RESTRICTEDWORLD TRADE
ORGANIZATIONWT/TPR/G/106
25 September 2002
(02-4952)
Trade Policy Review Body Original: English
TRADE POLICY REVIEW
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 Zambia is attached.
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/G/106
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CONTENTS
Page
I. INTRODUCTION 5
II. ECONOMIC DEVELOPMENTS 1996–2001 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 123.3 Investment Measures 133.4 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 17Zambia WT/TPR/G/106
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I. INTRODUCTION
1. Zambia’s Trade Policy is aimed at creating a competitive and productive economy driven by
private sector initiative, which would improve living standards for Zambians.
2. 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 andderegulated 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 factorsand inadequate investment and diversification efforts.
3. 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 ofthe Zambian economy tilted in favour of the private sector. At the beginning of 2002, Anglo
American Corporation (AAC), the major private sh areholder 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.
4. 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 therecent 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 ec onomic 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 theadjustment costs, it will be very difficult if not almost impossible for Zambia to meet the challenges
of globalisation.
II. ECONOMIC DEVE LOPMENTS 1996–2001
2.1 Macroeconomic environment
5. 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 restor e 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 asustainable balance of payments position in order to achieve positive per capita growth.
6. Real Gross Domestic Product (GDP) expanded by 6.4% in 1996 and by 3.3% in 1997.  This
performance was attributed mainly to the recove ry 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 acrossWT/TPR/G/106 Trade Policy Review
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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.  Theeconomy 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%.
7. In 1996 inflation increased to 43.5% from the 34.9% registered the previous year.  Prices
in 1997 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 regi stered 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-à-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.
8. In late 2000, Zambia obtained debt relief thr ough the Highly Indebted Poor Country (HIPC)
Initiative.  This is expected to help minimise the country’s external debt commitments, standing at
$6.5 billion at the end of 1999.  By having r eached 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, Zambia’s creditors would
write off some $3.8 billion of debt in nominal terms.  However, domestic debt, including arrears, hasalso risen to very high levels and the latter threatens the viability of small firms that supply food and
services to Government.
9. Although macroeconomic conditions were generally favourable in 2001, major challenges
still remain, some of which are factors outside the country’s macroeconomic policy framework.
From 2002 to 2004, Government envisages to attain broad strong sustainable growth by promotingincreased 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 (1996–2001)
(i) Agriculture
10. Enhanced agricultural productivity is being given the highest priority in promoting economic
growth, poverty reduction and food security.   In the last decade the sector’s 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.Zambia WT/TPR/G/106
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11. The real growth rate in the sector has been fl uctuating significantly mainly due to the sector’s
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.
12. 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.
13. 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
ASIP I, 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 inother 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.
14. 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 sector’s contribution to Gross Domestic Product (GDP).
15. In order to promote food security, food production and incomes of farmers, Government has
this year (2002) established a Crop Marketin g 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; landand 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.
(ii) Mining
16. The vulnerability of Zambia’s economy due to its reliance on copper mining is a major
concern to the Government. In 1997, Zambia ranked as the world’s seventh largest producer of
copper, and the world’s second largest producer of cobalt. Today, Zambia holds 4 percent of the
world’s 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 Zambia’s merchandise exports of US$ 822
million out of the total of US$ 1050 million and contributed about 6 percent towards GDP. Miningin 2000, accounted for about two thirds of Zambia’s total earnings from the export of goods and for
approximately 4.1% of real GDP.  The country ha s other mineral resources such as ferrous and
precious metals as well as industrial, agro and energy minerals that present potentially rewarding
investment opportunities.WT/TPR/G/106 Trade Policy Review
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17. 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 competitiveoperation 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.
18. In the year 2000 the Government completed the privatisation of its largest asset, ZCCM. The
step raised economic confidence due to the sector’s 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.
(iii) Manufacturing
19. This sector makes up 10.7% of the country’s 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 byincreased competition from cheap imports.
20. 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-shipmentInspection 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.
