RESTRICTEDWORLD  TRADE
ORGANIZATIONWT/TPR/S/66
28 January 2000
(00-0286)
Trade Policy Review Body
TRADE POLICY REVIEW
TANZANIA
Report by the Secretariat
This report, prepared for the first Trade Policy Review of Tanzania, 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 Tanzania on its trade
policies and practices.
Document WT/TPR/G/66 contains the policy statement submitted by the
Government of Tanzania
Note: This report is subject to restricted circulation and press embargo until the end of the meeting
of the Trade Policy Review Body on Tanzania.Tanzania WT/TPR/S/66
Page iii
CONTENTS
Page
SUMMARY OBSERVATIONS vii
(1) T HE ECONOMIC ENVIRONMENT vii
(2) I NSTITUTIONAL FRAMEWORK vii
(3) T RADE POLICY FEATURES viii
(i) Trade policy instruments and their impact viii
(ii) Policies by sector x
I. THE ECONOMIC ENVIRONMENT 1
(1) M AJOR FEATURES OF THE ECONOMY 1
(2) E CONOMIC DEVELOPMENTS 3
(i) From independence to 1985 3(ii) 1985 to the present 4
(3) T
RADE PERFORMANCE 4
(i) Trade in goods 4(ii) Trade in services 8
(4) I
NVESTMENT 9
(5) O UTLOOK 10
II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES 11
(1) I NSTITUTIONAL FRAMEWORK 11
(2) F ORMULATION AND IMPLEMENTATION OF POLICIES 12
(3) P OLICY OBJECTIVES 13
(4) L AWS AND REGULATIONS 14
(i) Trade legislation 14(ii) Investment code 14(iii) Mining 18(iv) Petroleum 18
(v) Free zones 19
(5) T
RADE AND INVESTMENT AGREEMENTS AND ARRANGEMENTS 19
(i) Multilateral agreements 19(ii) Trade-related assistance 21(iii) Regional agreements 23(iv) Other trade agreements or arrangements 27
(v) Trade disputes and consultations 27
(vi) Investment agreements or arrangements 28
III. TRADE POLICIES BY MEASURE 29
(1) I
NTRODUCTION 29
(2) M EASURES DIRECTLY AFFECTING IMPORTS 29
(i) Registration and documents 29
(ii) Inspection, customs valuation and customs clearance 29
(iii) Import duties 32(iv) Rules of origin 37WT/TPR/S/66 Trade Policy Review
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(v) Anti-dumping, countervailing and safeguard measures 37(vi) Prohibitions, quantitative restrictions, and licensing 37(vii) Standards and ecological and other technical requirements 38(viii) Government procurement 39(ix) Local-content requirements 41
(3) M
EASURES DIRECTLY AFFECTING EXPORTS 41
(i) Regulations 41
(ii) Export duties and taxes 42(iii) Prohibitions, licences, and other measures restricting exports 42(iv) Export subsidies 42(v) Duty and tax concessions 43
(vi) Export promotion, financing, and assistance 43
(4) O
THER MEASURES AFFECTING PRODUCTION AND TRADE 43
(i) State trading, state enterprises and privatization 43(ii) Subsidies and other forms of production assistance 44(iii) Price regulation and competition policy 45(iv) Measures for the protection of intellectual property rights 45
IV. TRADE POLICIES BY SECTOR 47
(1) I
NTRODUCTION 47
(2) A GRICULTURE AND RELATED ACTIVITIES 47
(i) General 47(ii) Policy by product category 50
(3) M
INING , AND ENERGY 55
(i) Mining 55
(ii) Energy 58
(4) M ANUFACTURING 59
(5) S ERVICES 61
(i) Financial services 62
(ii) Tourism, restaurant, hotels 64
(iii) Telecommunications 66(iv) Transportation 67
REFERENCES 70
APPENDIX TABLES 73Tanzania WT/TPR/S/66
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CHARTS
Page
I. THE ECONOMIC ENVIRONMENTI.1 Real GDP growth, 1994-2001 2
I.2 Imports by origin, 1991 and 1998 6I.3 Imports by major commodity group, 1990 and 1998 6
I.4 Exports by destination, 1991 and 1998 7
I.5 Exports by major commodity group, 1990 and 1998 8
III. TRADE POLICIES BY MEASURE
