Open Collections

UBC Theses and Dissertations

UBC Theses Logo

UBC Theses and Dissertations

A Case for Zambian entry into the East African Common Market 1970

You don't seem to have a PDF reader installed, try download the pdf

Item Metadata

Download

Media
UBC_1970_A8 S67.pdf [ 7.07MB ]
UBC_1970_A8 S67.pdf
UBC_1970_A8 S67.pdf
Metadata
JSON: 1.0102297.json
JSON-LD: 1.0102297+ld.json
RDF/XML (Pretty): 1.0102297.xml
RDF/JSON: 1.0102297+rdf.json
Turtle: 1.0102297+rdf-turtle.txt
N-Triples: 1.0102297+rdf-ntriples.txt
Citation
1.0102297.ris

Full Text

A CASE FOR ZAMBIAN ENTRY INTO THE EAST AFRICAN COMMON MARKET by DAVID MAYER SPRING A THESIS SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF M. A. i n the Department of Economics We accept t h i s thesis as conforming to the required standard THE UNIVERSITY OF BRITISH COLUMBIA MAY, 1970 I n p r e s e n t i n g t h i s t h e s i s i n p a r t i a l f u l f i l m e n t o f t h e r e q u i r e m e n t s f o r a n a d v a n c e d d e g r e e a t t h e U n i v e r s i t y o f B r i t i s h C o l u m b i a , I a g r e e t h a t t h e L i b r a r y s h a l l m a k e i t f r e e l y a v a i l a b l e f o r r e f e r e n c e a n d s t u d y . I f u r t h e r a g r e e t h a t p e r m i s s i o n f o r e x t e n s i v e c o p y i n g o f t h i s t h e s i s f o r s c h o l a r l y p u r p o s e s may be g r a n t e d by t h e H e a d o f my D e p a r t m e n t o r by h i s r e p r e s e n t a t i v e s . I t i s u n d e r s t o o d t h a t c o p y i n g o r p u b l i c a t i o n o f t h i s t h e s i s f o r f i n a n c i a l g a i n s h a l l n o t be a l l o w e d w i t h o u t my w r i t t e n p e r m i s s i o n . D e p a r t m e n t T h e U n i v e r s i t y o f B r i t i s h C o l u m b i a V a n c o u v e r 8, C a n a d a j This t h e s i s covers the subject of economic int e g r a t i o n i n the East A f r i c a n s e t t i n g . Following a review of custom union theory l i t e r a t u r e , a c l o s e r examina- t i o n i s made of the h i s t o r i c a l and economic background of the East A f r i c a n Common Market. A case i s then made f o r Zambian entry into the Common Market with p a r t i c u l a r emphasis put on the ef f e c t i t would have on the growth of G.D.P. (impact e f f e c t ) and the development of industry. An empirical examination of the impact e f f e c t indicates that Tanzania w i l l be the largest net gainer. A model i s also presented that shows the ef f e c t of i n t e g r a t i o n on the time horizon of i n d u s t r i a l growth. F i n a l l y , the t h e s i s concludes that there are net gains that can be enjoyed by a l l p a r t i e s i f i n t e g r a t i o n i s implemented i n a r a t i o n a l manner and i n d u s t r i a l planning i s executed by an inter-country i n d u s t r i a l planning board that would a l l o c a t e industry among the member countries based on sound economic c r i t e r i a . TABLE OF CONTENTS In t r o d u c t i on C h a p t e r I C h a p t e r II - C h a p t e r M l C h a p t e r IV C h a p t e r V C h a p t e r VI C o n c l u d i n g Remarks Custom u n i o n t h e o r y and i t ' s r e l e v a n c e t o t h e d e v e l o p i n g w o r l d . . P a s t h i s t o r y of e c o n o m i c c o - o p e r a t i o n i n E a s t A f r i c a . Zambia as p a r t o f t h e EACM. Impact e f f e c t o f Z a m b i a n e n t r y i n t o t h e Common M a r k e t . The e f f e c t o f i n t e g r a t i o n on t h e t i m e h o r i z o n o f i n d u s t r i a l d e v e l o p m e n t . C o s t c o n s i d e r a t i o n s o f p r o p o s e d i n t e g r a t i o n 1 " T h e c o n c e p t o f e c o n o m i c c o o p e r a t i o n o f f e r s t o member S t a t e s o f t h e E a s t . A f r i c a n s u b - r e g i o n a g r e a t p o t e n t i a l f o r a d v a n c e m e n t t o w a r d s o u r common good o f s u s t a i n e d e c o n o m i c g r o w t h . " D r . K e n n e t h Kaunda P r e s i d e n t o f ' t h e R e p u b I i c o f Z a m b i a 1 INTRODUCTION It i s most a p p r o p r i a t e t h a t t h i s q u o t a t i o n o f P r e s i d e n t K a u n d a ' s i n t r o d u c e s t h e theme o f t h e t h e s i s . F o r i t i s t h e e f f e c t s o f Z a m b i a n e n t r y i n t o t h e E a s t A f r i c a n Common M a r k e t ( E A C M ) , t h a t w i l l be o f m a i n c o n c e r n i n t h e f o l l o w i n g c h a p t e r s . A t p r e s e n t t h e o n l y members of t h e EACM a r e . K e n y a , Uganda and " . T a n z a n i a . T h e s e c o u n t r i e s have s h a r e d a common m a r k e t s i n c e 1927 and o v e r t h e y e a r s have c o - o p e r a t e d in d e v e l o p i n g common s e r v i c e s a n d o r g a n - i z a t i o n s . • O t h e r c o u n t r i e s o f t h e s u b - r e g i o n have e x p r e s s e d an i n t e r e s t i n p a r t i c i p a t i n g i n t h e EACM, and a r e t h e r e f o r e i n t e r e s t e d i n what p r o b - lems m i g h t a r i s e f r o m t h e e x t e n s i o n o f t h e common m a r k e t . 2 Z a m b i a in p a r t i c u l a r i s i n t e r e s t e d i n a s s o c i a t i n g w i t h t h e EACM, s i n c e i t i s a l a n d l o c k e d n a t i o n w h i c h f i n d s i t s e l f i n a r a t h e r p r e c a r i o u s e c o n o m i c and p o l i t i c a l s i t u a t i o n . It i s , t h e r e f o r e , a p p r o p r i a t e f o r us t o e x a m i n e t h e c a s e o f Z a m b i a n e n t r y i n t o t h e common m a r k e t , a n d a l s o t o hope t h a t o u r f i n d i n g s and a p p r o a c h w i l l be o f b e n e f i t t o o t h e r s t a t e s t h a t a r e c o n t e m p l a t i n g s i m i I a r a c t i o n . A c o m p l e t e e x a m i n a t i o n o f t h i r d c o u n t r y e n t r y i n t o a common m a r k e t must c o n s i d e r t h e e f f e c t i n t e g r a t i o n w i l l have on s u c h t h i n g s as c a p i t a l f o r m a t i o n , n a t i o n a l i n c o m e , i n d u s t r i a l i z a t i o n , f o r e i g n i n v e s t m e n t , a g r i c u l t u r a l p r o d u c t i o n , ' m o n e t a r y and f i s c a l p o l i c y , c o n s u m e r p r i c e l e v e l , f a c t o r m o b i l i t y , b a l a n c e of p a y m e n t s , i n t e r n a t i o n a l r e l a t i o n s , e d u c a t i o n p o I i t i c a I s t a b i l i t y , and f i n a l l y , t h e s o c i a l and c u l t u r a l a t t i t u d e s o f t h e n a t i o n . Such a s t u d y would be a H e r c u l e a n t a s k i n v o l v i n g n o t a t h e s i s b u t a b o o k - l e n g t h s t u d y . F o r t h i s r e a s o n we s h a l l f o c u s o u r a t t e n t i o n on a few o f . t h e m a j o r f a c t o r s s u c h as n a t i o n a l i n c o m e , t h e r a t e o f i n d u s t r i a l i z a t i o n , and t h e g e n e r a l c o u r s e o f e c o n o m i c d e v e l o p m e n t . O n l y c u r s o r y m e n t i o n w i l l be made t o t h e o t h e r f a c t o r s i n s o f a r as t h e y r e l a t e t o o u r main t o p i c s . The body o f t h e t h e s i s wi I I . c o n t a i n , (1) a t h e o r e t i c a l and h i s t o r i c a l p e r s p e c t i v e o f t h e s i t u a t i o n ( C h a p t e r s 1, 2 and 3 ) , (2) an e m p i r i c a l s t u d y o f t h e s h o r t r u n e f f e c t s o f t h e p r o p o s e d i n t e g r a t i o n ( C h a p t e r 4 ) , (3) a t h e o r e t i c a l model s u g g e s t i n g how t h e s t u d y m i g h t be e x t e n d e d ( C h a p t e r 5 ) , and f i n a l l y , (4) t h e summation and d r a w i n g t o g e t h e r o f o u r c o n c l u s i o n s . I t i s hoped t h a t t h e t h e s i s w i l l g i v e t h e r e a d e r an i n s i g h t i nt.o t h e p r o b l e m s f a c i n g t h e E a s t A f r i c a n Common M a r k e t , and t h e e f f e c t t h e " p r o p o s e d i n t e g r a t i o n " w i l l have on t h e c o n t i n u e d o p e r a t i o n o f t h e communi t y . CHAPTER I Custom U n i o n t h e o r y and i t ' s r e l e v a n c e t o t h e d e v e l o p i ng w o r I d . In t h e i n t r o d u c t i o n we p o i n t e d o u t t h e a I I - e n c o m p a s s i n g n a t u r e o f t h e q u e s t i o n . T h e r e has d e v e l o p e d a body of. e c o n o m i c t h e o r y d e a l i n g w i t h t h e v e r y q u e s t i o n o f e c o n o m i c i n t e g r a t i o n . The n e x t o b v i o u s q u e s t i o n i s , " T o what e x t e n t c a n t h i s body o f t h e o r y p r o v i d e us w i t h t o o l s t o e v a I u a t e . t h e e f f e c t s o f Z a m b i a n e n t r y i n t o t h e E a s t A f r i c a n Common " M a r k e t . Custom U n i o n t h e o r y has been a l a t e a r r i v a l t o t h e g e n e r a l body o f e c o n o m i c t h e o r y . I t w a s n ' t