Welfare impacts of import controls on Botswana's horticulture

Abstract

AbstractBotswana has, for the past two decades, used import controls (permits) to regulate horticultural imports, and thereby promote economic diversification through import substitution. This article estimates import demand equations to capture the impact of import controls on horticultural imports (oranges, potatoes, and onions) into Botswana, using data for 1974 to 2001. Parameter estimates are used to compute nominal protection rates (NPRs) and welfare effects. Model‐generated NPRs are estimated at 191%, 75%, and 109% for oranges, potatoes, and onions, respectively. Imports of oranges, potatoes, and onions declined by 32%, 29%, and 35%, respectively, due to the implementation of import controls. Over time consumer losses and quota rents rose while producer gains declined. Net social losses also increased, implying that import controls became increasingly burdensome. It is argued that import controls have not been very effective in promoting import substitution. The study is important for the trade liberalization debate in the Southern African Customs Union (SACU) and within the Southern African Development Community (SADC), where import permits and other nontariff barriers are pervasive, have proliferated, and are a major hindrance to intraregional trade.