III.1 Applied MFN tariff rates, by HS section, 1999 33
III.2 Distribution of tariff rates, 1999 34
III.3 Tariff escalation by 2-digit ISIC industry, 1999 35
IV. TRADE POLICIES BY SECTOR
IV.1 Average tariff rates on agricultural products by HS chapter, 1999 49
IV.2 Fishery exports, 1994-98 53IV.3 Large scale mineral rights granted, 1990-98 56IV.4 Manufactured exports, 1990-98 60
IV.5 Tariffs on manufactured products, 1999 61
IV.6 Tourist service earnings in Tanzania, 1991-98 65
TABLES
I. THE ECONOMIC ENVIRONMENT
I.1 Social and economic indicators 2
I.2 Balance of payments, 1990-98 5
I.3 Imports by major commodity group, 1990-98 7
I.4 Exports by major commodity group, 1990-98 8I.5 Services account, 1990-97 9I.6 Savings and investments 9
II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES
II.1 Trade-related laws 14
II.2 Summary of sectoral distribution of registered projects between July 1997 - June 1999 16II.3 Minimum investment levels for Zanzibar 17II.4 Notifications by Tanzania pursuant to the WTO provisions 20WT/TPR/S/66 Trade Policy Review
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Page
III. TRADE POLICIES BY MEASUREIII.1 Minimum dutiable values for selected items 32
III.2 Main features of the Tanzanian tariff schedule, 1999 34III.3 Distribution of tax exemptions by category, 1998-99 36III.4 Health and sanitary regulations 39
III.5 Procurement limits related to integrated roads project 40
III.6 Accounting officers purchasing authority 40III.7 Number of parastatals divested by mid-1998 by divestiture type 44
IV. TRADE POLICIES BY SECTOR
IV.1 Contribution of agriculture to Tanzania's exports 47
IV.2 Fisheries exports, 1994-98 53
IV.3 Summary of exports of forestry and beekeeping, 1995-1999 55IV.4 Mineral production, 1993-98 56IV.5 Mineral exports, 1993-98 57IV.6 Electricity consumption, 1991-98 58IV.7 Electricity consumption, 1992-98 59
IV.8 GATS specific commitments 62
IV.9 Capital requirement for insurers and brokers 64IV.10 Tourism in Tanzania, 1991-98 65
APPENDIX TABLES
III. TRADE POLICIES BY MEASURE
AIII.1 Effective tariffs 1999, by HS chapter 75Tanzania WT/TPR/S/66
Page vii
SUMMARY OBSERVATIONS
(1) THE ECONOMIC ENVIRONMENT
1. Situated on the east coast of Africa,
the United Republic of Tanzania is one of the
world's least developed countries.  Tanzania,
which includes the islands of Zanzibar andPemba, became independent in 1961.  With  a
per capita GNP of US$210, the economy is
essentially dependent on agriculture.
2. From independence in 1961, Tanzania
followed a socialis t model of economic
development.  This essentially non-market
approach resulted in the nationalization of
businesses and industries and the
collectivization of agriculture.  Over time, the
failures of this strategy became apparent asthe economy stagnated and suffered significant
setbacks.  Since 1985, Tanzania has
implemented a series of economic reforms, but
progress has been inconsistent.  However,
since 1995, the pace of reform has accelerated
and Tanzania has focused on macroeconomic
stabilization and fiscal reform supported byinternational financial institutions.
3. Tanzania's GDP has grown over 3%
over the past few years and is forecast to grow
at even higher rates through 2001.  Tanzania
is one of the most heavily indebted nations inthe world.  This large debt burden may be an
obstacle to economic development as costs
associated with debt servicing prevent the
allocation of resources to activities that could
serve to improve economic capacity,competitiveness, and increased investment.