u n t i l t h e e a r l y 1 9 5 0 ' s t h a t e c o n o m i c i n t e g r a t i o n became a p o p u l a r t o p i c . J a c o b V i n e r o p e n e d t h e w h o l e q u e s t i o n o f c u s t o m u n i o n t h e o r y i n 1950 w i t h h i s p i o n e e r i n g work e n t i t l e d , " T h e C u s t o m U n i o n I s s u e " . V i n e r was c o n c e r n e d w i t h t h e g e n e r a l l y a c c e p t e d h y p o t h e s i s t h a t s i n c e a c u s t o m u n i o n was a movement t o w a r d s f r e e t r a d e and s i n c e f r e e t r a d e i n c r e a s e d p o t e n t i a l g l o b a l w e l f a r e , t h e n any movement i n t h a t d i r e c t i o n would i n c r e a s e w e l f a r e . The V i n e r i a n model i s q u i t e s i m p l e and c a n b e s t be used t o show t h e c o n t r i b u t i o n s he made t o Custom U n i o n t h e o r y by d i s p e l l i n g t h e p r e v - i o u s I y he Id mi s c o n c e p t i on . T a b l e '1.1 p r e s e n t s t h e r e l e v a n t d a t a . Money p r i c e ( a t e x i s t i n g e x c h a n g e r a t e s ) o f a S i n g l e Commodity X i n T h r e e C o u n t r i e s C o u n t r y A B C P r i c e 28<t 24$ 20£ If c o u n t r y A l e v i e s an i m p o r t d u t y o f 50% on commodity X, i t w o u l d be s u f f i c i e n t t o p r o t e c t i t s l o c a l p r o d u c t i o n . If A forms a c u s t o m u n i o n w i t h B o r C and d r o p s t h e t a r i f f , t h e n c o u n t r y A w o u l d buy commod'iTy X f r o m a lower c o s t p r o d u c e r . T h i s i s t r a d e " c r e a t i o n " . If c o u n t r y A - l e v i e d a 25% i m p o r t t a x t h e n i t would buy commodity X from c o u n t r y C , t h e l o w e s t c o s t p r o d u c e r . If a c u s t o m u n i o n was c r e a t e d between A and B t h e n A w o u l d buy from B a t 24<£ r a t h e r t h a n C a t 20<£ p l u s 5$ t a r i f f . T h i s i s V i n e r ' s e x a m p l e o f t r a d e " d i v e r s i o n " s i n c e A buys f r o m a h i g h c o s t p a r t n e r p r o d u c e r r a t h e r t h a n from t h e l o w e s t c o s t p r o d u c e r . V i n e r ' c o n c l u d e d t h a t b e c a u s e t r a d e d i v e r s i o n r e p r e s e n t e d a s h i f t f r o m t h e l o w e s t c o s t s o u r c e o f s u p p l y t o a h i g h e r c o s t s o u r c e , t h a t i t r e p r e s e n t e d a move- ment f r o m a more t o a l e s s e f f i c i e n t a l l o c a t i o n o f r e s o u r c e s . V i n e r f u r t h e r c o n c l u d e d t h a t t h e g r e a t e r t h e o v e r l a p o f c o m m o d i t i e s p r o d u c e d and p r o t e c t e d by b o t h c o u n t r i e s , t h e g r e a t e r wi I I be t h e g a i n s f r o m i n - t e g r a t i o n . V i n e r ' s ana I y s i s o f t h e c u s t o m u n i o n i s s u e s t i r r e d t h e i n t e r e s t o f o t h e r e c o n o m i s t s who were a n x i o u s t o c o n t r i b u t e t o t h e d i s c u s s i o n . V i n e r i a n a n a l y s i s s e t t h e d i r e c t i o n f o r f u t u r e i n v e s t i g a t i o n and f o r o v e r a d e c a d e r e f i n e m e n t s were added t o h i s a n a l y s i s . .-• T h e e m p h a s i s o f t h e s e i n v e s t i g a t i o n s was p l a c e d upon t h e w e l f a r e g a i n s and t h e c o n d i t i o n s n e c e s s a r y t o b r i n g them a b o u t . D r s . Makower 2 and M o r t o n c o n c l u d e d from t h e i r s t u d y t h a t t h e g r e a t e r t h e d i f f e r e n c e between the. c o s t r a t i o s o f t h e o v e r I a p p i n g c o m m o d i t i e s o f t h e p a r t n e r c o u n t r i e s , t h e g r e a t e r would be g a i n s f r o m t r a d e c r e a t i o n . I m p l i c i t i n V i n e r ' s a n a l y s i s was t h e a s s u m p t i o n t h a t c o m m o d i t i e s were consumed i n some f i x e d p r o p o r t i o n i n d e p e n d e n t o f t h e s t r u c t u r e of r e l a t i v e p r i c e s . T h i s weakness i n V i n e r ' s t h e o r y was p i c k e d up q u i t e 3 4 5 i n d e p e n d e n t l y by L i p s e y , Meade and G e h r e l . A l l t h r e e r e a l i z e d t h e i m p o r t a n c e i n most c a s e s o f t h e s u b s t i t - u t i o n e f f e c t and t h e i m p l i c a t i o n s i t c a r r i e d f o r c u s t o m u n i o n t h e o r y . 5. ! F i q u r e 1.1 Commod i t y A The m a i n g i s t o f t h e a r g u m e n t i s as f o l l o w s : c o n s u m e r s a r e assumed t o d e t e r m i n e t h e i r c o n s u m p t i o n p a t t e r n s b a s e d upon t h e r e l a t i v e p r i c e o f c o m m o d i t i e s . P r o f e s s o r G e h r e l s r e s t r i c t s h i s a n a l y s i s t o two c o m m o d i t i e s w h i c h we w i l l assume a r e s u b j e c t t o a s u b s t i t u t i o n e f f e c t . F i g u r e 1.1 shows c o u n t r y A p r o d u c i n g commodity Y and t r a d i n g w i t h c o u n t r y B w h i c h p r o d u c e s commodity X . T h e s l o p e o f l i n e A . B r e p r e s e n t s t h e t e r m s o f t r a d e between X and Y when A t r a d e s w i t h B. The f r e e t r a d e equ i Ii b r i um p o i n t w i l l be when A . B i s t a n g e n t t o t h e hi g h e s t i nd i f f e r e n c e c u r v e U If a t a r i f f i s imposed by A on commodity X t h e n t h e r e l a t i v e p r i c e i n t e r m s o f good Y w i l l be' h i g h e r , as i n d i c a t e d by t h e s l o p e o f I i ne A ' B ' . The new equ i Ii b r i um wi I I be where t h e A ' B ' c u t s A . B and i s t a n g e n t t o J J ' ' a t p o i n t H . T h i s i s t h e p o i n t where t h e d o m e s t i c m a r k e t r a t e o f t r a n s f o r m a t i o n e q u a l s t h e f r e e t r a d e m a r k e t r a t e o f t r a n s f o r m a t i o n w h i c h i s t a n g e n t t o 1'". U n d e r t h e s e c o n d i t i o n s i t i s p o s s i b l e t o e s t - a b l i s h a t r a d e d i v e r t i n g c u s t o m u n i o n and i n c r e a s e w e l f a r e . Such i s t h e c a s e o f a u n i o n w i t h c o u n t r y C w i t h a m a r k e t t r a n s f o r m a t i o n l i n e o f A . C . T h e new e q u i l i b r i u m i s a t p o i n t E where A . C i s t a n g e n t t o i n d i f f e r e n c e c u r v e I''-.. T h u s , t h e r e has been a g a i n in w e l f a r e . A l t h o u g h a c a s e may be made by G e h r e l s i n a 2 commodity m o d e l , L i p s e y ^ p o i n t s o u t t h a t when o t h e r c o m m o d i t i e s a r e c o n s i d e r e d a t t h e same t i m e t h e r e s u l t s a r e n o t s o p r o f o u n d . U n d e r t h e s e c i r c u m s t a n c e s i t c a n n o t be presumed t h a t t h e r e w i l l a l w a y s be g a i n s from u n i o n . '- " P r o f e s s o r Meade^ t a c k l e s t h e same p r o b l e m s . . He d i r e c t s most o f h i s a t t e n t i o n t o c r i t i c i s m and e x t e n s i o n o f V i n e r i a n a n a l y s i s and m a k e ' s a p o s i t i v e c o n t r i b u t i o n by c l a r i f y i n g many of t h e u n c e r t a i n t i e s . He r e - e x a m i n e s most o f t h e V i n e r t h e o r y u s i n g B e l g i u m and t h e N e t h e r l a n d s as e x a m p l e s o f p o t e n t i a l c u s t o m u n i o n p a r t n e r s . He c o n c l u d e s t h a t a c u s t o m 8 u n i o n i s more l i k e l y t o i n c r e a s e e c o n o m i c w e l f a r e : .7. (1) If t h e e c o n o m i e s o f the. p a r t n e r ' c o u n t r i e s a r e a c t u a l l y v e r y c o m p e t i t i v e o r s i m i l a r b u t p o t e n t i a l l y v e r y comp I ementary. o r d i ss imi l a r . ( 2 ) The h i g h e r a r e t h e i n i t i a l r a t e s o f d u t y on i m p o r t s i n t o t h e p a r t n e r c o u n t r i e s . (3) If e a c h i s t h e p r i n c i p a l s u p p l i e r t o t h e o t h e r o f t h e p r o d u c t s w h i c h i t e x p o r t s t o * t h e o t h e r and i f each i s t h e p r i n c i p a l m a r k e t f o r t h e o t h e r o f t h e p r o d u c t s w h i c h i t i m p o r t s from t h e o t h e r . ( 4 ) The g r e a t e r i s t h e p r o p o r t i o n o f t h e w o r l d ' s p r o d u c t i o n , c o n s u m p t i o n , and t r a d e w h i c h i s c o v e r e d by t h e members of t h e u n i o n . (5) The lower t h e r a t e o f i m p o r t d u t i e s i n t h e r e s t o f t h e I ' - w o r l d b u t t h e g r e a t e r t h e number o f i n d e p e n d e n t c u s t o m s a r e a s i n t o w h i c h t h e r e s t o f t h e w o r l d i s d i v i d e d . (6) If w o r l d t r a d e b a r r i e r s t a k e t h e f o r m o f f i x e d q u a n t i t a t i v e r e s t r i c t i o n s r a t h e r t h a n o f t a x e s on i m p o r t s . (7 ) The g r e a t e r i s t h e s c o p e f o r e c o n o m i e s o f l a r g e - s c a l e p r o d - u c t i o n i n t h o s e i n d u s t r i e s w i t h i n t h e u n i o n w h i c h a r e now e n a b l e d t o expand by u n d e r c u t t i n g s i m i l a r i n d u s t r i e s i n o t h e r p a r t s o f t h e u n i o n . (8) If t h e r e i s a p a r t i a l , a l l - r o u n d r e d u c t i o n by p a r t n e r c o u n t r i e s r a t h e r n t h a n a t o t a l e l i m i n a t i o n o f t h o s e d u t i e s . P r o f e s s o r Meade c o n c l u d e s t h a t t h e r e i s a g e n e r a l p r e j u d i c e i n f a v o u r o f c u s t o m u n i o n s . 