermediation and sustainable financial institutions. The overall Agriculture Policy is to facilitate and support the development of a sustainable and competitive agricultural sector that assures food security at national and household levels and maximises the sectors contribution to Gross Domestic Product (GDP). In order to promote food security, food production and incomes of farmers, Government has this year (2002) established a Crop Marketing Authority (CMA) to replace the Food Reserve Agency (FRA) that was established in 1996 to purchase food for strategic reserves from areas deemed economically disadvantaged. The CMA will be a buyer of the last resort for selected crops in outlying areas not serviced by the private sector. During the period from 2002-2005, Zambia will strive to improve the finance, investment, marketing, trade and agricultural-business climate; land and Infrastructure development; and technology development and dissemination. A targeted support system for food security will also be established. It is anticipated that positive developments in these areas will eventually lead to poverty reduction. Mining The vulnerability of Zambias economy due to its reliance on copper mining is a major concern to the Government. In 1997, Zambia ranked as the worlds seventh largest producer of copper, and the worlds second largest producer of cobalt. Today, Zambia holds 4 percent of the worlds known reserves of copper, and was the sixth largest producer of cobalt in 2000. In the year 2000, Mining and quarrying accounted for over 80% of Zambias merchandise exports of US$ 822 million out of the total of US$ 1050 million and contributed about 6 percent towards GDP. Mining in 2000, accounted for about two thirds of Zambias total earnings from the export of goods and for approximately 4.1% of real GDP. The country has other mineral resources such as ferrous and precious metals as well as industrial, agro and energy minerals that present potentially rewarding investment opportunities. Government amended its mining policy in 1995, to encourage private investment in exploration, development of new mines, in addition to returning the major copper mines to the private sector. In 1996, Government decided to restructure the mining industry and privatise the Zambia Consolidated Copper Mines (ZCCM) and its ancillary activities. The privatisation of ZCCM was in line with Governments policy on mines and mineral development, and her structural adjustment programme supported by the IMF and the World Bank. This called for competitive operation and development of the mining sector by private entrepreneurship. However, the real output in the mining sector continued to decline during the years under review (1996 to 2000). This is attributed to a drop in the production of copper and cobalt due to operational difficulties in several mines, which in turn was a result of lack of investment in the sector over the past years. In the year 2000 the Government completed the privatisation of its largest asset, ZCCM. The step raised economic confidence due to the sectors expected catalytic role in reviving the general economy. The mining and quarrying sector rebounded in 2001. The favourable performance was due to significant increases in copper and cobalt production. Recognising the importance of small-scale mining, Government in 2001, put in place a system aimed at facilitating the growth of the small-scale mining sector. Manufacturing This sector makes up 10.7% of the countrys Gross Domestic Product (GDP) and employs 9.6% of the workforce. The key sub-sectors are agro-based namely food processing, coffee, tea, tobacco and wood products. Other industries in manufacturing, include chemicals, rubber and plastics, industrial minerals and fabricated metal. The manufacturing sector has been faced with a number of constraints including lack of adequate investment, high production and communication costs, outdated technologies resulting in most local products being less competitive compounded by increased competition from cheap imports. To enhance the activities and competitiveness of the private sector, the Government has implemented a number of measures. These included, streamlining the Duty Draw Back and the Manufacturing under Bond systems, which provide relief to export producers through rebates of duties paid on imported raw materials. In addition the Import Declaration Fee and the Pre-shipment Inspection requirements on imports were eliminated in 1998. In 1998, the Government restructured the tariff system, by reclassifying some products and lowering duty on capital goods and raw materials to either 0 or 5% while maintaining a rate of 25% on imports of finished goods. Services The services sector is Zambias largest employer (over 60% of labour force) and accounts for 52.1% of Gross Domestic Product (GDP). Between 