Because of Tanzania's programme of
structural reform and fiscal restraint, it is in
line to receive debt relief under the IMF and
World Bank's Heavily Indebted PoorCountries (HIPC) programme.
4. Tanzania's main trading partners are
the European Union, Japan, India, and Kenya.
Tanzania's exports are primarily agricultural
commodities with coffee, cashew nuts, tobacco
and cotton constituting the largest sectors.
Machinery, transportation equipment,industrial raw materials, and consumer goods
constitute the major portion of imported
products.  Because of the decrease in
agricultural production during the past few
years, attributable to climatic conditions, food
and foodstuffs imports have increased sharply.Tanzania is a net importer of services.
(2) I
NSTITUTIONAL FRAMEWORK
5. The Constitution of the United
Republic of Tanzania was adopted in 1977
with amendments passed in 1984 and 1992.The Constitution calls for a parliamentary
form of government with a separation of
powers among the executive, legislative, and
judicial branches of government.
6. Tanzania's President, Vice-president,
and National Assembly members are elected
by direct popular vote for five-year terms.  The
President serves as Head of State and selects
his Cabinet from among National Assembly
members.  The Cabinet is responsible for
government policy planning, and formulation.
The National Assembly, a unicameral body,exercises legislative power over all Union
matters.  Zanzibar has its own President and a
House of Representatives, which exercises
legislative power over non-Union matters.
The semiautonomous relationship betweenZanzibar and the mainland is manifested in a
number of policy areas, although
harmonization in most areas related to trade
matters has been moving forward.  Foreign
investment is considered a non-Union matterand therefore falls separately under the
oversight of the Zanzibar Government.
7. Tanzania has a body of statutes that
govern imports, customs duties, foreign
investment, business licensing, intellectualproperty, export control, competition policy,
and other related matters.  The Investment Act
of 1997 was enacted to help create an
attractive commercial environment, and to
provide incentives for inward investment.
With a few exceptions, 100% foreign
ownership is permitted in most economicactivities.  A separate statute focuses onWT/TPR/S/66 Trade Policy Review
Page viii
investment opportunities in the mineral sector.
The Mining Act of 1998 similarly liberalizes
opportunities for foreign investment and
provides special incentives to investors.
8. The Government of Zanzibar oversees
its own foreign investment procedures.Zanzibar permits 100% foreign ownership
except in some small retail areas and small
tourist services.  Zanzibar has also enacted
legislation for the creation of economic
processing zones and provides supportservices and other incentives for businesses
that export 80% or more of their output.
9. Tanzania is a founding Member of the
WTO, having signed the Final Act of the
Uruguay Round and the Marrakesh Agreementon 15 April 1994.  Tanzania grants at least
MFN treatment to all its trading partners.  As
with other WTO Members, Tanzania has
adopted in their entirety the results of the
Uruguay Round.  As a least developed
country, Tanzania benefits from the special
and differential treatment afforded developingcountries in the form of exemptions or delayed
implementation of certain provisions.
Tanzania is not currently involved in any
dispute settlement proceeding under the WTO.
10. Tanzania faces many challenges and
obstacles to its trade and economic
development.  Tanzania has participated in the
Integrated Framework for Trade-Related
Technical Assistance to Least Developed
Countries (IF) by preparing an assessment ofits needs for trade-related assistance and by
engaging in a Roundtable Meeting with its
development partners.  Despite its involvement
in the IF, and the technical assistance it has
already received from its developmentpartners such as the WTO and other members
of the IF, Tanzania is in need of substantial
ongoing technical assistance in a wide range
of trade-related areas.