9 A g a i n , L i p s e y p o i n t s o u t t h e w e a k n e s s e s o f t h e t h e o r y . M e a d e ' s h y p o t h e s i s may h o l d i n a s i t u a t i o n o f a m a r g i n a l c h a n g e i n t a r i f f r a t e s b u t i n most c u s t o m u n i o n s i t u a t i o n s t h e r e w i l l be l a r g e t a r i f f r e d u c t i o n s w i t h t h e r e s u l t o f c h a n g e s i n s u p p l y and demand c o n d i t i o n s . The r e s u l t s w i l l t h e n n o t be so o b v i o u s and you c a n n o t c o n e Iude t h a t t h e r e i s a g e n e r a l p r e j u d i c e i n f a v o u r o f c u s t o m u n i o n s . A f t e r c o n c l u d i n g a g e n e r a l s u r v e y . o f c u s t o m u n i o n t h e o r y L i p s e y o f f e r s t h r e e o f h i s own p r o p o s i t i o n s c o n c e r n i n g w e l f a r e : (1) "when o n l y some t a r i f f s a r e t o be c h a n g e d , w e l f a r e i s more l i k e l y t o be r a i s e d i f t h e s e t a r i f f s a r e m e r e l y r e d u c e d t h a n i f 10 t h e y a r e c o m p l e t e l y r e m o v e d . " (2) . " g i v e n a c o u n t r y ' s v o l u m e o f i n t e r n a t i o n a l t r a d e , a c u s t o m u n i o n i s more l i k e l y t o r a i s e w e l f a r e t h e h i g h e r i s . t h e p r o p o r t i o n o f t r a d e w i t h t h e c o u n t r y ' s u n i o n p a r t n e r and t h e lower t h e p r o p o r t i o n o f t r a d e w i t h t h e o u t s i d e w o r l d . " (3) " a c u s t o m u n i o n i s ' more l i k e l y t o r a i s e w e l f a r e t h e lower i s t h e t o t a l v o l u m e o f f o r e i g n t r a d e , f o r t h e lower i s f o r e i g n t r a d e t h e lower must be p u r c h a s e s f r o m t h e o u t s i d e w o r l d r e l a t i v e t o p u r c h a s e s o f d o m e s t i c c o m m o d i t i e s . " ^ D i s c u s s i O n ,of t h e t o p i c d i d n o t end h e r e . T h r o u g h o u t t h e l i t e r - 12 a t u r e d i f f e r e n t a s p e c t s o f V i n e r i a n a n a l y s i s were d i s c u s s e d as w e l l as e m p i r i c a l a t t e m p t s b e i n g made t o e s t i m a t e t r a d e c r e a t i o n and t r a d e d i v e r s i o n f o r g i v e n c o u n t r y g r o u p s . ^ T h e s e t h e o r i e s were m o s t l y d e v e l o p e d w i t h t h e e c o n o m i e s o f d e v e l o p e d c o u n t r i e s i n m i n d . The o b v i o u s q u e s t i o n t h e n a r i s e s : What h e l p c a n t h e s e t h e o r i e s o f f e r when c o n s i d e r i n g t h e s i t u a t i o n o f d e v e l o p i n g c o u n t r i e s ? . One common c h a r a c t e r i s t i c . o f t h e t h e o r i e s p r e v i o u s l y m e n t i o n e d ( h e n c e f o r t h r e f e r r e d t o as t h e C l a s s i c a l t h e o r y o f Custom U n i o n s ) a r e t h a t t h e y a r e s t a t i c m o d e l s , c o n c e r n e d w i t h t h e w e l f a r e e f f e c t g e n e r a t e d by t r a d e d i v e r s i o n and t r a d e c r e a t i o n . T h i s i s c e r t a i n l y a l e g i t i m a t e c o n - c e r n f o r d e v e l o p e d c o u n t r i e s where t h e s t r u c t u r e s o f t h e d o m e s t i c e c o n o m i e s c o n c e r n e d a r e a l r e a d y formed and d i s p l a y a c e r t a i n amount o f r i g i d i t y . As P r o f e s s o r L i p s e y m o s t a p t l y p o i n t s o u t i n t h e i n t r o d u c t i o n t o h i s " S u r v e y A r t i c l e " , most o f t h e a t t e n t i o n o f c u s t o m u n i o n t h e o r y has been  p l a c e d upon w e l f a r e g a i n s a r i s i n g f r o m s p e c i a l i z a t i o n of p r o d u c t i o n w h i l e t h e w e l f a r e g a i n a c c r u i n g f r o m a c h a n g e i n t h e r a t e o f e c o n o m i c g r o w t h i s " n o t b e i n g d e a l t w i t h a t a l l " . ^ Y e t . i t i s t h i s v e r y s o u r c e o f we I f a r e ' g a i n t h a t i s o f d o m i n a n t i m p o r t a n c e t o t h e d e v e l o p i n g w o r l d . The e m p h a s i s o f t h e c l a s s i c a l t h e o r i e s , t h e r e f o r e , has l i m i t e d t h e i r use as a n a l y t i c a l t o o l s i n t h e d e v e l o p i n g w o r l d . The f i x e d and s t a t i c a s s u m p t i o n s o f c l a s s i c a l t h e o r y a r e v a r i a b l e s i n t h e d y n a m i c , p r o c e s s o f d e v e l o p m e n t . The a s s u m p t i o n s o f f i x e d f a c t o r p r o p o r t i o n , f u l l employment o f r e s o u r c e s , c o m p e t i t i v e p r i c i n g , g i v e n i n d u s t r i a l s t r u c t u r e , f o r e x a m p l e , a r e a l l a s s u m p t i o n s t h a t do n o t h o l d f o r t h e d e v e l o p i n g w o r l d : t h e y a r e t h e v a r i a b l e f a c t o r s t h a t a r e l o o k e d t o t o c r e a t e an i n c r e a s e i n t h e r a t e of e c o n o m i c d e v e l o p m e n t . We m u s t , t h e r e f o r e , f i n d a t h e o r y t h a t t a k e s i n t o c o n s i d e r a t i o n t h e s e f a c t o r s w h e n ; - p r e s e n t i n g a t h e o r y o f e c o n o m i c i n t e g r a t i o n as an e n g i n e o f g r o w t h . S e e i n g t h e need f o r s u c h an a p p r o a c h D r s . C o o p e r and M a s s e l l d e v e l o p e d a. t h e o r y t h a t would t a k e i n t o a c c o u n t some o f t h e s e f a c t o r s . The m a i n c o n t r i b u t i o n o f t h e i r model i s t h e r e a l i z a t i o n t h a t d e v e l o p i n g c o u n t r i e s d e s i r e i n d u s t r i a l i z a t i o n . T h i s f o l l o w s t h e P r e b i s h - U N t h e s i s t h a t d e v e l o p i n g c o u n t r i e s must l o o k t o i n c r e a s e d i n d u s t r i a l d e v e l o p m e n t and e v e n t u a l e x p o r t o f m a n u f a c t u r e d goods i n o r d e r t o narrow t h e income d i s p a r i t i e s between t h e ' h a v e ' and ' h a v e n o t ' c o u n t r i e s . In o r d e r t o u n d e r g o t h e d y n a m i c c h a n g e s i n t h e s t r u c t u r e o f t h e i r e c o n o m i e s , t h e C o o p e r - M a s s e I I model a c c e p t s i n d u s t r i a l i z a t i o n as a l e g i t i m a t e p o l i c y g o a l . An i n t e r e s t i n g f e a t u r e o f t h e i r model i s t h a t i t shows t h e t r a d e - o f f between i n d u s t r i a l i z a t i o n and n a t i o n a l i n c o m e . T h i s m i g h t r e f l e c t t h e s i t u a t i o n . i n many d e v e l o p i n g n a t i o n s w h i c h e x p o r t p r i m a r y p r o d u c t s . One d r a w b a c k o f t h e i r model i s t h a t a f t e r p r e s e n t i n g a c o n v i n c - i n g a r g u m e n t r e g a r d i n g t h e i n a p p r o p r i a t e n e s s o f c l a s s i c a l t h e o r y , t h e y 10. p r o c e e d t o make some o f t h e , s a m e a s s u m p t i o n s ( i . e . f u l l e m p l o y m e n t , . c o n s t a n t c o s t s , c o m p e t i t i v e p r i c i n g and c o n s t a n t t e r m s o f t r a d e ) . B u t i t i s p e r h a p s i n i t i a l l y n e c e s s a r y t o , r e t a i n some o f t h e s e a s s u m p t i o n s i n o r d e r t o c o n s t r u c t a d e t e r m i n a t e and c o m p r e h e n s i v e t h e o r e t i c a l m o d e l . The model accommodates t h e g o v e r n m e n t s d e s i r e f o r i n d u s t r i a l - i z a t i o n by c o n s t r u c t i n g a demand c u r v e D.D w h i c h shows t h e l e v e l o f i n d u s - t r i a l p r o d u c t i o n d e s i r e d a t d i f f e r i n g l e v e l s o f c o s t o f p r o t e c t i o n . T h i s demand c u r v e i s n e g a t i v e l y s l o p e d , i n d i c a t i n g t h a t a t a h i g h c o s t o f p r o t e c t i o n a s m a l l e r amount o f i n d u s t r i a l p r o d u c t i o n w i l l be d e s i r e d by n a t i o n a l p l a n n e r s . In i t s o r i g i n a l f o r m t h e model l a b e l s t h e v e r t i c a l a x i s as t h e m a r g i n a l c o s t o f i n d u s t r y ; I have Changed t h e v e r t i c a l a x i s t o r e a d as t h e m a r g i n a l c o s t o f p r o t e c t i o n f o r i n f a c t t h e c o s t o f p r o - t e c t i o n i s n o t t h e m a r g i n a I . c o s t of t h e i n d u s t r y b u t t h e d i f f e r e n c e b e - tween