1995 and 1999, it contributed on average about 10% to GDP. This contribution has grown substantially over the past decade. Most of the growth has been from establishment of a number of financial sector firms with commercial banks dominating the sector. Financial Services Financial services are a major intermediate service that networks all economic activities. Firms need an orderly and effective supply of financial services in order to organize their production efficiently and effectively and in order to be competitive in both the domestic and international trade. The Bank of Zambia, which is the countrys Central Bank, regulates the financial system of the country. In 2000, Government amended the Banking and financial Services framework to strengthen the ability of the Central Bank to respond promptly and comprehensively to any adverse developments in the financial sector. Most non-banking institutions are now governed by the Banking and financial Services Act of 2000. The emergence of capital markets in Zambia has had a positive impact on the economic and financial sectors. The liberalisation of the insurance market has brought about a rapid expansion in the number of service providers. Of the eight insurance companies in existence in 1998, one was state-owned, one was wholly foreign owned, one was indigenous and the rest were a partnership between local and foreign investors. An Insurance and Pensions Authority was set up in 1998 to ensure adequate supervision of the pensions and insurance sectors. The enactment of the Prohibition and Prevention of Money Laundering Act in 2001, has legally equipped regulatory authorities to deal with the scourge of money laundering and related vices. Although, autonomous liberalisation and reform has increased the number of service providers in financial services sector, the market is still dominated by commercial banks. Zambia suffers from another financial development shortcoming, namely the absence of reliable sources of long-term credit and development banking. Almost all economic sectors are adversely affected by this limitation. There however exists a large potential for the development of financial services such as investment banks, pension banks and various non-banking institutions that provide long-term credit. Tourism Tourism is of export interest to Zambia and the aim is to develop a sustainable sector based on quality products and services which will be sensitive to national and community needs and aspirations. Measured by activities in the hotels, bars and restaurants, tourist arrivals and bed occupancy rates, the sector registered a phenomenal growth of 24.2% in 2001 compared to a growth of 12.3% in 2000. The sectors contribution to Gross Domestic Product (GDP) rose from 1.8 % in 1999 to a projected 2.1% in 2001. Originally dominated by parastatal companies, it is now dominated by the private sector especially hotels and tourist lodges. The main objective of the tourism policy introduced in 1997 is to develop a sustainable tourism sector. This policy aims at encouraging easy access for entrepreneurs seeking to enter the industry and to ensure the preservation of resources. The Government in 1998 passed the Zambia Wildlife Authority Act to transform the National Parks and Wildlife Services Department into an autonomous entity, the Zambia Wildlife Authority (ZAWA). ZAWA would address the problems encountered in the management of wildlife. In 2001 Government started the process of developing the Tourism Development Master Plan aimed at funding tourism investments in the country. Transport Transport and communications play a critical role in the growth and development of the economy. Government policy in the area of transport and communications has continued to be the rehabilitation and maintenance of infrastructure. Over the period 1994 to 2001, transport services contribution to Gross Domestic Product (GDP) growth averaged 3.2 percent in real terms. Being a landlocked country, transport costs account for 60 to 70 percent of the cost of production of goods. This proportion is too high in comparison to sub regional levels and this has worked against the competitiveness of Zambia exports. The transport cost element, is a major challenge to Zambias development efforts. Road and air transport services are completely in private hands. The objective of Government policy in this area was to improve operating efficiency and performance of the sector for the benefit of the customers changing requirements. Being a poor but large country, road transport will continue to be the major mode of transport. The major challenges associated with this; are the need for rehabilitation and maintenance, and linking this mode of transport with increased overall productivity for the economy. The implementation of ongoing programs of rehabilitation and