11. Tanzania is also actively pursuing a
regional integration strategy.  It is a signatory
of the Common Market for Eastern andSouthern Africa (COMESA), although it hasannounced its intention to withdraw from
COMESA.  Tanzania is also a member of the
Southern African Development Community
(SADC), which it has indicated is more
compatible with its national interests.  More
recently, it has been moving forward with thestrengthening of the East African Co-
operation (EAC) agreement with neighbouring
Kenya and Uganda.  All of these regional
efforts are intended to harmonize economic
policy and facilitate trade although long-termplans call for the EAC to become a political
federation with authority to represent the
common interests of member States.
12. Under the Lomé Convention, Tanzania
receives the full range of aid made availableto ACP countries by the European Union.
Under Lomé IV, many Tanzanian exports to
the EU enjoy non-reciprocal preferential
treatment in the form of exemption from
import duties.  Likewise, Tanzania's goods
enjoy non-reciprocal preferential access to the
markets of other developed countries throughthe Generalized System of Preferences.  Due
to Tanzania's limited export capacity, the
benefits that Tanzania reaps from theses
preferential arrangements has been minimal.
(3) T
RADE POLICY FEATURES
(i) Trade policy instruments and their
impact
13. The reforms that Tanzania has
undertaken since 1985 – and at a more
accelerated pace in the past few years – haveresulted in a trade policy framework that has
been significantly liberalized and that is
essentially based on tariffs.  Export
restrictions have been eliminated as have
foreign exchange controls.  Tanzania has beenmaking a concerted effort to create an
environment that is conducive both to
domestic and foreign investment.  In keeping
with the Government's desire to promote
Tanzanian exports, particularly agricultural
products, it has placed emphasis on open
markets abroad.  Nevertheless, its severelyTanzania WT/TPR/S/66
Page ix
limited export capacity has hindered any
significant export-led growth.
14. The recent reform of Tanzania's
customs duties has resulted in a simplified
five-tier structure with tariff rates of 0%, 5%,
10%, 20%, and 25%.  This tariff structure issomewhat escalatory with many processed
products facing a higher effective rate of
protection (ERP) along the processing chain.
Such a tariff structure provides substantial
import protection to higher-level processingactivities, causing resource misallocation and
inflicting higher costs to Tanzanian
consumers.  The simple average of applied
import duties is 16.2%.
15. In addition to import duties, Tanzania
introduced a 20% VAT in 1997.  Excise taxes
are also levied on petroleum, alcoholic and
non-alcoholic beverages, and tobacco
products.  The Government of Tanzania relies
heavily on revenues from tariffs and VAT;
consequently, there is pressure to maintain
revenues through high tariff levels.  However,this pressure could be reduced – as could
tariff rates – if the extent of exemptions
granted were reduced or eliminated.  In 1999,
42% of duties were not collected on the
mainland, while in Zanzibar, thecorresponding rate was 33%.  VAT exemptions
constituted 31% of collections.
16. The Tanzanian Revenue Authority
(TRA) has a preshipment inspection contract
with COTENCA Inspection S.A., which tookeffect on 1 March 1999.  COTECNA is
responsible for inspecting all imports whose
f.o.b. value exceeds US$5,000.  Tanzania still
uses the Brussels definition of value (BDV).
Although Tanzania has notified the WTO ofdeferred application of Article VII, TRA
officials do not believe that they will be able to
make the changeover to transaction value until
2001, and will be seeking an additional
extension along with technical assistance to
implement Article VII.  Tanzania has no
national legislation regarding anti-dumping,countervailing, or safeguard measures,although the authorities suggest that such
measures may be introduced in the future.
17. The Tanzania Bureau of Standards
(TBS) is charged with the administration of
standards issues, which include 572 published
standards.  TBS is a member of theInternational Organization for Standards
(ISO) and has been notified to the WTO as the
contact point for issues related to the
Agreement on Technical Barriers.  Most
Tanzanian standards are voluntary in natureand TBS adopts international standards
whenever they exist.  Sanitary and
phytosanitary standards are the responsibility
of the Ministry of Agriculture and
Cooperatives, which conducts an inspectionand certification programme for all imports of
plant and animal products.