t h e m a r g i n a l c o s t a n d w o r l d m a r k e t p r i c e . T h i s c h a n g e i s t h e r e - f o r e c o n s i s t e n t w i t h t h e r e s t o f t h e m o d e l . . The s u p p l y c u r v e S . S i s s t e p p e d s i n c e e a c h d i f f e r e n t d e s i r e d i n - d u s t r y r e q u i r e s d i f f e r i n g d e g r e e s o f p r o t e c t i o n . T h e i n d u s t r i e s a r e a r r a n g e d i n a s c e n d i n g o r d e r o f , c o s t s o f p r o d u c t i o n . S i n c e t h e n a t i o n a l p f a n n e r s ' d e s i r e f o r i n d u s t r i a l p r o d u c t i o n D.D and t h e s u p p l y o f i n d u s t r i a l p r o d u c t i o n S . S t h e e q u i l i b r i u m p o i n t i s where t h e two c u r v e s i n t e r s e c t a t poi n t P . i n f i g u r e 1.2. A l l i n d u s t r i e s t o t h e r i g h t o f V w i l I n o t be p r o t e c t e d and t h o s e t o t h e l e f t o f V w i l l be p r o t e c t e d a t a t o t a l c o s t ( o r l o s s o f n a t i o n a l income) o f O . S . P . V . I t i s assumed i n t h i s model t h a t t h e c o u n t r y c o n s i d e r e d , has a c o m p a r a t i v e a d v a n t a g e i n p r i m a r y goods e x p o r t , i . e . c o r n . If i t wanted t o m a x i m i z e n a t i o n a l income i t s h o u l d engage i n t h e e c o n o m i c a c t i v i t y w i t h t h e h i g h e s t r e t u r n i n t h i s c a s e c o r n p r o d u c t i o n . Any d i v e r s i o n o f e c o n o m i c r e s o u r c e f r o m c o r n p r o d u c t o n w i l l mean a d e c r e a s e i n n a t i o n a l i u . a . Fi q u r e 1.4 Marg i naI C o s t ^ o f P r o t e c t i on! ius „ S^syf.jLXS. L Coat, •Surfs Surfs $/>i><S C M /V P I n d u s t r i a l P r o d u c t i o n i n c o m e . T h e r e i s , t h e r e f o r e , a c o n s c i o u s t r a d e - o f f made between i n d u s t r i a l p r o d u c t i o n and n a t i o n a l i n c o m e . T h i s s i t u a t i o n i s i l l u s t r a t e d i n f i g u r e 1.3 by a p r o d u c t i o n c o n s u m p t i o n c u r v e MN. If no i n d u s t r i a l p r o d u c t i o n i s u n d e r t a k e n t h e n n a t i o n a l income w i l l be m a x i m i z e d a t p o i n t M. As i n d u s t r i a l p r o d u c t i o n i n c r e a s e s n a t i o n a l income- f a l l s u n t i l i t r e a c h e s p o i n t N where a l l n a t i o n a l income i s d e r i v e d from i n d u s t r i a l p r o d u c t i o n . The s h a p e of t h e i n d i f f e r e n c e c u r v e I . I . i n d i c a t e s t h e n a t i o n a l p l a n n e r s ' p r e f e r e n c e , f o r e x a m p l e , a ho i z o n t a I I . I . w o u l d show i n f i n i t e p r e f e r e n c e f o r c o r n p r o d u c t i o n as a method o f m a x i m i z i n g i n c o m e . W i t h s u c h an i n d i f f e r e n c e map t h e c o r n e r s o l u t i o n M w o u l d r e s u l t and c o r n p r o d u c t i o n would be t h e o n l y e c o n o m i c a c t i v i t y . P o i n t P i n f i g u r e 1.3 c o r r e s p o n d s t o t h e p o i n t o f i n t e r s e c t i o n o f D.D and S . S i n f i g u r e 1 .2. S i m i l a r l y t h e l e v e l o f i n d u s t r i a l p r o d u c t i o n O.V c o r r e s p o n d i n b o t h d i a g r a m s . . '. . When a c u s t o m u n i o n i s f o r m e d between two c o u n t r i e s o f w h i c h e a c h has an i n t r a - u n i o n c o m p a r a t i v e a d v a n t a g e i n a t l e a s t one i n d u s t r y , t h e n b o t h w i l l g a i n from i n t e g r a t i o n . A s s u m i n g t h a t b o t h c o u n t r i e s A and B have a d e s i r e d i n d u s t r i a l p r o d u c t i o n OM ( f i g u r e 1.4) t h e n by f o r m i n g a u n i o n , e a c h c o u n t r y wi II s p e c i a I i z e i n i t s l o w e s t c o s t i n d u s t r y . In t h e s i t u a t i o n d e p i c t e d i n f i g u r e 1.4, A p r o d u c e s h a t s and B p r o d u c e s c o a t s f o r t h e c o m b i n e d m a r k e t . The i n c r e a s e i n w e l f a r e f r o m t h e n a t i o n a l - p l a n n e r s ' ' " p o i n-t .of v i e w c a n be shown by f i g u r e 1.5. The o r i g i n a l p r o d u c t i o n c o n s u m p t i o n c u r v e f o r t h e c o u n t r y A i s M.N and t h e d e s i r e d l e v e l o f i n d u s t r i a l p r o d u c t i o n OV i s i n d i c a t e d a t p o i n t P where I.I i s t a n g e n t t o M . N . C u r v e R . S . r e p - r e s e n t s t h e s i t u a t i o n f o r A when i n u n i o n w i t h B . P o i n t R i s lower t h a n M w h i c h i n d i c a t e s t h a t e v e n i f A u n d e r t a k e s no i n d u s t r i a l p r o d u c t i o n i t 12. must s h a r e ' t h e c o s t o f p r o t e c t i o n o f i n d u s t r y i n B . S i m i l a r l y , i f A u n d e t t a k e s j u s t i n d u s t r i a l a c t i v i t y i t w i l l have a h i g h e r n a t i o n a l income ( i n d i c a t e d by p o i n t S) as p a r t o f a u n i o n , s i n c e h a l f o f t h e b u r d e n of p r o t e c t i o n wi II be b o r n e by C o u n t r y B. The i n t e r m e d i a t e c a s e where b o t h s p e c i a l i z e i n t h e i r l o w e s t c o s t i n d u s t r y shows t h a t w i t h t h e same l e v e l o f i n d u s t r i a l i z a t i o n O . V t h a t A- i s on a h i g h e r i n - d i f f e r e n c e c u r v e I ' l ' . U s i n g t h e b a s i c m o d e l , C o o p e r and Masse I I e x a m i n e d i f f e r e n t p o s s i b l e s i t u a t i o n s f a c i n g p o t e n t i a l p a r t n e r s and c o n c l u d e : " T h e p o t e n t i a l g a i n from C U w i l l be l a r g e r i f : (1) t h e r e i s a . s t e e p l y r i s i n g m a r g i n a l c o s t o f p r o t e c t i o n i n t h e two c o u n t r i e s . (2) t h e e c o n o m i e s have a s t r o n g p r e f e r e n c e f o r i n d u s t r y . ( 3 ) t h e c o u n t r i e s a r e c o m p l e m e n t a r y . (4) n e i t h e r c o u n t r y d o m i n a t e s t h e o t h e r i n i n d u s t r i a l p r o d u c t i o n g e n e r a l l y . " ^ What c a n t h i s model t e l l us a b o u t t h e p o s s i b l e w e l f a r e g a i n s f r o m o u r p r o p o s e d i n t e g r a t i o n ? From t h e i n f o r m a t i o n a v a i l a b l e some p o t e n t i a l g a i n s from C U wi II be f o r t h c o m i n g s i n c e t h e r e i s a s t r o n g p r e f e r e n c e f o r i n d u s t r i a l d e v e l o p m e n t . The c o u n t r i e s i n v o l v e d a r e p o t e n t i a l l y c o m p l e - m e n t a r y and t h e hope i s t h a t f u t u r e d e v e l o p m e n t w i l l b r i n g e a c h c o u n t r y ' s i n d u s t r i a l s e c t o r t o a l e v e l where no one p a r t n e r c o u n t r y w i l l d o m i n a t e t h e o t h e r . Thus two o f t h e a b o v e f o u r c o n d i t i o n s a r e f u l f i l l e d . The C o o p e r - M a s s e I I model has come c l o s e r t o p r o v i d i n g an e c o n o m i c t o o l w i t h w h i c h t o s t u d y e c o n o m i c i n t e g r a t i o n i n t h e d e v e l o p i n g w o r l d . It has made a p o s i t i v e c o n t r i b u t i o n t o c u s t o m u n i o n t h e o r y i f o n l y t o r e f o c u s t h e d i r e c t i o n o f i n v e s t i g a t i o n o f t h i s t o p i c . W i t h r e g a r d t o t h e q u e s t i o n o f Z a m b i a n e n t r y i n t o t h e E a s t A f r i c a n 13. Common M a r k e t o u r i n q u i r y f o l l o w s t h e same d i r e c t i o n . The t o o l s — t h a t - - - - - - we s h a l l use w i l l a l s o i n c o r p o r a t e t h e c o u n t r i e s ' d e s i r e f o r i n d u s t r i a l - i z a t i o n . They d e a l more s p e c i f i c a l l y w i t h t h e e f f e c t s on t h e i n d u s t r i a l p r o c e s s i t s e l f and how s u c h a p r o c e s s wi II a f f e c t t h e r a t e o f e c o n o m i c d e v e l o p m e n t o f t h e r e g i o n . . We a r e , t h e r e f o r e , f o c u s i n g o u r a t t e n t i o n on t h e v e r y s o u r c e o f w e l f a r e g a i n t h a t L i p s e y has p o i n t e d o u t i s m i s s i n g from t h e c l a s s i c a l t h e o r y . 