Utilization of Trade Preferences in Zambia: Firm Specific Issues

Preferential agreements are intended to increase trade between countries involved. However, in reality, although the overarching purpose of these agreements in terms of market opening is often achieved, increases in trade is seldom realized. For countries like Zambia where data on trade via the preferential route are rarely captured, it is pertinent to analyze, from a firm’s perspective, the utilization of the existing agreements. This study set out to analyze the extent of Zambia’s utilization of trade preferences using both secondary and primary data sources. The secondary data establishes that despite these agreements having granted almost all Zambian exports duty-free and quota-free access, the country’s utilization rates have been low. This result is affirmed by the exporters and further validated by the key informants as both surveys establish that Zambian firms have not utilized the trade preferences effectively. They have attributed the low utilization of these preferences to internal and external challenges. The internal challenges include- lack of production capacity, poor infrastructure, poor knowledge of markets, and high transport costs. Externally, the challenges include- difficulties in meeting sanitary and phyto-sanitary measures, costly rules of origin, technical barriers to trade and cumbersome paperwork requirements. The country therefore, needs to address these challenges if it is to utilize these agreements effectively.