Monday, March 5, 2012

Uganda, China and Preferential Trade Treatment

Shinyekwa Isaac and Lawrence Othieno have researched Uganda's comparative trade advantage as it applies to China and other members of the East African Community (EAC). Dated September 2011 and titled Uganda's Revealed Comparative Advantage: The Evidence with the EAC and China, it was published by the Economic Policy Research Centre (EPRC) established in 1993 in Kampala. The goal of the EPRC is to foster sustainable growth and development of the Ugandan economy through research and applied policy analysis.

From my perspective, the paper is especially useful because it analyzes Uganda's chances to benefit from the special preferential treatment offered on 4,021 product lines by China. There have been very few studies of China's preferential trade ties with African countries. While there has been more analysis of the larger U.S. preferential trade program for African countries, it seems that neither the U.S. nor the Chinese program has had the positive impact that was originally envisaged. The purpose of these zero tariff programs is to increase African exports to the United States and China respectively.

While Uganda's exports to China increased from $237,000 in 2001 to $20 million in 2009, its imports from China increased from $16 million to $231 million over the same period. Uganda experienced a growing trade deficit with China each year between 2001 and 2009. Uganda's exports to China are growing but at a slower rate than imports from China. Uganda mainly exports cotton, coffee, leather, fish, oil seeds, timber and mineral products to China. One of the purposes of the study is to identify Ugandan products that can benefit from zero tariff treatment into China. The study concludes that without Ugandan policy changes, "Uganda may not have the capacity to increase her exports to China due to the various supply constraints in the economy."

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