14. CHAPTER 1 I P a s t h i s t o r y o f e c o n o m i c c o - o p e r a t i o n i n E a s t A f r i c a . B e f o r e we a d d r e s s t h e main q u e s t i o n o f ' t h e t h e s i s i t w i l l be b e n e f i c i a l t o have a b r i e f l o o k a t t h e h i s t o r y o f e c o n o m i c c o - . o p e r a t i o n o f t h e a r e a . T h u s i t i s t h e p u r p o s e o f t h i s c h a p t e r t o b r i e f l y r e v i e w t h e main e v e n t s l e a d i n g up t o i n d e p e n d e n c e and t h e p r o b l e m s p r e s e n t l y f a c i n g t h e EACM. • A l t h o u g h t h e p o t e n t i a l b e n e f i t s from i n t e g r a t i o n m i g h t be g r e a t f o r a p a r t i c u l a r g r o u p o f d e v e l o p i n g c o u n t r i e s , n o t a l l a r e a s c a n t a k e , a d v a n t a g e of s u c h a u n i o n . T h e r e a r e c e r t a i n p r e c o n d i t i o n s t h a t must be met p r i o r t o i n t e g r a t i o n : a d e q u a t e i n t e r - t e r r i t o r y i n f r a s t r u c t u r e , a d e g r e e o f p o l i t i c a l s t a b i l i t y , p l a n n e d d e v e l o p m e n t , and a s u f f i c i e n t m e a s u r e o f c o - o r d i n a t i o n and h a r m o n i z a t i o n o f c e r t a i n e c o n o m i c p o l i c i e s . W i t h i n t h e E a s t A f r i c a n c o n t e x t most o f t h e s e p r e c o n d i t i o n s were s a t i s f i e d . The main r e a s o n e x p l a i n i n g t h e e x i s t e n c e o f s u c h a c o n d u c i v e a t m o s p h e r e was t h a t a l l t h r e e c o u n t r i e s were u n d e r t h e same c o l o n i a l r u l e s i n c e W o r l d War I. B r i t i s h C o l o n i a l p o l i c y d i c t a t e d t h e d e v e l o p m e n t o f t h e t h r e e t e r r i t o r i e s on an i n t e g r a t e d b a s i s . In o r d e r t o f a c i l i t a t e s u c h a p o l i c y , a t r a n s p o r t a t i o n s y s t e m was d e v e l o p e d l i n k i n g t h e m a j o r m a r k e t a r e a s i n t h e r e g i o n . A l t h o u g h t h i s s y s t e m i s n o t h i g h l y d e v e l o p e d compared w i t h a d v a n c e d e c o n o m i e s , i t i s a d e q u a t e enough t o p r o v i d e c h e a p t r a n s p o r t between t h e m a j o r p o p u l a t i o n c e n t r e s . The b a s i s f o r . t h e c o n s u m e r goods t r a n s p o r t i s t h e r a i l s y s t e m , t h e m a i n l i n e l i n k i n g t h e p r i n c i p a l p o r t a r e a , Mombasa, w i t h N a i r o b i , K a m p a l a , and t h e n o r t h and w e s t p a r t o f U g a n d a . A s e c o n d I i n e l i n k s 15. D a r - e s - S a I a a m w i t h t h e i n t e r i o r of. T a n z a n i a and a t h i r d l i n e c o n n e c t s t h e p o r t o f T a n g a w i t h i m p o r t a n t a g r i c u l t u r a l a r e a s o f Moshi and A r u s h a and w i t h Mombasa. The r a i l w a y s a r e c o m p l e m e n t e d by a r o a d s y s t e m t h a t i s v e r y good i n t e r m s o f s t a n d a r d s o f t r o p i c a l A f r i c a . W i t h t h e major r a i l l i n k s c o m p l e t e d i n t h e e a r l y 1 9 0 0 ' s , a common m a r k e t was e s t a b l i s h e d between Kenya and Uganda i n 1917, w h i l e T a n z a n i a p a r t i c i p a t e d i n s t a g e s . In 1922 common e x t e r n a l t a r i f f s were e s t a b l i s h e d , by 1923 t h e r e was f r e e t r a d e o f d o m e s t i c goods and by 1927 i n t e r n a l t a r i f f s on i m p o r t e d goods had been e l i m i n a t e d between t h e t h r e e t e r r i t o r i e s . . I t w a s n ' t u n t i l 1949 t h a t T a n z a n i a ' s d e p a r t m e n t o f c u s t o m s was a m a l g a m a t e d w i t h t h e o t h e r two. In 1926, t h e f i r s t C o n f e r e n c e o f E a s t A f r i c a n G o v e r n o r s was h e l d , and i n 1932, i t was a g r e e d by t h e S e c r e t a r y o f S t a t e f o r C o l o n i a l A f f a i r s t h a t t h e g o v e r n o r s o f T a n g a n y i k a , Uganda and Kenya would meet a n n u a l l y t o d i s c u s s m a t t e r s o f common i n t e r e s t , and t h a t a p e r m a n e n t s e c r e t a r i a t would be e s t a b l i s h e d . D u r i n g W o r l d War I I , t h e t h r e e t e r r i t o r i e s p o o l e d t h e i r r e s o u r c e s t o h e l p i n t h e war e f f o r t and became s e l f - s u f f i c i e n t i n f o o d . p r o d u c t i o n . In 1945, t h e C o l o n i a l O f f i c e p r o p o s e d t h a t a p e r m a n e n t body c a l l e d t h e H i g h C o m m i s s i o n , r e p l a c e t h e C o n f e r e n c e o f G o v e r n o r s . T h i s body w o u l d d e a l w i t h t h e i n c r e a s i n g r e s p o n s i b i l i t y o f t h e t e r r i t o r i e s . A f t e r a r e v i s i o n o f t h e o r i g i n a l p r o p o s a l , on J a n u a r y 1, 1948, t h e H i g h C o m m i s s i o n was c r e a t e d w i t h s e v e n e x e c u t i v e o f f i c e s : a d m i n i s t r a t o r , c o m m i s s i o n e r o f t r a n s p o r t a t i o n , p o s t m a s t e r - g e n e r a l , l e g a l s e c r e t a r y , f i n a n c i a l s e c r e t a r y , c o m m i s s i o n e r o f c u s t o m s and c h i e f a d m i n i s t r a t i v e s e c r e t a r y . 16. The l e g i s l a t i v e arm o f t h e EACM was' t h e C e n t r a l L e g i s l a t i v e A s s e m b l y (CLA) t h a t c o n s i s t e d o f a S p e a k e r , t h e s e v e n e x - o f f i c i o members ( m e n t i o n e d i n t h e p r e v i o u s p a r a g r a p h ) , s i x n o m i n a t e d members and t w e n t y u n o f f i c i a l members. The t h r e e g o v e r n o r s e a c h n o m i n a t e d two members, a p p o i n t e d t h r e e u n o f f i c i a l members and t h e t e r r i t o r i a l l e g i s - l a t u r e s e l e c t e d t h r e e u n o f f i c i a l members. The r e m a i n i n g two u n o f f i c i a l members were l o c a l A r a b c i t i z e n s a p p o i n t e d by t h e H i g h C o m m i s s i o n . The CLA had l i m i t e d powers and was a r u b b e r stamp body t h a t was t o s u p p o r t t h e d e c i s i o n s o f t h e H i g h C o m m i s s i o n . No b i l l c o u l d be i n t r o d u c e d i n t o t h e a s s e m b l y u n l e s s i t s i n t r o d u c t i o n had r e c e i v e d a p p r o v a l o f t h e H i g h C o m m i s s i o n . The H i g h C o m m i s s i o n c o u l d a s s e n t o r r e f u s e a s s e n t t o b i l l s a t i t s d i s c r e t i o n and i t a l s o had t h e power t o d e c l a r e p a s s e d a b i l l w h i c h t h e a s s e m b l y f a i l e d t o p a s s . The C L A ' s power was l i m i t e d t o l e g i s l a t i o n o n - a p p r o p r i a t i o n o f f u n d s t o d i f f e r e n t common a g e n c i e s . A l o n g w i t h t h e s e two j o i n t e s t a b l i s h m e n t s came t h e f o r m a t i o n o f t h e Common S e r v i c e s O r g a n i z a t i o n . T h i s body was t o r u n a c o - o r d i n a t e d p r o g r a m i n t r a n s p o r t a t i o n , c o m m u n i c a t i o n , r e v e n u e c o l l e c t i o n and r e s e a r c h s e r v i c e s . (See A p p e n d i x I A ) . T h i s a r r a n g e m e n t a l l o w e d f o r t h e most e c o n o m i c a l d i s - t r i b u t i o n o f s k i I led a d m i n i s t r a t o r s . The main Iimi t a t i o n on t h e EACM was t h a t i t d i d n o t , u n t i l 1961, have i t s own s o u r c e o f r e v e n u e . I t d e p e n d e d on t h e t e r r i t o r i a l c o u n c i l s and t h e B r i t i s h C o l o n i a l and W e l f a r e O f f i c e s f o r i t s o p e r a t i n g e x p e n s e s . F o l l o w i n g t h e R a i s m a n R e p o r t ^ r e c o m m e n d a t i o n s , a d i s t r i b u t i v e p o o l was e s t a b l i s h e d u n d e r t h e a d m i n i s t r a t i o n o f t h e H i g h C o m m i s s i o n t o f i n a n c e common s e r v i c e s . The f u n d r e c e i v e d 40% o f income t a x f r o m c o r p o r a t i o n s , 6% o f Customs and E x c i s e d u t i e s c o l l e c t e d i n E a s t A f r i c a . T h e f u n d p a i d 1 7 ; t h e c o s t o f c o l l e c t i o n , and t h e r e m a i n i n g r e v e n u e was used t o f i n a n c e / t h e s e r v i c e s w i t h t h e r e m a i n i n g amount b e i n g d i v i d e d e q u a l l y among t h e t h r e e t e r r i t o r i e s . In t h a t same y e a r t h e H i g h C o m m i s s i o n was t r a n s - formed i n t o t h e E a s t A f r i c a n Common S e r v i c e s O r g a n i z a t i o n ( E A C S O ) . T h i s was n o t s i m p l y a c h a n g e i n name a l o n e . b u t was an o f f i c i a l s h i f t f r o m c o l o n i a l t o i n d e p e n d e n t r u l e . T h e e x e c u t i v e body was made up o f r e p r e s e n t a t i v e s o f t h e t h r e e t e r r i t o r i a l g o v e r n m e n t s w h i c h , f o r e x a m p l e , e v e n had t h e powers t o amend t h e c o n s t i t u t i o n . A t t h e same t i m e t h e CLA was e n l a r g e d and made t o c o n s i s t w h o l l y o f members e l e c t e d by t h e l e g i s l a t u r e s o f t h e t h r e e c o u n t r i e s . T h e A u t h o r i t y was r u n by C o m m i t t e e s on w h i c h m i n i s t r i e s o f t h e t h r e e i n d i v i d u a l c o u n t r i e s were r e p r e s e n t e d and w h i c h c o v e r e d F i n a n c e , Communic- a t i o n , Commerce and I n d u s t r y , S o c i a l and R e s e a r c h S e r v i c e s and L a b o u r . T h e d e c i s i o n s o f t h e s e c o m m i t t e e s must be made on a u n a m i n o u s b a s i s t h u s l i m i t - i n g t h e i r e f f e c t i v e n e s s t o m a t t e r s on w h i c h t h e r e a r e no m a j o r d i v e r g e n c e s o f i n t e r e s t s among t h e t h r e e c o u n t r i e s . T h e s e i n s t i t u t i o n a l c h a n g e s came a t an o p p o r t u n e t i m e when i t was p o l i t i c a l l y e s s e n t i a l t o s h e d t h e yoke o f t h e B r i t i s h c o l o n i a l r u l e r s . T h i s r e o r g a n i z a t i o n of t h e EAHC f o r m a l i z e d t h e b r e a k between B r i t a i n and E a s t A f r i c a , b u t m a i n t a i n e d t h e i m p o r t a n t o r g a n i z a t i o n a l t o o l f o r c o n t i n u e d c o - o p e r a t i o n . 