RESTRICTEDWORLD  TRADE
ORGANIZATIONWT/TPR/S/106
25 September 2002
(02-4953)
Trade Policy Review Body
TRADE POLICY REVIEW
ZAMBIA
Report by the Secretariat
This report, prepared for the second Trade Policy Review of Zambia, has been
drawn up by the WTO Secretariat on its own responsibility.  The Secretariat has,
as required by the Agreement establishing the Trade Policy Review Mechanism
(Annex 3 of the Marrakesh Agreement Establishing the World Trade
Organization), sought clarification from the Government of Zambia on its trade
policies and practices.
Any technical questions arising from this report may be addressed to
Mr. Jacques Degbelo (tel:  739 5583) or Mr. Clemens Boonekamp
(tel:  739 5226).
Document WT/TPR/G/106 contains the policy statement submitted by the
Government of Zambia.
Note: This report is subject to restricted circulation and press embargo until the end of the meeting
of the Trade Policy Review Body on Zambia.Zambia WT/TPR/S/106
Page iii
CONTENTS
Page
SUMMARY OBSERVATIONS
(1) T HE ECONOMIC ENVIRONMENT vii
(2) I NSTITUTIONAL  FRAMEWORK viii
(3) T RADE  POLICY  INSTRUMENTS viii
(4) S ECTORAL  POLICIES ix
(5) T RADE  POLICY  AND TRADING  PARTNERS x
I. THE ECONOMIC ENVIRONMENT 1
(1) M AJOR FEATURES OF THE ECONOMY 1
(2) R ECENT ECONOMIC DEVELOPMENTS 3
(3) T RADE PERFORMANCE AND INVESTMENT 5
(i) Trade in goods and services 5(ii) Investment 7
(4) O
UTLOOK 9
II. TRADE AND INVESTMENT REGIMES 11
(1) T HE INSTITUTIONAL FRAMEWORK 11
(2) P OLICY FORMULATION AND IMPLEMENTATION 11
(3) T RADE LAWS AND REGULATIONS 12
(4) P OLICY OBJECTIVES 14
(5) A GREEMENTS 14
(i) Multilateral agreements 14(ii) Regional agreements 17
(iii) Other agreements and arrangements 22
(6) I
NVESTMENT POLICIES 24
(7) T RADE -RELATED TECHNICAL ASSISTANCE 26
(i) Implementation of legislation 26(ii) Financial and administrative means to implement WTO Agreements 27
(iii) Notification requirements 28
(iv) Training of officials 28(v) Negotiating skills 29(vi) Other areas 29
III. TRADE POLICIES AND PRACTICES BY MEASURE 30
(1) I
NTRODUCTION 30
(2) M EASURES DIRECTLY AFFECTING IMPORTS 30
(i) Registration and documentation 30(ii) Customs inspection and clearance 31(iii) Tariffs, other duties, and taxes 32(iv) Customs valuation 38(v) Import prohibitions, quantitative restrictions, and licensing 39
(vi) Anti-dumping, countervailing, and safeguard measures 39
(vii) Standards and other technical requirements 40(viii) Government procurement 42(ix) Local-content requirements 43WT/TPR/S/106 Trade Policy Review
Page iv
Page
(x) Other measures 43
(3) M EASURES DIRECTLY AFFECTING EXPORTS 44
(i) Registration and documentation 44(ii) Export taxes 44(iii) Export prohibitions, controls, and licensing 44
(iv) Export subsidies and assistance 45
(v) Export-processing zones 45(vi) Export promotion and finance 45
(4) M
EASURES AFFECTING PRODUCTION AND TRADE 46
(i) Incentives 46
(ii) Assistance to adjustment, and research and development 47
(iii) State-owned enterprises and privatization 47(iv) Competition policy 50(v) Protection of intellectual property rights 52
IV. TRADE POLICIES BY SECTOR 57
(1) O
VERVIEW 57
(2) A GRICULTURE AND RELATED ACTIVITIES 57
(i) Main features 57(ii) Policy developments 59(iii) Policy by key product category 62
(3) M
INING AND ENERGY 66
(i) Mining and quarrying 66
(ii) Energy 70
(4) M ANUFACTURING 72
(5) S ERVICES 73
(i) Telecommunications 74(ii) Transport 75
(iii) Financial Services 77