maintenance of transport and communications infrastructure under the Road Sector Investment Programme (ROADSIP), which is a partnership between road users, the Government and donors, will continue. Communications Communication systems still remain largely underdeveloped. Zambian telephone density is only 0.18 implying that there are less than 2 phones per 100 population. Access to Internet services still remains very low with only about 5,000 users at the end of 2001. Postal services, on the other hand, cover the entire country with a network of 134 Postal Offices and 98 sub-Postal Offices, in addition to private courier services. In order to supervise and promote the provision of Communication services, the Government established the Communication Authority in 1994. The Communication Authority licenses cellular firms, private broadcasting stations, privately owned radio stations and Internet service providers. It is envisaged that the improvement in the infrastructure will stimulate and optimise existing productive capacities. Government will continue to pursue the following policy actions: i). Facilitate the setting up of communication facilities in tourist attraction areas, ii). Improve access to communications in rural areas and iii) encourage private sector participation in the provision of postal and courier services in rural areas. Energy Except for petroleum, which is wholly imported, Zambia is richly endowed with a wide range of indigenous energy sources particularly woodlands and forests for wood fuel, hydropower and coal. Woodlands and forests cover about 66 percent of the total land area and provide about 70 percent of the total energy needs. The hydropower resource potential is estimated at 6,000 mega watts (MW), although installed capacity is only 1,715.5 mega watts (MW), which contributes about 14 percent to total energy use. Petroleum contributes about 12 percent of the total energy needs. Apart from being a critical input in many sectors, the energy industry has a capacity to earn foreign exchange and is a major employer thus contributing to economic development and poverty reduction. The Government in 1996 initiated legislation and institutional changes in the energy sector. The National Energy Council was dissolved and the Energy Regulation Board was established to regulate and monitor the performance of the energy sector. Governments policy objective since 1997 has been to promote optimum supply and utilisation of energy, especially indigenous forms, to facilitate the socio-economic development of the country in a sustainable manner given its potential impact to the environment. Government therefore aims to increase electricity access from the current 20 percent to 35 percent, reducing the production of charcoal by encouraging other alternative energy sources and increasing electricity exports by 300 percent by 2010. Between now and 2010, Government will strive to enhance the capacity of current energy delivery infrastructure, create new energy delivery infrastructure and promote efficient production and utilisation of wood fuel. TRADE DEVELOPMENTS AND POLICY Zambia remains committed to creating an environment conducive for international trade. In this regard, therefore, Government has continued with its open approach to trade that extends beyond the region. Zambia will continue to be fully involved in developments in the Multilateral Trading System and will be fully committed to the objectives, principles and rules of the Multilateral Trading System. Zambias major trading partners are the Common Market for Eastern and Southern Africa (COMESA) member states, South Africa, EU countries and Japan. The major trading partners in COMESA are Zimbabwe, Malawi and the Democratic Republic of Congo. Zambias main imports are crude oil, chemicals and machinery, iron, steel and manufactured goods. The Traditional exports are copper and cobalt with the Non Traditional Exports being primary agricultural products, gemstones, timber, electricity, cement and textiles. Zambia is also keen to derive maximum benefits from the USA led African Growth and Opportunity Act (AGOA). In 1996, the value of exports was US$ 974.9 million, and in 1997, exports grew by 16.7% to US$1,159. A significant decline of about 25 percent was recorded in 1998. This was attributed mainly to a combination of reduced metal export volumes and prices, and the continuing price falls for agricultural commodities in the major export markets. In 2001 total export earnings increased to US$ 871 million from US$ 746 in 2000, this growth was attributed among others things to increased exports to South Africa following the market access resulting from the implementation of the Southern African Development Community (SADC) Trade Protocol. Nonetheless, copper continued to be a major foreign exchange earner for the economy during 1997 to 2001. On the other hand, the value of merchandise imports also declined in 1998 by 16%. This was a reflection of the generally weak domestic performance as well as subdued investment optimism arising from the delay in privatising the mining conglomerate, Zambia Consolidated Copper Mines (ZCCM). In 1999 the value declined further by 10%. In 2001 a surge in imports destined for the metal sector stimulated by increased demand for intermediate and capital goods, resulting from a revival of mining activity, caused the value of imports to increase by more than 29% from the previous year (2000). 