18. A f u r t h e r i n c e n t i v e f o r c o n t i n u e d e c o n o m i c i n t e g r a t i o n was t h e e x i s t e n c e o f a common c u r r e n c y f o r t h e t h r e e t e r r i t o r i e s . ' In 1919 t h e E a s t A f r i c a n C u r r e n c y B o a r d was e s t a b l i s h e d by t h e B r i t i s h C o l o n i a l O f f i c e . L i k e o t h e r C u r r e n c y B o a r d s i t s m a i n f u n c t i o n was t o a c t as a ; c u r r e n c y a u t h o r i t y , e x c h a n g i n g E a s t A f r i c a n s h i l l i n g s f o r pounds s t e r l i n g o n t h e b a s i s o f 2 0 : 1 . U n d e r t h i s e a r l y s y s t e m t h e EACB had l i m i t e d powers and l o c a l .money s u p p l y was l i m i t e d t o t h e r e q u i r e m e n t s o f t h e b a l a n c e of p a y m e n t s . In 1955 t h e EACB was a u t h o r i z e d t o h o l d p o r t f o l i o s e c u r i t i e s o f t h e l o c a l g o v e r n m e n t t o t h e e x t e n t o f 10 m i l l i o n p o u n d s . T h i s amount had g r a d u a l l y i n c r e a s e d t o 35 m i l l i o n pounds i n .1964. T h i s I p r o v i d e d an a d d i t i o n a l d e g r e e o f m o n e t a r y f l e x i b i l i t y and p e r m i t t e d a d e g r e e o f d e f i c i t f i n a n c i n g t o t h e t h r e e g o v e r n m e n t s , w h i c h u n t i l r e c e n t l y has n o t been t a k e n u p . -.. T h u s t h e EACB s e r v e d a u s e f u l p u r p o s e i n t h e p r e - i n d e p e n d e n c e t i m e s . I t was l o g i c a l t h a t w i t h p o l i t i c a l i n d e p e n d e n c e and t h e t a l k o f f e d e r a t i o n t h i s body would be c o n v e r t e d t o a C e n t r a l Bank a u t h o r i t y h a v i n g t h e power t o d e t e r m i n e c r e d i t p o l i c y r a t h e r t h a n l e a v i n g i t t o t h e d i s c r e t i o n o f t h e c o m m e r c i a l B a n k s . (The f a c t t h a t t h i s n a t u r a l e v o l u t i o n n e v e r t o o k p l a c e w i l l be d i s c u s s e d l a t e r i n t h e p a p e r . ) R e f l e c t i n g on t h e e a r l y i n s t i t u t i o n a l a r r a n g e m e n t s o f t h e E a s t A f r i c a Common M a r k e t e v e r y t h i n g seemed t o be s e t f o r a s u c c e s s f u l t r a n s f o r m a t i o n f r o m c o l o n i a l r u l e t o i n d e p e n d e n c e and c o n t i n u e d e c o n o m i c i n t e g r a t i o n . Even u n d e r s u c h f a v o u r a b l e c o n d i t i o n s t h e EACM was b e s e t w i t h p r o b - lems t h a t came t o a c l i m a x i n 1964 when T a n z a n i a t h r e a t e n e d t o w i t h d r a w f r o m t h e o r g a n i z a t i o n . E x a m i n a t i o n o f i n t e r - t e r r i t o r i a l t r a d e r e v e a l s some b a s i c c h a r a c - T a b l e 2.1 I n t e r - t e r r i t o r i a l t r a d e Of E a s t A f r i c a Kenya Uganda T a n z a n i a Combined Ug.& T a n . b E x p o r t s 1 m p o r t s • •• E x p o r t s Imports E x p o r t s Imports E x p o r t s 1mports 1959 F o o d , b e v e r a g e s and . t o b a c c o 6 , 5 6 0 2 , 7 9 6 . 2 , 9 2 9 3 , 7 0 4 . 1,423 4 , 4 1 2 . 4,352, 8,116 Raw m a t e r i a Is and mi n e r a I f u e I s . 388 1,862 1,342 342 880 406 2 , 2 2 2 748 M a n u f a c t . g o o d s and c h e m i c a l s 5 , 2 8 4 826 . 953 2 , 4 4 8 268 3,231 .. 1,221 5 ,679 d TOTAL .12,232 5 , 4 8 4 5 , 2 2 4 ' , 6 , 4 9 4 2,571 8 , 0 4 9 7 , 7 9 5 14,543 1966 F o o d , B e v . , t o b a c c o 7 , 3 0 6 3 , 4 2 0 2,755 4 , 1 3 4 1,433 3,941 . 4 , 1 8 8 . 8 , 0 7 5 Raw m a t . & mi n . f u e I s 5 , 2 0 9 2 , 1 0 0 . 1,430 2 , 9 5 8 936 2,518 2 , 3 6 6 5 , 4 7 6 M a n u f . g o o d s & chem. ••• 16,277 5 , 5 8 8 6 , 2 4 5 9 , 3 1 2 2 , 2 6 8 9 , 8 8 8 ' 8 , 5 1 3 19,200 2 8 , 7 9 2 11,108 •10,430 16,404 4 , 6 3 7 . 16,347 15,107 32,751 Kenyan I n t e r - t e r r i t o r i a l e x - p o r t s as % of Combined Uganda and T a n z a n i a i n t e r - t e r . I m p o r t s Kenyan I n t e r - t e r r i t o r i a l Im- p o r t s as % o f t o t a l c o m b i n e d I n t e r - t e r . e x p o r t s o f Ug. & T a n . 1959 F o o d , b e v . t o b a c c o Raw m a t . & m i n . f u e l s M a n u f . g o o d s & c h e m ' s TOTAL 1966 F o o d , b e v . t o b a c c o Raw m a t . & mi n . f u e l s M a n u f . g o o d s & c h e m ' s 8 0 . 8 51 .8 9 3 . 0 4 8 4 . 1 9 0 . 4 95. 1 8 4 . 7 8 7 . 9 6 4 . 2 8 3 . 7 6 7 . 7 7 0 . 3 8 1 . 6 8 8 . 7 6 5 . 6 7 3 . 5 a b c d S I T C c a t . 0 & S I T C " 2 - S I T C " 5 - E x c I u d i ng S I T C c a t e g o r y 9 . S o u r c e : I . M . F . S u r v e y s o f A f r i c a n E c o n o m i c s V o l . I I , p . 8 0 2 0 . t e r i s t i e s t h a t have led t o d i s c o n t e n t . By l e a v i n g i n d u s t r i a l i z a t i o n " t o m a r k e t f o r c e s a l o n e , i t was n a t u r a l t h a t a m a n u f a c t u r i n g i n d u s t r y would d e v e l o p , i n t h e most c o n d u c i v e a r e a . I t happened t h a t Kenya was t h e most d e v e l o p e d t e r r i t o r y of t h e t h r e e . N a i r o b i , now t h e c a p i t a l of K e n y a , was t h e c o l o n i a l a d m i n i s t r a t i v e c e n t r e f o r t h e e n t i r e r e g i o n . A d e q u a t e i n f r a s t r u c t u r e , a d e v e l o p e d f i n a n c i a l m a r k e t and c l o s e p r o x i m i t y t o m o n e t i z e d l o c a l m a r k e t s made i t t h e i d e a l l o c a t i o n f o r i n d u s t r i a l i z a t i o n . T h i s meant t h a t N a i r o b i became t h e g r o w i n g p o i n t o f t h e a r e a . I n d u s t r i e s would l o c a t e i n Kenya and e x p o r t t h e i r p r o d u c t s t o Uganda and T a n g a n y i k a . S i m i l a r l y most i m p o r t s t o t h e a r e a p a s s e d t h r o u g h t h e i m p o r t h o u s e s o f K e n y a . T r a n s f e r o f i m p o r t e d goods f r o m Kenya t o Uganda and T a n g a n y i k a 2 r o s e f r o m 18$ i n 1956 t o 23$ i n 1963. I n t e r - t e r r i t o r i a l t r a d e h a s ' i n - c r e a s e d s i x - f o I d f r o m 7 m i I Ii on pounds in. 1949 t o 44 mi 1 Ii on i n 1966. ~* In t e r m s o f v a l u e on i n t e r - t e r r i t o r i a l t r a d e Kenya has been t h e m a j o r s o u r c e o f s u p p l y as w e l l as t h e p r i n c i p a l m a r k e t w i t h i n t h e r e g i o n . ( F r o m t a b l e 2.1)'." • In 1966 Kenya f u r n i s h e d 29 m i l l i o n pounds o r 88$ o f T a n g a n y i k a and U g a n d a ' s t o t a l i n t e r - t e r r i t o r i a l i m p o r t s . A l s o i n 1966 Kenya p r o d u c e d 85$ of m a n u f a c t u r e d g o o d s and c h e m i c a l s i m p o r t e d by T a n z a n i a and Uganda f r o m E . A f r i c a , 95% o f raw m a t e r i a l and m i n e r a l f u e l s , and 91$ o f f o o d s t u f f s , b e v e r a g e s and t o b a c c o . On t h e o t h e r h a n d , K e n y a , i n 1966, p r o v i d e d a m a r k e t f o r 74$ o f T a n g a n y i k a and U g a n d a ' s 9 m i l l i o n pound c o m b i n e d i n t e r - t e r r i t o r i a l e x p o r t o f m a n u f a c t u r e s and c h e m i c a l s , 66$ has been e x p o r t e d t o . Kenya o f 2 m i l l i o n raw m a t e r i a l s and m i n e r a l f u e l s 89$ e x p o r t e d t o Kenya and o f 4 m i l l i o n pounds w o r t h o f f o o d s t u f f s , b e v e r a g e s and t o b a c c o , 82$ go t o K e n y a . A f u r t h e r i n d i c a t i o n o f t h e i n e q u i t a b l e d i s t r i b u t i o n o f r e g i o n a l p r o d u c t i o n i s t h e c o m p o s i t i o n o f i n t e r - t e r r i t o r i a l e x p o r t s . Among K e n y a ' s i n t e r - t e r r i t o r i a l e x p o r t s i n 1966, t h e l e a d i n g c o m m o d i t i e s were p e t r o l e u m 21- p r o d u c t s , c l o t h i n g and f o o t w e a r , p u l p and p a p e r p r o d u c t s , s o a p and c l e a n i n g p r e p a r a t i o n s , w h e a t , s y n t h e t i c f a b r i c s , c e m e n t , m a r g a r i n e