18. Tanzania is neither an observer to,
nor signatory of, the Uruguay Round
Plurilateral Agreement on Government
Procurement.  Except for procurement
regulations imposed as part of aid and loansprovided by international financial
institutions, Tanzania's own procurement
procedures are a confusing agglomeration of
memoranda and other understandings that
vary from ministry to ministry;  procurementissues are under review and new legislation
may be forthcoming.
19. Tanzania has been pursuing an
aggressive policy of privatization in
conjunction with support it receives frominternational financial institutions.  The
intention of the Government is for all
parastatal entities to be either privatized or
liquidated, although no target date for the
completion of this process has beenannounced.  Major privatizations are
currently under way in the telecommunications
and utility sectors as well as in financial
services.  Although there is legislation on
competition policy in Tanzania, enforcement
has been informal, because regulations and
procedures have not yet been formalized.WT/TPR/S/66 Trade Policy Review
Page x
20. Tanzania's Registrar of Companies
oversees intellectual property matters, which
are governed by legislation on patents, trade
and service marks, and copyrights.  Tanzania
has been amending its legislation to conform
with WTO requirements;  the most recent isthe Copyright Act of 1999.  It intends to meet
its obligations in other areas by 2006.
Tanzania is a member of the African Regional
Industrial Property Organization (ARIPO) as
well as the World Intellectual PropertyOrganization (WIPO).  It is a signatory to the
Paris Convention and the Berne Convention
and other international protocols.  Tanzania's
lack of enforcement mechanisms for
intellectual property infringement is currentlybeing addressed and the Government has
indicated that enforcement procedures will be
strengthened.
(ii) Policies by sector
21. Tanzania's agriculture sector
constitutes over 50% of national GDP and
provides a majority of the country's exportearnings.  The sector has been substantially
liberalized since the mid 1980s and market
forces have been allowed to prevail.  The
Government has withdrawn from direct
involvement in production, processing, andmarketing activities and has retained only its
role in setting policies.  Traditional export
crops include coffee, cashew nuts, tobacco,
and cotton, although efforts are being
undertaken to promote non-traditional cropssuch as spices, horticultural items, and
oilseeds.  Climatic conditions in Tanzania in
the past few years, fluctuating between
drought and flood conditions, have led to
unpredictable agricultural production.  Thishas resulted in severe food shortages and
varying levels of export earnings.
22. Tanzania's mineral sector, focused
primarily on gold production, offers one of the
best opportunities for growth.With over US$600 million of new investment
in this sector likely to be realized in the next
2-3 years, the mineral sector promises to be an
increasingly important contributor to GDP
and export earnings.  However, the viability of
Tanzanian gold production is closely tied tointernational gold prices, which have shown
continued volatility.  Any further downward
pressure on gold prices will put prospects in
this area at risk.
23. Tanzania's manufacturing sector is
underdeveloped.  The sector is characterized
by food processing, beverages, agri-business,
and light manufacturing, along with some
textile and footwear producers. Despite efforts
to take advantage of opportunities arisingfrom regional integration, the manufacturing
sector has been hampered by high input costs.
In particular, the tariff, which provides for
high levels of protection for value-added
goods, makes it difficult for Tanzanian
manufacturers who must source inputs from
outside the country.  These costs, along withhigh energy prices, have resulted in a
generally uncompetitive manufacturing sector
with low  capacity utilization.
24. The services sector, like the rest of the
economy, has undergone significantliberalization.  Privatization efforts are under
way in a number of subsectors including
telecommunications, insurance, and financial
services.  Tourism constitutes the largest
component of services GDP and holds promisefor continued growth as the Government is
focusing its efforts both on the supply side
(infrastructure) and the demand side.
Privatization of the telecommunications sector
is moving forward with the recognition thattelecommunications infrastructure is an
essential component of overall economic
development.  Tanzania intends to underline
its commitment to telecommunications
liberalization by making specific bindings
under the General Agreement on Trade in
Services (GATS).