3.1 Trade Policy Objectives The Ministry of Commerce, Trade and Industry is responsible for the implementation and review of trade policies. Due to the crosscutting nature of Trade Policy, various executive institutions and organs of government administer other trade policy measures. Zambias judiciary plays a role in the interpretation of trade related statutes and laws. The Ministry of Commerce, Trade and Industry, at times initiates policy measures in consultations with the private sector and other relevant institutions. It has also institutionalised the participation of the private sector in policy making by setting up a Public- Private Sector Consultative Forum at the Ministry of Commerce, Trade and Industry. This meets regularly to discuss trade and related issues affecting the economy as a whole. The primary objectives of Zambias trade policy are as follows: To maintain an open economy with a liberalised import and export regime that supports industrial development; To encourage the production of exportable products and continue the process of diversifying the export base; To support and encourage exports of value added goods; To seek new markets and strengthen Zambias trading ties with regional and other international markets; To ensure efficient customs administration and fair trade practices; and reduce poverty through sustainable economic growth. The Government has from 1996 continued to streamline export procedures through the simplification and harmonisation of relevant documents; reform direct and indirect taxation both in structure and in procedure, and to control fiscal deficit. In 1998, the administration of the duty draw back scheme was reformed to make it an efficient instrument; the Import Declaration Fee was abolished to ensure consistency with Zambias commitments to the ϲʹ and Pre-shipment inspection requirements were also abolished in 1998. Government remains committed to the constant process of reforming the tax system to yield sufficient resources for Government to finance development and other expenditures. In the mining sector, for example, Government will remove the discrimination that exists in the sector and reduce the Mineral Royal Tax from 2 percent to 0.6 percent on the gross revenue of mineral revenue earned by mining companies. In addition, there will be no payment of withholding tax on dividends, royalties and management fees to share holders or their affiliates, including any lender to the affected mining companies. All these measures are aimed at sustaining the fortunes of the mining industry, which will continue to be a major player in the economy. Custom duties are constantly being reviewed down wards in line with Zambias commitments. Excise duty and others levies on diesel have been reduced from 60 percent to 45percent to encourage production and distribution in the Agriculture and other productive sectors. 3.2 Domestic Laws and Regulations Governing Domestic Trade Reforms in the area of trade have created both opportunities and challenges for Zambian industries. The decline in the mining industry between 1996 -2001 posed major challenges for the entire economy including domestic trade. Liberalisation of the economy has led to a freer entry of imports, exposing the inherent weaknesses in the manufacturing sector. Many firms have closed and most of the few remaining ones are unable to withstand the competition from imports. Imports causing injury to domestic producers have prompted Government to examine other alternatives to deal with unfair competition. Government is contemplating the introduction of measures that are ϲʹ compatible to safeguard Zambian industries, from unfair competition. Since Zambias last trade policy review in 1996, Government has continued with structural reforms to improve efficiency and promote economic development. In particular, divestiture of Government interests in parastatal companies has allowed for more private sector participation. The Zambia Privatisation Agency (ZPA) whose act was passed in 1992 to spearhead the privatisation process will be strengthened to undertake post-privatisation monitoring. In 2001, Government passed the Export Processing Zones Act, to support diversification of the export base and address the