Comparative Advantage of Tanzanian Coffee Sector under “Everything but Arms” Export Trading Regime

Abstract

This paper assesses the comparative advantage of the Tanzanian coffee sector in the European Union (EU) before and during the Everything but Arms (EBA) trading regime. Coffee’s comparative advantage at the EU level was compared to other commercial crops’ comparative advantage namely; sisal, tobacco, cashew nuts, tea and cotton. To get a clear effect of the regime, Balassa Revealed Comparative Advantage (RCA) index has been employed to analyze exports values from 1995 to 2000 before EBA and from 2001 to 2019 during EBA as two separate periods. Findings from this study indicate that before EBA, coffee was a third product to be exported but during EBA it become a less specialized product. Therefore, EBA has promoted less the export of coffee to the EU market than expected that it will increase as the regime released transaction costs which were restricting the trade. To benefit from EBA preferential agreements, policymakers and sectorial stakeholders have to revisit EBA terms and conditions especially that of “Rule of Origin” which is reported as a major obstacle for most countries to utilize trade preferences agreements merely when they bump into low production within the country of origin.

Keywords: RCA, EAC, EBA, EU Market, Balassa Index

DOI: 10.7176/JESD/13-4-02

Publication date: February 28^th 2022