(iv) Services
21. The services sector is Zambia’s 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 financia l sector firms with commercial banks dominating
the sector.
(a) Financial Services
22. 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.Zambia WT/TPR/G/106
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23. The Bank of Zambia, which is the country’s 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.
24. 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.
25. 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.
26. Although, autonomous liberalisation and reform has increased the number of service
providers in financial services sector, the market is still dominated by commercial banks. Zambiasuffers 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.
27. There however exists a large potential for the development of financial services such as
investment banks, pension banks and various non-ba nking institutions that provide long-term credit.
(b) Tourism
28. 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 phenome nal 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.
29. 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 andWildlife 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.
(c) Transport
30. 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 Pr oduct (GDP) growth averaged 3.2 percent in real terms. Being aWT/TPR/G/106 Trade Policy Review
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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 Zambia’s
development efforts.
31. 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 benefitof 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 InvestmentProgramme (ROADSIP), which is a partnership between road users, the Government and donors,
will continue.
(d) Communications
32. 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 servicesstill 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.
33. In order to supervise and promote the provis ion 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.
34. 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.
(e) Energy
35. Except for petroleum, which is wholly imported, Zambia is richly endowed with a wide range
of indigenous energy sources particularly woodlan ds 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 about14 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.
36. 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.
37. Government’s 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. GovernmentZambia WT/TPR/G/106
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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.
III. TRADE DEVELOPMENTS AND POLICY
38. Zambia remains committed to creating an envir onment 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.
39. Zambia’s 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 Democrat ic Republic of Congo.  Zambia’s 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).
40. In 1996, the value of exports was US$ 974.9 million, and in 1997, exports grew by 16.7% to
US$1,159.  A significant decline of about 25 percent was recorded in 1998.  This was attributed
mainly to a combination of reduced metal export volumes and prices, and the continuing price falls
for agricultural commodities in the major export ma rkets. In 2001 total export earnings increased to
US$ 871 million from US$ 746 in 2000, this growth was attributed among others things to increasedexports to South Africa following the market acc ess 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.
41. 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 optimismarising from the delay in privatising the mining conglomerate, Zambia Consolidated Copper Mines
(ZCCM). In 1999 the value declined further by 10%.
42. 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
43. 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. Zambia’s judiciary
plays a role in the interpretation of trade related statutes and laws. The Ministry of Commerce, Tradeand 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.WT/TPR/G/106 Trade Policy Review
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44. The primary objectives of Zambia’s 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 Zambia’s trading ties with regional and other
international markets;
- To ensure efficient customs administration and fair trade practices; and reduce
poverty through sustainable economic growth.
45. 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 Zambia’s commitments to the WTO and Pre-shipment
inspection requirements were also abolished in 1998.
46. 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 miningindustry, which will continue to be a major player in the economy.
47. Custom duties are constantly being reviewed down wards in line with Zambia’s
commitments. Excise duty and others levies on diesel have been reduced from 60 percent to
45 percent to encourage production and distribution in the Agriculture and other productive sectors.
3.2 Domestic Laws and Regulations Governing Domestic Trade
48. 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. Importscausing 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
WTO compatible to safeguard Zambian industries, from unfair competition.
49. Since Zambia’s last trade policy review in 1996, Government has continued with structural
reforms to improve efficiency and promote economic development. In particular, divestiture ofGovernment 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.
50. 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. Government’s intention isZambia WT/TPR/G/106
Page 13
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.
51. Government will introduce legal and regulatory framework to ensure the protection of
industrial and commercial property rights.
52. 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
53. 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.
54. During 2001–2003, 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
55. 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.
56. 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 Zambia’s domestic producers whilecreating a challenge to improve the competitiveness of products. This has also meant increased
competition for Zambian products from increased imports.