lack of competitiveness and slackened productivity in the manufacturing sector, which has been caused by a number of constraints. Governments intention is to create a link between primary extraction and industrialization through addition of value to primary goods especially those for export. Such a programme is expected to induce capital market development, skills development, technology and research development, micro, small and medium enterprise development and rural industrialization. Government will introduce legal and regulatory framework to ensure the protection of industrial and commercial property rights. Zambia currently does not provide any trade-distorting type of domestic support mainly due to fiscal constraints faced. However, there is need for the Government to support its subsistence rural farmers in order to achieve better food security and rural poverty alleviation. 3.3 Investment Measures Private domestic and foreign investment is key to the growth of the manufacturing sector for stimulating economic growth and reducing poverty in Zambia. Interest rates during the period under review remained high constraining efforts to increase investment and output in productive sectors of the economy, particularly agriculture. Governments role is to limit the budget deficit to 3 percent of Gross Domestic Product (GDP) so as to reduce considerably the need for bank financing and thus support a reduction in interest rates. During 20012003, Government will direct public resources to support private investment in areas such as agriculture, tourism, manufacturing, science, technology and the services sectors. The 1994 Investment Act, which was amended in 1996, was meant to bring it in line with Government objectives to attain economic development. In addition, Zambia is a signatory to the Multilateral Investment Guarantee Agency (MIGA), which provides guarantees to investors. 3.4 Trade Arrangements In order to expand markets for Zambian products and promote trade, the Government actively seeks and supports bilateral, regional and Multilateral Trading arrangements. The key issues include the establishment of fair domestic and foreign trade regimes that facilitate trade to take place on a common set of agreed rules and one that does not stifle domestic production and that sales in foreign markets are not disrupted by certain restrictions. Zambia is a signatory to both the Common Market for Eastern and Southern Africa Free Trade Area (COMESA FTA) and the Southern African Development Community (SADC) Trade Protocol, whose objectives include facilitating, increasing and promoting intra-regional trade through the gradual reduction of tariffs. The regional groupings also make it possible for the member states to be attractive foreign investment destinations. Membership to both COMESA and SADC has to some extent expanded economic opportunities for Zambias domestic producers while creating a challenge to improve the competitiveness of products. This has also meant increased competition for Zambian products from increased imports. COMESA aims at establishing a Customs Union by the year 2004, while SADC envisages the establishment of a free trade area by the year 2008. Zambias dual membership inevitably brings about some complications in managing the regional trade policy because of the overlapping of some activities that may bring about duplication and even inconsistencies. Potential areas of duplication exist in infrastructure development, energy, basic industries, trade, monetary harmonization and insurance schemes. The solution to these problems lies in harmonisation of goals and objectives of the two regional trade agreements and those other areas of possible duplication between the two organizations. In 2001, a joint Task Force was established by Heads of Governments of COMESA and SADC to identify areas for harmonisation in order to avoid duplication and inconsistencies between the two regional agreements. The following areas have been identified as a starting point: Harmonisation of customs procedures and legislation, and a Regional Customs Bond Guarantee Scheme; Convene joint technical meetings on non-tariff barriers with a view of developing a coordinated programme for their elimination; Develop a regional legal framework for mutual recognition and implementation of standards, quality assurance, accreditation and metrology; and Design a regional programme on the harmonisation of Sanitary and Phytosanitary measures. The harmonisation of certain activities between COMESA and SADC is intended to make their objectives more internally consistent so as to Avoid negating some of the potential gains from regionalism and undermining the potential improvement in the investment climate that arise from a larger market and improved transparency; Introduce common and simple (rather than conflicting) rules