(iv) Tourism 78(v) Information Technology 80
REFERENCES 81
APPENDIX TABLES 85Zambia WT/TPR/S/106
Page v
CHARTS
Page
I. THE ECONOMIC ENVIRONMENT
I.1 Sources of imports, 1996-00 7
I.2 Destinations of exports, 1996-00 8
III TRADE POLICIES AND PRACTICES BY MEASURE
III.1 Distribution of applied MFN duties, 2001/02 33
III.2 Breakdown of applied MFN duties by sector, 2001/02 34
IV. TRADE POLICIES BY SECTOR
IV.1 Average tariff rates by ISIC classification, 2001/02 61
TABLES
I. THE ECONOMIC ENVIRONMENT
I.1 Main economic indicators, 1996-01 2
I.2 Balance of payments, 1996-01 5
I.3 Composition of imports, 1996-00 6I.4 Composition of exports, 1996-01 6I.5 Investments certificates by country of origin, 1995-01 9I.6 Investment commitments by sector, 1995-01 9
II. TRADE AND INVESTMENT REGIMES
II.1 Trade-related legislation in Zambia, 2002 13
II.2 Status of Zambia's selected notification requirements to WTO, as of March 2002 15
III TRADE POLICIES AND PRACTICES BY MEASURE
III.1 Alternate tariffs, 2001/02 32
III.2 MFN tariff escalation by ISIC-2 digit categories, 2001/02 35III.3 State-owned companies, June 2002 49III.4 Competition cases received, 1998-01 51III.5 Intellectual property-related applications and grants/registrations, 1994/01 53
IV. TRADE POLICIES BY SECTOR
IV.1 Characterization of Zambian Agriculture, 1999 58
IV.2 Production of selected crops, 1998-01 62
IV.3 Agricultural Exports, 1995-98 64
IV.4 Mineral production, 1997-00 67IV.5 Gross metal receipts, 1996-00 69IV.6 Selected performance indicators in the tourism sub-sector, 1995-00 79WT/TPR/S/106 Trade Policy Review
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APPENDIX TABLES
Page
III TRADE POLICIES AND PRACTICES BY MEASURE
AIII.1 Applied MFN tariff statistics, by HS 2-digit, 2002 87
IV. TRADE POLICIES BY SECTOR
AIV.1 Applied MFN tariff statistics, by ISIC Rev.2 category, 2002 90Zambia WT/TPR/S/106
Page vii
SUMMARY OBSERVATIONS
(1) THE ECONOMIC ENVIRONMENT
1. Since its Trade Policy Review (TPR)
in 1996, Zambia has continued to implement
its economic reforms launched in 1991.  In
recent years, the reforms have consolidatedthe substantial liberalization efforts made
during the 1990s, with an emphasis on poverty
reduction.  The trade regime has remained
substantially liberalized.  An Integrated
Financial Management Information System(IFMIS) is being introduced to modernize
financial, administrative, and control systems
and to ensure that funds allocated to
programmes are expended in a cost-effective
and efficient manner.  Repurchase operationshave been added to the statutory reserve ratio
requirement as measures to control the money
supply for price stabilization purposes.
2. In general, the reforms have created
an environment conducive to economic growth
and made Zambia eligible for debt relief under
the Enhanced Heavily Indebted Poor CountryInitiative.  However, Zambia's macroeconomic
performance has not been good.  Inflation,
measured by changes in annual average
consumer prices, has remained over 20%;  the
2002 drought-related food crisis, the worstsince the 1992 drought, is expected to fuel
inflation, largely driven by food prices.  The
Government's domestic borrowing to finance
the public deficit has also contributed to
maintaining high interest rates;  the short- andmedium-term lending rate to the private sector
was around 46% (per year) in 2001.  Zambia's
gross international reserves hardly cover one
month of potential imports.