57. COMESA aims at establishing a Customs Uni on by the year 2004, while SADC envisages the
establishment of a free trade area by the year 2008.  Zambia’s dual membership inevitably brings
about some complications in managing the regional trade policy because of the overlapping of someactivities 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 ofWT/TPR/G/106 Trade Policy Review
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the two regional trade agreements and those other areas of possible duplication between the two
organizations.
58. In 2001, a joint Task Force was established by Heads of Governments of COMESA and
SADC to identify areas for harmonisation in orde r 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.
59. 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 confli cting) 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.
60. 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 statesfor analysis and comments.  In this annex, substantially all sectors and modes of supply and the
positive list modalities as under GATS are to apply.
61. Zambia has trading partners who are not memb ers 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 ofCongo, Mozambique, Tanzania, Namibia, Botswa na, 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.
62. 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 isalso one of the qualifying countries under the African Growth and Opportunity Act passed by the
United States of America.
IV. ZAMBIA AND THE MULTILATERAL TRADING SYSTEM
4.1 Implementation of the Uruguay Round AgreementsZambia WT/TPR/G/106
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63. Zambia recognizes that the WTO 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 WTO. 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 WTO requirements; and
- Lack of capacity to carry out awareness campaigns and studies to identify potential
areas of liberalisation and carry out liberalisation assessments.
Zambia’s submission to the WTO, under the “Integ rated Framework Needs A ssessment and Technical
Assistance Needs” elaborates even further on the constraints faced.
64. To cushion these problems, Zambia has however received WTO technical assistance in the
form of seminars, workshops and technical missions.  Assistance has also been provided throughvarious trade policy courses, which have been very beneficial in terms of understanding the WTO
agreements and obligations embodied in them.
65. 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, invest ment, poverty reduction, enhancing enforcement
mechanisms and other core development issues through complementarities with internationalorganisations that have such mandates.   It is therefore in the interest of all WTO members that
institutions such as UNCTAD and ITC be funded adequately to execute their mandates effectively.
66. 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 thinktank closely linked to policy institutions in the country is necessary for Zambia and requires support
from all well-wishers.  A National Working Group on WTO comprising relevant Government and
private sector institutions is also being set up to facilitate the implementation of Zambia’s
obligations under the WTO.
67. Technical Assistance should also be given to the development, strengthening and
diversification of Zambia’s production and export bases for both goods and services. This is
particularly so in the light of Zambia’s 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
(i) Cotonou Agreement
68. 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 herWT/TPR/G/106 Trade Policy Review
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because it is likely to help in the development of the private sector, increase employment and
improve access to productive resources .
(ii) European Union Everything Bu t Arms Initiative (EBA)
69. 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 sugarunder 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.
(iii) The African Growth and Opportunity Act (AGOA)
70. 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 w ill 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 fortextile benefits under AGOA in December 2001.  Za mbia earned these benefits by instituting a
regulatory system to prevent transhipment of te xtiles 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.
71. However even though both the EBA and AGOA offe r 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 foragricultural products.
72. 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 andother requirements in the international markets, makes it difficult for these small economies to be
integrated in the World economy.
4.3. The Doha Mandate
73. 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 WTO.  Therefore,all implementation issues still remain a priority fo r 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 othersare some of the examples.
74. 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 sectorsZambia WT/TPR/G/106
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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 technicalassistance, there is urgent need to effectively bring on board of the negotiations all relevant
stakeholders in capitals.
75. 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 asothers.
76. 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 WTO
compatible.
77. In terms of industrial tariffs, reduction of Zambia’s 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.
78. 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 manyimplementation costs and development interests.
79. On Safeguards, government is in the process of legislating a law and would require adequate
technical assistance.
80. 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 WTO
rules.
V. CONCLUSION
81. 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
Government’s 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 lowe r 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 oflowering interest rates.
82. 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.WT/TPR/G/106 Trade Policy Review
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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 foodsecurity as a result of drought during the last season; and the HIV/AIDS pandemic.
83. To achieve greater coherence in global economic policy making, implementation efforts of
WTO 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.
84. 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.
85. 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 WTO and the
provision of technical assistance.
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