of origin into the trading process; Prevent costly duplication of administrative effort; and Reinforce the reform momentum by consolidating the political will needed to pursue reforms. As a member of the Southern African Development Community (SADC), Zambia is part of a regional initiative in a plan of action for negotiations on services. As a region, it has also been agreed that an annex on trade in services be developed to provide the common legal framework for the conduct of trade among SADC members in matters pertaining to the General Agreement on Trade in Services (GATS). The draft annex is currently in circulation among all the member states for analysis and comments. In this annex, substantially all sectors and modes of supply and the positive list modalities as under GATS are to apply. Zambia has trading partners who are not members of either COMESA or SADC. A number of bilateral agreements have been negotiated with Egypt, China, Belgium and Ukraine. There are proposed bilateral agreements with Belarus. Bilateral agreements with the Democratic Republic of Congo, Mozambique, Tanzania, Namibia, Botswana, Zimbabwe, Rwanda, Sudan and the Slovak Republic are under negotiation. A trade agreement with Malawi was negotiated and is at the moment awaiting ratification and signing. In addition, Zambia is a signatory to the Cotonou Agreement and being a least developed country, a beneficiary to the Everything But Arms (EBA) facility by the European Union. Zambia is also one of the qualifying countries under the African Growth and Opportunity Act passed by the United States of America. ZAMBIA AND THE MULTILATERAL TRADING SYSTEM 4.1 Implementation of the Uruguay Round Agreements Zambia recognizes that the ϲʹ has a potentially important role in promoting development prospects by reducing trade barriers in the international markets through negotiations and implementation thereafter. Zambia however faces various problems in this regard and it is for this same reason that Zambia has reservations against any increased agenda of the ϲʹ. Some of the constraints include the following: Lack of adequate financial, institutional, and technical capacities to effectively coordinate and implement the various agreements; Lack of capacity to participate effectively in negotiations; Meeting notification obligations; Amending of relevant domestic legislation to conform to ϲʹ requirements; and Lack of capacity to carry out awareness campaigns and studies to identify potential areas of liberalisation and carry out liberalisation assessments. Zambias submission to the ϲʹ, under the Integrated Framework Needs Assessment and Technical Assistance Needs elaborates even further on the constraints faced. To cushion these problems, Zambia has however received ϲʹ technical assistance in the form of seminars, workshops and technical missions. Assistance has also been provided through various trade policy courses, which have been very beneficial in terms of understanding the ϲʹ agreements and obligations embodied in them. Notwithstanding, and while appreciating this assistance, there is still need for further assistance because the capacity to implement the agreements is still inadequate. It is important therefore, that technical assistance goes beyond education on the agreements and obligations to contribute towards long-term projects, investment, poverty reduction, enhancing enforcement mechanisms and other core development issues through complementarities with international organisations that have such mandates. It is therefore in the interest of all ϲʹ members that institutions such as UNCTAD and ITC be funded adequately to execute their mandates effectively. Assistance is also needed in improving co-ordination among major players and stakeholders, trade policy analysis and strategy formulation driven by national development needs and in enhancing the policy research capacity in the country. For example, establishing a national think tank closely linked to policy institutions in the country is necessary for Zambia and requires support from all well-wishers. A National Working Group on ϲʹ comprising relevant Government and private sector institutions is also being set up to facilitate the implementation of Zambias obligations under the ϲʹ. Technical Assistance should also be given to the development, strengthening and diversification of Zambias production and export bases for both goods and services. This is particularly so in the light of Zambias current problems alluded to earlier that are facing the copper industry, which has been the mainstay of the economy. 