and s h o r t e n i n g , m i l k and c r e a m , perfume and c o s m e t i c s , b u t t e r and ghee and c i g a r e t t e s . U g a n d a ' s l e a d i n g e x p o r t s were c o t t o n p i e c e g o o d s , a n i m a l and v e g e t a b l e o i l s and f a t s , raw t o b a c c o , i r o n and s t e e l b a r s , m a r g a r i n e and s h o r t e n i n g . T h o s e of T a n z a n i a were a n i m a l and v e g e t a b I e o i l s and f a t s , a l u m i n u m p r o d u c t s , b l a n k e t s , raw t o b a c c o , c l o t h i n g and f o o t w e a r . T h i s c o m p o s i t i o n o f i n t e r - t e r r i t o r i a I e x p o r t s f u r t h e r a f f i r m s o u r s u s p i c i o n t h a t Kenya p o s s e s s e s a l a r g e s h a r e o f t h e m a n u f a c t u r i n g s e c t o r o f t h e r e g i o n . B e c a u s e o f t h i s s i t u a t i o n Kenya h a s • c o m e t o r e l y more h e a v i l y on i n t e r - t e r r i t o r i a l t r a d e t h a n e i t h e r T a n z a n i a o r U g a n d a . From - 1959-1966 K e n y a ' s t o t a l i n t e r - t e r r i t o r i a l e x p o r t s r o s e f r o m 37$ o f e x t e r n a l d o m e s t i c e x p o r t s t o 5 0 $ . - T h e c u m u l a t i v e e f f e c t . o f : (1) t h e g r o w i n g i m b a l a n c e o f i n t e r - c o u n t r y t r a d e , (2) t h e r e s u l t i n g l o c a t i o n a l d i s t r i b u t i o n o f i n d u s t r i a l - i z a t i o n , and (3) t h e g r o w i n g d i s c o n t e n t o f T a n z a n i a and Uganda, l e d ' t o a s e r i o u s e v a l u a t i o n o f t h e d i s t r i b u t i o n o f costs and b e n e f i t s o f i n t e g r a t i o n . T h e r e a r e t h r e e b a s i c q u e s t i o n s i n v o l v e d i n s u c h an a n a l y s i s : 1. Would some c o u n t r i e s have g a i n e d f r o m n o t b e l o n g i n g t o t h e EACM? 2. What g a i n s and l o s s e s w o u l d be i n v o l v e d f o r t h e members o f t h e u n i o n i f i t were t o be b r o k e n up? 3 . What would be t h e long r u n g a i n s and l o s s e s o f e a c h member o f EACM i f t h e common m a r k e t b r o k e up? It w o u l d be an i m p o s s i b l e t a s k t o a n s w e r t h e f i r s t q u e s t i o n s i n c e i t r e q u i r e s an a s s e s s m e n t o f what d e v e l o p m e n t w o u l d have been f o r i n d i v i d u a l c o u n t r i e s w i t h o u t EACM. E v e n i f .economic ana I y s i s c o u I d g i v e us t h i s h i s t o r i c a l p e r s p e c t i v e i t w o u l d be no g u i d e f o r t h e f u t u r e t o c o u n t r i e s 2 2 . a l r e a d y p a r t i c i p a t i n g i n t h e common m a r k e t . The t h i r d q u e s t i o n a l s o r e q u i r e s some t y p e o f h i s t o r i c a l p e r s p e c t i v e . A l t h o u g h i t i s an i m - p o r t a n t q u e s t i o n f o r f u t u r e p o l i c y d e c i s i o n s i t i n v o l v e s t a k i n g i n t o c o n s i d e r a t i o n ' p r o b l e m s t h a t a r e p a s s e d o v e r i n a c o m p a r a t i v e s t a t i c a n a l y s i s . T h e r e f o r e most o f t h e e f f o r t has been s p e n t on a q u a n t i t a t i v e a n a l y s i s o f t h e d i s t r i b u t i o n o f c o s t s and b e n e f i t s o f t h e EACM w i t h r e f - e r e n c e t o t h e s e c o n d q u e s t i o n . The f i r s t a t t e m p t was made by A . J . Brown 4 5 i n 1961, f o l l o w e d by D. P. Ghai i n 1964. A t h i r d a t t e m p t was made i n 6 1965 by W. T . Newlyn and i n 1966 i m p o r t a n t comments were made on t h e works o f G h a i and Newlyn by A . Haze I w o o d . ^ P r e s e n t a t i o n o f t h e s e t h e o r i e s i n A p p e n d i x IB s h o w . t h a t e v e n t h o u g h i t c a n be c a n be shown u n d e r c e r t a i n a s s u m p t i o n s t h a t T a n z a n i a and Uganda m i g h t g a i n f r o m a b r e a k u p o f EACM, t h e s e t h e o r i e s a r e c r i t i c i s e d o r i n v a l i d a t e d by t h e v e r y a s s u m p t i o n s on which, t h e y a r e b a s e d . B u t one t h i n g , ' c o m m o n l y u n d e r s t o o d f r o m a l l t h e s e a n a l y s e s i s t h a t Kenya has c e r t a i n l y been t h e n e t g a i n e r from t h e EACM and t h a t s t e p s must be t a k e n t o r e c t i f y t h e s i t u a t i o n . Such was t h e p u r p o s e o f t h e Kampala e x p e r i m e n t . In 1965 t h e t h r e e g o v e r n m e n t s a g r e e d t o m e a s u r e s t h a t would t r y and e q u a l i z e t h e s i t u a t i o n ( s e e A p p e n d i x I C ) . But t h i s a r r a n g e m e n t was s o o n t o b r e a k down f o r s e v e r a l r e a s o n s . Kenya had m i l d l y a s s e n t e d t o t h e new m e a s u r e s on t h e a s s u m p t i o n t h a t t h e EACM would c o n t i n u e t o o p e r a t e on a common c u r r e n c y . When T a n z a n i a a n n o u n c e d p l a n s t o o p e n t h e i r own c e n t r a l b a n k s , Kenya w i t h d r e w i t s s u p p o r t • f r o m t h e a g r e e m e n t and r e t a l i a t e d by w i t h d r a w i n g i t s s u p p o r t o f t h e p l a n n e d R o v e r a s s e m b l y p l a n t f o r T a n z a n i a and t h e i n d u s t r i a l r e a l l o c a t i o n s c h e m e s . T a n z a n i a r e t a l i a t e d by i m p o s i n g r e s t r i c t i o n s on i m p o r t s f r o m K e n y a . 2 3 . I t became a p p a r e n t w i t h i n a few months t h a t t h e a g r e e m e n t would n o t be h o n o u r e d . . W i t h t h i s r e a l i z a t i o n came t h e need f o r r e - e x a m i n a t i o n o f t h e w h o l e common m a r k e t s e t - u p . T h e r e f o r e , i n 1965, a t h r e e c o u n t r y M i n i s t e r i a l C o m m i s s i o n u n d e r t h e c h a i r m a n s h i p of K. P h i l i p o f Denmark was e s t a b l i s h e d t o e x a m i n e t h e a r r a n g e m e n t s o f t h e EACM and make recommend- a t i o n s on a number o f a s p e c t s o f . i t s o p e r a t i o n s . The r e s u l t s o f t h e P h i l i p ' s C o m m i s s i o n was t h e d r a f t i n g and a c c e p t - a n c e o f t h e E a s t A f r i c a n T r e a t y f o r E c o n o m i c C o - o p e r a t i o n . In J u n e o f 1967 t h e t h r e e heads of s t a t e s i g n e d t h e T r e a t y w h i c h , f o r t h e f i r s t t i m e , l e g a l i z e d t h e e x i s t e n c e o f t h e common m a r k e t . The g o a l s were b r o a d and aimed a t p r e s e r v i n g t h e i n s t i t u t i o n s o f t h e common m a r k e t w h i c h had c o n t r i b u t e d t o t h e d e v e l o p m e n t o f t h e r e g i o n and a t t h e same t i m e t r i e d t o r e s o l v e some o f t h e p r o b l e m s w h i c h had b e s e t t h e commu n i t y . The a d m i n i s t r a t i v e s t r u c t u r e o f t h e EACM r e m a i n e d r e l a t i v e l y u n c h a n g e d . The o n l y c h a n g e was t h a t , t h e t h r e e t e r r i t o r i a l members o f t h e A u t h o r i t y were t o h o l d m i n i s t e r i a l p o s t s i n t h e i r l o c a l g o v e r n m e n t s and be p a r t o f t h e c a b i n e t w i t h no o t h e r p o r t f o l i o . S e c o n d l y , o f m i n o r e c o n o m i c i m p o r t a n c e was t h e d e c e n t r a l i z a t i o n o f t h e h e a d q u a r t e r s o f t h e common s e r v i c e o r g a n i z a t i o n s . Ra i I ways r e m a i n i n : N a i r o b i , h a r b o u r s and t h e h e a d q u a r t e r s of t h e community i t s e l f go t o T a n z a n i a , and p o s t and t e l e g r a p h and t h e new E a s t A f r i c a n D e v e l o p m e n t Banks (EADB) w i l l be s e t up i n U g a n d a . A l t h o u g h t h e r e may be some l o s s o f a d m i n i s t r a t i v e e c o n o m i e s t h e d e c e n t r a l i z a t i o n was p o l i t i c a l l y e x p e d i e n t . Now t u r n i n g t o t h e m a i n p r o b l e m f a c i n g t h e EACM we w i l l e x a m i n e t h o s e c h a n g e s w h i c h t r y t o t a c k l e t h e p r o b l e m o f u n e q u a l d i s t r i b u t i o n o f c o s t s and b e n e f i t s d i s c u s s e d e a r l i e r . Two new c o n c e p t s were i n t r o d u c e d i n t o t h e T r e a t y t o remedy t h e 24. s i t u a t i o n . F i r s t t h e s e t t i n g up o f t h e E a s t A f r i c a n D e v e l o p m e n t B a n k — = - - - - — a n d , s e c o n d , t h e i n t r o d u c t i o n o f a t r a n s f e r t a x s y s t e m on i n t e r - t e r r i t - o r i a l t r a d e . - The Bank was s e t up w i t h t h e e x p r e s s p u r p o s e o f a i d i n g , t h e l e s s e r d e v e l o p e d ' h a v e n o t ' c o u n t r i e s o f t h e EACM. A l l t h r e e c o u n t r i e s c o n t r i b u t e d . eq.ua I I y t o t h e 56 m i l l i o n d o l l a