3. In addition, continued decline in
copper production (by more than 50% since
1970) has led to falls in investment and low
economic growth (around 1% per year on
average during the 1990s, the lowest growth
rate within SADC).  Zambia's diversification
process has not yet taken hold.  The mining
and quarrying sector, centred around copper,still accounts for about 70% of the total value
of merchandise exports, and contributesaround 6% to real GDP.  Agriculture,
including livestock, fishing and forestry,
accounts for some 17% of real GDP and over
70% of employment.  Manufacturing
contributes around 18% to real GDP, and
services nearly 60%.  This poor performancehas increased poverty:  Zambia's GDP per
capita was US$302 in 2000 and the share of
its population living under the poverty line
increased from 70% in 1991 to 75% in recent
years.  Severe health problems, especiallymalaria and HIV/AIDS, have also
compounded Zambia's development
challenges.  Moreover, the decision by the
Anglo-American Corporation (the main asset
owner in the mining and quarrying sector) todiscontinue the funding of mining operations
in Zambia, further darkens the country's
economic prospects.
4. Despite the substantial liberalization
of Zambia's trade regime, poor performance
by the mining and quarrying sector, and
financial difficulties, including depletion ofinternational reserves, have contributed to a
decline in the share of its merchandise trade in
its GDP from some 62% in 1995 to below 54%
in 2000 although an increase to 59% was
estimated for 2001.  The main imports includemachinery, crude oil, chemicals, iron, steel,
textiles, and vehicles.  Maize is imported
according to weather-related needs.  Copper
and its by-product cobalt still dominate
merchandise exports (around two thirds of thetotal value).  The share of non-traditional
exports increased from around one fourth in
1996 to about one third in recent years.  This
was due to falls in metal exports, and to the
good performance of horticultural andfloricultural products, processed foods, cotton,
tobacco, and sugar.  In general, Zambia's
export markets are more diversified than the
sources of its imports.  South Africa is the
main supplier of imports, followed by
Zimbabwe, while Japan is the major
destination of Zambian exports, followed bySaudi Arabia, Thailand, and India.  Zambia is
a net importer of services, with increasing
deficits on the services account largely
attributable to high transportation costs.WT/TPR/S/106 Trade Policy Review
Page viii
(2) INSTITUTIONAL FRAMEWORK
5. The Republic of Zambia, independent
since 1964, is a multi-party democracy.
Legislative authority in Zambia rests with the
Parliament consisting of the National
Assembly and the President, who is the Headof State, the Executive Head of Government
and the Commander-in-Chief of the defence
forces.  The President appoints Cabinet
members, including the Vice-President, from
among members of the National Assembly.The Ministry of Commerce, Trade and
Industry (MCTI) is responsible for trade policy
formulation and implementation.  Other
ministries are involved in both formulation
and implementation of trade policy, dependingon the nature of the issues.  Traditionally there
have not been national-level reviews of trade
policy.  Under the authority of the Investment
Board, the Investment Centre coordinates
government policies on investment, and
promotes and facilitates investment in Zambia.
6. Policies, including trade policies, are
formulated and implemented by means of
legislation.  Statutory Instruments may be
issued by relevant Ministries (the MCTI for
trade-related issues) to enact subsidiary
provisions of Acts.  The Constitution, andthrough it Zambian law, takes precedence over
international treaties, which once signed by
the President, have to be ratified by Cabinet
and incorporated into Zambian law, with
amendments to the laws as needed.  Zambiahas recently revised or amended some of its
trade-related laws.
7. Zambia is an original Member of the
WTO and grants at least MFN treatment to all
its trading partners.  Zambia is not a signatoryto any of the plurilateral trade agreements.  It
supports the Doha Development Agenda,
which it considers as an opportunity to
improve the conditions of access for its exports
into other markets.  Zambia has benefited from
regular WTO technical assistance.  It has also
been assisted by other multilateral agenciesand several bilateral development agencies in
trade-related issues.  It has requested further
assistance to, inter alia, amend/reviselegislation, improve the quality of its export
products, fully implement certain WTO
notification obligations, build capacity for
negotiations, and improve its reference centre.
