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
Highlights
Coffee is one of the most produced, exported and widely consumed crops worldwide
The aim of providing this coffee trade information is to extend the coffee trade performance history of the country, whereby Revealed Comparative Advantage (RCA) estimation intends to measure the contribution of Everything but Arms (EBA) initiatives in exporting coffee to the European Union (EU) market
It has been observed that sisal and agave fibres, raw and tea have high levels of RCA compared to other products before and during EBA
Summary
Coffee is one of the most produced, exported and widely consumed crops worldwide. International Coffee Organization (2015) reported that coffee is one of most commercial crops relevant for economic growth and poverty reduction. The largely produced and commercialized varieties of coffee worldwide are Arabica (Coffea Arabica) and Robusta (Coffea canephora). The leading coffee producers worldwide are Brazil, Vietnam, Colombia, Indonesia, Ethiopia, Honduras, India, Uganda and Mexico and Guatemala. According to Szenthe (2019), Tanzania ranked as the 18th country in coffee production. Most of the coffee produced from these countries is exported and a small portion is consumed domestically. The prime coffee importers are the European Union, Japan, Norway, the Russian Federation, Switzerland, Tunisia and the United States (International Coffee Organization, 2019)
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