Tariff Impact on Industrialization in Tanzania: Evidence from Edible Oil Sub-Sector

Abstract

The research is financed by the Federal Ministry of Food and Agriculture under the auspices of the Federal Office for Agriculture and Food, Germany

Abstract

Developing countries implement protectionist policies like imposing tariffs, with the aim of promoting domestic production. This study assesses the impact of the imposed tariffs on edible oil on Tanzania’s economy using a recursive dynamic computable general equilibrium model (CGE). Findings from this study show that implementing the tariff intervention on the dibble oil sub-sector has two principle outcomes; first, it triggers domestic producers to supply more due to the rise in demand and prices for the commodities, thus increases domestic production to meet demand; second, it reduces imports, consequently, decreasing citizens’ welfare by limiting the availability and access options from imported commodities. Protectionist policies, when solely used as a solution to increase domestic production in a sector that is inefficient in terms of productivity, creates a supply deficit in the market, thus reducing consumers’ welfare. Therefore, to improve sustainability and increase industrial competitiveness, it is imperative to promote policies and interventions that target increasing productivity. Interventions, like the use of improved seed and other modern technologies, that reduce costs of production are critical as commodities will be sold at a slightly competitive premium or the same prices as imported commodities.

Keywords: Tariff; Industrialization; Edible oil; Recursive dynamic CGE; Tanzania

DOI: 10.7176/JESD/10-10-02

Publication date:May 31^st 2019