8. Zambia participates in regional trade
agreements, including the Common Market forEastern and Southern Africa (COMESA) and
the Southern African Development Community
(SADC), and benefits from non-reciprocal
preferential treatment under the Cotonou
Agreement, the Everything But Arms Initiativeof the European Union, and the African
Growth and Opportunity Act of the United
States.  Zambia considers regional and
bilateral trade agreements as a first step
towards greater integration and widerliberalization.  However, its membership in
several trade agreements, with different
provisions, goals, geographical coverage, and
trade liberalization agenda, is difficult to
manage.
(3) T
RADE POLICY INSTRUMENTS
9. In general, few changes have been
introduced to Zambia's MFN trade regime
since its first Review in 1996.  The simple
average rate of its MFN tariff has remained
broadly unchanged (13.6% in 1996 and 13.4
in 2002).  The tariff, which is Zambia's maintrade-policy instrument, still comprises four
bands:  zero, 5%, 15% and 25%.  The
coefficient of variation is still around 0.7 and
indicates a modest dispersion of tariff rates
from one category of products to another.  Themodal rate, i.e. the most common, is 15% and
applies to some 33% of all tariff lines.  The
maximum rate of 25% applies to consumer
and "non-essential" goods.  Negative tariff
escalation from the first to the second stages ofprocessing has led to widespread duty and tax
concessions.  The ongoing tariff
rationalization process (within the prevailing
range of rates) should help to reducing the
need for such concessions.
10. In addition to the tariff, Zambia also
collects a 17.5% value-added tax on goodsand services, and excise duties on selected
goods, whether imported or locally produced.Zambia WT/TPR/S/106
Page ix
In the Uruguay Round, like other WTO
Members, Zambia bound tariffs on all
agricultural products;  some 97% of  tariff
lines for these products were bound at a
ceiling rate of 125% and the others at ceiling
rates ranging from 45% to 60%.  Tariffs ononly 3.6% of lines for non-agricultural
products were bound;  ceiling rates range
from 30% to 60%, with a simple average
bound rate of 42%.  Other duties and charges
on all these products were bound at zero.  Inprinciple, customs valuation has been based
on the transaction value since January 2000.
11. Zambia has eliminated the:  5%
import declaration fee (IDF) deemed
inconsistent with its WTO commitments on"other duties and charges";  the preshipment
inspection requirement on imports;  the "anti-
dumping duty" collected (on an MFN basis) on
all imports of window and door frames;  all
export taxes;  and all quantitative restrictions.
Import controls are maintained only for
environmental, sanitary, phytosanitary, moral,health, and security reasons.  Several incentive
schemes are available, mainly for exporters,
and plans exist for the implementation of a
2001 Export Processing Zone Act.  However,
export prohibition applies to certain logs, andto grain (to forestall shortages in the domestic
market, e.g. during drought years).
Gemstones and timber are subject to special
export controls.
12. Zambia has pursued its privatization
programme, though at a slower pace in recent
years.  The establishment of the Competition
Commission in 1997 buttressed the
enforcement of the 1994 Competition and Fair
Trading Act.  The public procurement regime,currently under review, provides for price
preferences of between 5% and 20%, subject
to a local content of at least 40%.  Zambia has
no compulsory standards.  Provisions of its
1994 Standards Act are to be revised with a
view to aligning the activities of the Zambia
Bureau of Standards (ZABS) on those ofsimilar foreign  entities.  Financial constraints
already hamper ZABS' ability to carry out its
current mandate.13. Zambia is drafting legislation on
safeguards, and intends to amend/revise
existing legislati on on anti-dumping and
countervailing measures, and intellectual
property rights to fully align them on the
relevant WTO Agreements.
(4) S
ECTORAL POLICIES
14. Mining and quarrying has
traditionally been the backbone of the
Zambian economy.  Copper and its by-product
cobalt have been the major products, and havedominated Zambian exports;  however, their
importance has been declining.  Zambia has
been one of the leading sources worldwide for
both products.  Gemstone production has
potential to expand, and new efforts are beingdirected toward it.  Coal production has
declined.  Until recently, activities in the
sector were dominated by public enterprises.
However, with the privatization of the Zambia
Consolidated Copper Mines (ZCCM) in
March 2000, most are currently privately run.