4.2. Implications of Other Trading Arrangements on Zambia Cotonou Agreement This agreement is expected to promote and expedite economic, cultural and social development of the African Caribbean and Pacific (ACP) countries, including Zambia, and gradually integrate them into the world economy. Zambia views this Agreement as beneficial to her because it is likely to help in the development of the private sector, increase employment and improve access to productive resources. European Union Everything But Arms Initiative (EBA) The EBA Initiative eliminates tariffs on all tariff lines except arms trade with effect from March 2001, with long transition periods for bananas, rice and sugar. The full liberalisation of sugar, rice and bananas is being done in phases. Zambia has keen interest in the liberalisation of sugar under which she has so far exported 9,000 tons of raw sugar. Complete elimination of duties on sugar (a critical product to Zambia) is expected by 1st July 2009. Zambia hopes this will then create an even greater opportunity for sugar originating from Zambia. The African Growth and Opportunity Act (AGOA) The African Growth and Opportunity Act, provides preferential market access to qualifying African States. Zambia was among the first batch of 34 countries that were formally proclaimed eligible under AGOA by the US President on October 2, 2000. AGOA allows Zambian producers of certain goods duty free and quota free access to the US market. It is therefore expected that AGOA will open markets to some Zambian exporters and there by providing Zambia an opportunity to develop its export sector; particularly non-traditional exports. Zambia recently qualified for textile benefits under AGOA in December 2001. Zambia earned these benefits by instituting a regulatory system to prevent transhipment of textiles from other countries. There is already overwhelming response from local textile companies who are willing to increase their exports by taking advantage of the AGOA provisions. However even though both the EBA and AGOA offer preferential market access to Zambia, there are still challenges to be faced. Challenges such as, the conditions that must be satisfied to obtain the zero-duty treatment in particular the rules of origin, and Pest Risk Assessment for agricultural products. Without special treatment as provided by the arrangements cited above, least developed countries like Zambia are at a disadvantage in the multilateral trading system by virtue of their level of development. Apart from implementation problems, the inability to participate effectively worsened by high tariffs and trade distorting sanitary and phytosanitary measures, subsidies and other requirements in the international markets, makes it difficult for these small economies to be integrated in the World economy. 4.3. The Doha Mandate Zambia expects that the Doha Mandate and its emphasis on development will be translated into tangible and concrete benefits to her in order to improve participation in the ϲʹ. Therefore, all implementation issues still remain a priority for Zambia. The full implementation of the special and differential treatment provisions embedded in various agreements, adequate provision of technical assistance, technology transfer, mainstreaming of the Brussels Program of Action and other trade related commitments, expeditious solution mandated in the Declaration on TRIPS and Public Health related to pharmaceutical manufacturing capacity, agriculture and services, and others are some of the examples. Agriculture and Services sectors, promise to be potentially important sectors for production and export diversification in the light of threats that are facing the copper industry, therefore, Zambia will follow actively negotiations in the two areas with the aim of deriving maximum benefits. She expects that market barriers in the markets of developed countries in both sectors would soon be removed. Zambia also needs technical assistance and adequate capacity building regarding sanitary and phytosanitary measures which continue to hamper her progress in exports particularly in the agriculture sector. The existing Zambia Bureau of Standards lacks adequate infrastructure, technology, and other relevant instruments needed to improve the exports. Focused technical assistance, too will be required in the final stages of negotiations on agriculture and services, many of which involve technical issues. Through focused and development-based technical assistance, there is urgent need to effectively bring on board of the negotiations all relevant stakeholders in capitals. Zambia awaits the establishment of modalities for special treatment of LDCs in the negotiations in Services which is being done by the Services Council to guide her in the negotiations. She is also stills studying the requests made by developed country partners as well as others. Zambia will actively participate in the ACP/EU negotiations in accordance with the waiver adopted at Doha in this regard, and ensure that the results of these negotiations are ϲʹ compatible. In terms of industrial tariffs, reduction of Zambias tariffs may have a negative impact on her fiscal revenues as well as industry, and that due to the limited export earnings; Zambia will not be able to compensate this deficit in fiscal resources, without being cautious. Government is therefore closely and actively following negotiations in this area. In terms of TRIPS Agreement, Zambia, like other developing countries would like a review of TRIPS as provided for under Article 71.1 in order to address all the necessary concerns including implementation of Article 66.2 on technology transfer, protecting traditional knowledge, etc. Implementation of the TRIPS Agreement by poor countries like Zambia should address the many implementation costs and development interests. On Safeguards, government is in the process of legislating a law and would require adequate technical assistance. In terms of market access, Zambia would like duty-free and quota-free market access which is predictable. Therefore, she prefers binding of all market access for all her products under the ϲʹ rules. CONCLUSION The Government will continue to support and implement trade liberalisation and build on the achievements of the past years. In addition, to restore and sustain macroeconomic stability, the Governments macroeconomic objectives for the year 2002 are to achieve real Gross Domestic Product (GDP) of at least 4%; lower annual inflation to 13% by the end of the year and single digit inflation thereafter; limit the budget deficit to 3% of GDP and to increase gross international reserves by US$129 million and maintaining stability in the foreign exchange market. The Government will aim for a balanced budget, to lower inflationary pressures, encourage savings and investment and reduce its own debt service obligations. The government will seek to address the issue of high interest rates by limiting the budget deficit to 3% of GDP, reducing the Statutory Reserves Ratio for commercial banks lending to the agricultural sector and exploring other means of lowering interest rates. For the period 2002-2004, Zambia has developed a Poverty Reduction Strategy Paper whose primary goal is to achieve sustained economic growth of between 5% and 8% in the medium term. Zambia however faces grave challenges to this progress. This is worsened by the problems facing the mining sector; the failure to achieve self-sufficiency in food production and enhance food security as a result of drought during the last season; and the HIV/AIDS pandemic. To achieve greater coherence in global economic policy making, implementation efforts of ϲʹ members in particular LDCs should be fully supported by the Bretton Woods institutions through financing of the development policies of the country in the sectors that are being liberalised without conditions. Zambia is committed to mainstreaming trade into its Poverty Reduction Strategy Paper (PRSP) because it has potential to contribute to national development. However, since mainstreaming of trade in Least Developed Countries (LDCs) is currently being done through the Integrated Framework (IF) Pilot Scheme, to which Zambia is not yet member; it will not be until membership has been granted that Government will effectively mainstream trade. For this reason, Government has requested the six agencies of the IF to be member of the Pilot and hopes that this will be granted soon. Lastly, in its continued desire to participate effectively in the multilateral trading system, Zambia will among others, support all efforts aimed at improving market access for Zambian products, the provision of flexibility through Special and Differential Treatment, technology transfer, addressing the imbalances that impair her to exercise her rights under the ϲʹ and the provision of technical assistance. __________ WT/TPR/G/106 Trade Policy Review Page  PAGE i Zambia WT/TPR/G/106 Page  PAGE i Zambia WT/TPR/G/106 Page  PAGE 3 WT/TPR/G/106 Trade Policy Review Page  PAGE 18 Zambia WT/TPR/G/106 Page  PAGE 17 $()*ABNOPeos0 / 0 % &&&[iwitt>y?y}}hFGڴ۴CJ5>*CJCJmH65CJ jUCJ5 j5U:CJ,>* 5:CJ,Q $%&'()Pbcdeo 0!$$l40+p# E #$$l40+p# E $d$!$$l40+p#`E $$$dh$ $%&'()Pbcdeopqrs Odv 0Q2 o   / 0 1 2 4 A 9J   9J  J  ?= GF  Oopqrs F$ $$l0+p#E $$ @"$$l`0+p#E $$ $$l0+p#E   "$G$$l $%$$l F$Odv 0Q2 o ? p#b 2" b 2" x b 2" = p#b 2"   / 0 1 2 4 A Hm" o 5#% &&c'') & Fz  & F  & F = p#b 2" b 2"Hm" o 5#% &&c'')$+-.2˾yl_RE8J   &J  &J  J  J  J  Rz  R'J   'J   SJ   S:J   :J   J  J   J   ')$+-.225:94;B;=3@<@AACEFG IIIKNNQTT^V & F{225:94;B;=3@<@AACEFG IIʼ{naTG:-J   4J   4J   J   J   J   \{  \J   )J   )~J   ~J   (J   (J   tJ   tJ   KJ   KIIKNNQTT^V}W2Y9Y<\1]`$`aɼzl_RE=0J  % J  J  $ J  # J  " J   J  ! 5J  5J   ~J   ~-J   -J   FJ   FJ   J   [J   [^V}W2Y9Y<\1]`$`a#d gZh[iwill9mmmEnnpsttwy| & Fa#d gZh[iwill9mmmEnnpsttwƹzm`SFA4J  / =IJ  . 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