The State still owns the mines, but it transfersthe lease to private operators by means of a
mining right;  there are eight types of rights
depending on the nature of activities.  Several
incentives schemes (e.g. through duty and tax
concessions) are available to investors in thesector.  Mining and quarrying constitute the
least tariff-protected sector of the Zambian
economy (8.2% on average).  The 2001
decision by the Anglo-American Corporation
not to provide additional funding to miningoperations further threatens the future of the
copper industry, already in difficulties for
several years.
15. Agriculture, dominated by small-scale
farmers, is the largest employer.  Farming islargely based on traditional methods;  it is
mainly subsistence oriented.  Productivity is
low and output is dependent on weather
conditions.  Zambia's large potential in
agriculture (e.g. good climate for farming,
abundant labour, and water supplies) remains
unexploited.  Zambia's agricultural policy isaimed at food security, poverty reduction, and
promotion of cash crops, mainly as non-
traditional exports.  Agriculture is the mostWT/TPR/S/106 Trade Policy Review
Page x
tariff protected sector (18.7% on average, up
from 18.2% in 1996).  The planned
establishment of a Crop Marketing Authority
(as a buyer of last resort in rural areas) will to
some extent overturn the reforms in this sector,
where all the marketing boards were abolishedin the early 1990s.  In forestry, the prohibition
of log exports seems inconsistent with the
relatively high customs tariffs on imports of
this product.
16. Manufacturing has strong linkages
with the other sectors, primary sectors in
particular.  It has been dominated by small-
scale industries producing mostly for the
domestic market.  The development of the
sector has been hampered by high productioncosts (high prices of energy, transportation,
and telecommunications, and high interest
rates), limited access to financing, low
capacity utilization, and low quality of
products.  Moreover, subject to duty and tax
concessions, the negative tariff escalation is
not conducive to investment in manufacturingof semi-finished goods.  Various incentives
schemes are available, however, to investors
in the sector, and tariff rationalization is under
way to reduce the costs of imported inputs not
competing with local production.  Moreover,the 2001 Export Processing Zones Act is
expected to boost manufactured exports.
Customs tariffs on manufactured imports
average 13.2%, quite close to the overall
average tariff of 13.4%.
17. Zambia has traditionally run deficits
in its services account due to its landlocked
position, high transportation costs, and limited
services exports.  Export opportunities in the
services sector remain largely unexploited;  intourism, for instance, Zambia's attractions
compare favourably with those of certain main
tourist destinations in Africa.  However,
inadequacies in infrastructure and
marketing/promotion, financial constraints,
lack of skilled labour, and a reputation as a
high-cost destination have hampered thedevelopment of the subsector.  The
Government has recognized inadequacies inall forms of transport services and has
formulated a policy to turn Zambia's
landlocked position into an asset, by making it
a hub for the expected trade among countries
in the region.  In telecommunications, the de
facto monopoly of Zamtel, a state-ownedcompany, contributes to maintain fixed
telephone services prices relatively high.
Under the General Agreement on Trade in
Services (GATS), Zambia bound, without
limitation, measures affecting all modes ofsupply (except presence of natural persons) for
a limited range of services.
(5) T
RADE POLICY AND TRADING
PARTNERS
18. Zambia participates actively in the
multilateral trading system and in various
preferential arrangements to fully benefit from
its liberalization efforts through increased
trade.  However, its membership in
overlapping preferential arrangements makes
its trade regime more complex and difficult to
manage.  Moreover, the reforms are yet toshow their full effects because of Zambia's
continued dependence on copper (an industry
in difficulties for several years) despite its
diversification efforts, and its poor
macroeconomic performance.
19. Improvement of Zambia's low level of
multilateral commitments, both on goods and
services, would increase the predictability of
its trade regime and renders its reforms more
credible.  Continued structural reforms,
including privatization, and further tariff
rationalization would contribute to better
resource allocation.  Such efforts will improveZambia's ability to attract investment.
20. Zambia has received technical
assistance but it needs more in order to
address its current major concerns, including
its full participation in the multilateral tradingsystem and exploitation of the related
opportunities.  Trading partners could help by
ensuring that their markets are open to
Zambian goods, increasingly agriculture
products.