r c a p i t a l s t o c k , b u t b o t h Uganda and T a n z a n i a have d r a w i n g r i g h t s o f 38 3/4$ w h i l e Kenya c a n draw o n l y 2 2 | ? o f t h e t o t a l i n v e s t m e n t s , g u a r a n t e e s and l o a n s . P r i o r i t i e s a r e g i v e n t o i n d u s t r i a l d e v e l o p m e n t p r o j e c t s i n t h e l e s s e r i n d u s t r i a l i z e d c o u n t r i e s and t h e p r o j e c t s f i n a n c e d by t h e EADB w i l l be d e s i g n e d t o make t h e c o u n t r i e s e c o n o m i e s more c o m p l e m e n t a r y . i 1 T h e t r a n s f e r t a x s y s t e m i n e s s e n c e i s a l i m i t e d i n t e r - c o u n t r y t r a d e r e s t r i c t i o n . I t i s d e s i g n e d t o h e l p t h e d e f i c i t c o u n t r i e s d e v e l o p l o c a l m a n u f a c t u r i n g w i t h o u t h a v i n g t o compete w i t h Kenyan goods i n t h e i n i t i a l p e r i o d of p r o d u c t i o n . The t a x a p p l i e s t o l o c a l l y p r o d u c e d a r t i c l e s o f a d e f i c i t c o u n t r y in i n t e r - t e r r i t o r i a I m a n u f a c t u r e d goods t r a d e , and c a n be a p p l i e d up t o a p e r i o d o f e i g h t y e a r s . T h e p r i v i l e g e w o u l d be f o r f e i t e d o n c e t h e c o u n t r y r e d u c e s i t s d e f i c i t by 80%. The t a r i f f r a t e i t s e l f c a n n o t e x c e e d 50% o f t h e ad v e l o r e m t h i r d c o u n t r y r a t e on s i m i l a r i m p o r t s , and l o c a l p r o d u c t i o n must have a v a l u e o f $ 1 0 0 , 0 0 0 . o r s u p p l y ]5% o f t h e d o m e s t i c m a r k e t . A l t h o u g h t h e T r e a t y t r i e d t o i m p r o v e t h e d i s t r i b u t i o n o f b e n e f i t s and c o s t s o f i n t e g r a t i o n i t r e s o r t e d t o methods o f s e c o n d b e s t s o l u t i o n . The t r a n s f e r t a x i n p a r t i c u l a r i s o f a s h o r t r u n , s t o p gap n a t u r e . I t w i l l be a r g u e d l a t e r i n t h e t h e s i s t h a t t h e o n l y ' l o n g - r u n s o l u t i o n t o t h i s p r o b l e m i s t h e e n a c t m e n t o f a r e g i o n a l i n d u s t r i a l d e v e l o p m e n t p l a n . T h i s i s what Uganda and T a n z a n i a have been a s k i n g f o r and i t i s t h e p r e m i s e o f t h i s t h e s i s t h a t u n d e r t h e p r o p o s e d i n t e g r a t i o n t h i s f a c t i s more l i k e l y 2 5 . t o become a r e a l i t y . Thus t h e h i s t o r y o f t h e a r e a shows a good r e c o r d o f e c o n o m i c c o - o p e r a t i o n . W i t h t h e i n d e p e n d e n c e o f t h e t h r e e c o u n t r i e s and t h e g r o w t h o f n a t i o n a l i n t e r e s t s , t h e r o a d t o c o n t i n u e d i n t e g r a t i o n i s n o t s o e a s y . P r o b l e m s have a r i s e n and s o l u t i o n s p r o p o s e d b u t t h e f u t u r e o f t h e EACM w i l l be d e t e r m i n e d i n t h e n e x t d e c a d e and i t i s t h e c o n t e n t i o n o f t h e a u t h o r t h a t Z a m b i a n e n t r y i n t o t h e common m a r k e t w i l l i n c r e a s e t h e p r o b a b i l i t y o f s u c c e s s . I hope t h e f o l l o w i n g f o u r c h a p t e r s w i l l c o n - v i n c e t h e r e a d e r t o be o f t h i s same o p i n i o n . 26. ; CHAPTER III Zambia as p a r t o f t h e EACM. H a v i n g i n v e s t i g a t e d t h e e a r l y h i s t o r y o f t h e E a s t A f r i c a n Common M a r k e t and t h e p r o b l e m s w h i c h f a c e d . i t , we now t u r n t o t h e m a i n p r e m i s e o f o u r t h e s i s , ' Z a m b i a n E n t r y i n t o t h e E A C M ' . In o r d e r t o l o g i c a l l y p r e s e n t o u r a r g u m e n t s we must f i r s t c o n s i d e r how Z a m b i a f i t s i n t o t h e e x i s t i n g e c o n o m i c s t r u c t u r e . ' ' . . B e c a u s e t h i s ' q u e s t i o n i s o f p a r a m o u n t i m p o r t a n c e , t h i s c h a p t e r w i l l be d e v o t e d t o an e x a m i n a t i o n o f d i f f e r e n t a s p e c t s o f t h e e n q u i r y , s u c h a s : (1) s i m i l a r i t i e s and d i f f e r e n c e s i n t h e b a s i c s t r u c t u r e s and d e v e l o p m e n t o f t h e f o u r e c o n o m i e s , (2) e x p o r t o r i e n t a t i o n o f a l l f o u r c o u n t r i e s and i m p l i c a t i o n s o f o u r p r o p o s e d i n t e g r a t i o n , and f i n a l l y , (3) ' t h e l i k e l y b e n e f i t s a c c r u i n g f r o m o u r p r o p o s e d i n t e g r a t i o n . C o m p a r a t i v e e x a m i n a t i o n In o r d e r t o have a l o o k a t t h e s e t t i n g o f t h e f o u r c o u n t r i e s , I have drawn up t a b l e ' 3 A I , w h i c h b r i e f l y s u m m a r i z e s some o f t h e b a s i c c h a r a c t e r i s t i c s u n d e r t h e h e a d i n g s o f " g e o g r a p h y " , " d e m o g r a p h y " , " c l i m a t e " , and " e c o n o m y " . A l t h o u g h t h i s c h a r t d o e s n o t g i v e us enough i n f o r m a t i o n f o r a d e t a i l e d a n a l y s i s , a few b a s i c o b s e r v a t i o n s c a n be made. F i r s t , t h e o b v i o u s d i f f e r - e n c e i n s i z e s o f d o m e s t i c p o p u l a t i o n : t h e p o p u l a t i o n o f Z a m b i a i s o n l y a l i t t l e more t h a n h a l f t h a t o f U g a n d a . S e c o n d , we o b s e r v e t h a t a l l f o u r c o u n t r i e s a r e e x p o r t o r i e n t e d : t h a t i s t o s a y t h a t t h e y r e l y h e a v i l y upon e x p o r t s a s a m a j o r s o u r c e o f f o r e i g n e x c h a n g e , and a l a r g e p o r t i o n . o f t h e i r G . D . P . i s d e v o t e d t o e x p o r t p r o d u c t i o n . T h u s , e v e n a v e r y c u r s o r y l o o k a t t h e e c o n o m i c s e t t i n g r e v e a l s two v e r y i m p o r t a n t c h a r a c t e r i s t i c s . T o t a k e o u r a n a l y s i s one s t e p f u r t h e r , we wi I I e x a m i n e t h e make-up . o f G . D . P . i n t h e c o u n t r i e s i n v o l v e d . T a b l e 3 . 2 shows t h e g r o s s d o m e s t i c S e t t i n g G e o g r a p h y C l i m a t e K e n y a . Uganda 2 2 5 , 0 0 0 s q . mi l e s N & S t o r . 560 mi Ri f t v a l ' two ma i n Tunu and , 280 e q u a - mi . o f es w i d e , ey in W e s t , r i v e r s - Gal a n a . 9 1 , 1 3 4 s q . m i . , 400 •mi . N - S , 350 E-W, M t . E l g o n 14,178'.. 1/7 swamp and l a k e . L . V i c t o r i a 3 r d in w o r l d . On p l a t e a u 4 - 6 , 0 0 0 ' I i f t i n g t o t h e N . T r o p i c a l v e g i t a t i o n o n C o a s t . H a l f c o u n t r y a r i d l o w l a n d . Natu- r a l v e g i t a t i o n o f p o o r g r a s s and b a r r e n d e s e r t . R e s t o f K. h i g h l a n d , 2 - 9 , 0 0 0 ' . , Mt. Kenya , 1 7 , 0 0 0 ' w i t h 100" r i a n f a l i , d e - t o 10" in t h e N . 5 5 ° c r e a s i n g a v e r a g e a t 9,0.00' and 80° F a t t h e c o a s t . G r a s s l a n d a t m i d d l e a l t i t u d e . SW c o r n e r o f c o u n t r y b e s t f a r m l a n d i n A f r i c a . 6 5 - 8 5 ° F. 4 0 - 5 0 " r a i n a n u a I l y R a i n y s e a s o n Apr/May & S e p t / O c t Good c o n d i t i o n s f o r a g r i c u l t u r e and Ii v e s t o c k . T a n z a n i a 3 6 3 , 0 0 0 s q . m i . 6$ w a t e r c o v e r e d . Z a n - z i b a r 640 s q . m i . Low c o a s t a l s t r i p r i s i n g t o 4 , 0 0 0 ' . Mt. K i I i m a n j a r o - 1 9 , 5 6 5 ! M t . : M e r u 1 4 , 9 7 9 . R u f i j i & Ruvuma main r i v e r s . Lake T a n g a n y i ka i n west a t e l e v a t i o n 2 , 5 3 4 ' . 7 9 ° F . mean temp, i n a d e q u a t e and p o o r l y d i s t r i b u - t e d r a i n f a l l . T r o p i c a l s t o r m s . 50" in low a r e a s , so p e r r e n i a l c r o p s . 3 0 " o r l e s s in C e n t r a l P l a i n . 10$ i s c u l t i v a t e d . Demography Economy P o p . 9 . 9 m i l l , i n 1967. A f r i c a n , 2$ I n d i a n . 4 2 , 0 0 0 E u r o p e a n s , 3 9 , 0 0 0 A r a b s , 4 , 0 0 0 o t h e r s . Main A f r i c a n g r o u p s K i k u y u s , L u o , L u h y a , " Language engI i s h o r swah i i i . Nai rob i i s. 2 7 0 , 0 0 0 ( c a p i t a l ) Mombassa, .180,000 ( p o r t ) . p o p u l a t i o n . 6-7% u r b a n A g r i c u l t u r a l base.;' 75$ i n : a g r i c . Gi ves 35%' o f GDP and 50% o f F o r e i g n e a r n i n g : Manu. o f f o o d s t u f f s and raw' m a t e r i a l s . P o p . 7.7 mi I I . ( 1 9 6 6 ) . 2 . 6 $ i n c r e a s e a n u a l l y . 98$ A f r i c a n . 8 0 , 0 0 0 A s i a n . I 1,000 E u r o p e a n s K a m p a l a , 8 0 , 0 0 0 ( c a p i t a l ) A g r i c u I t u r a I b a s e . C o t t o n & C o f f e e . 90$ o f p o p . in a g r i c . , 60$ o f GDP, 80$. o f e x p o r t e a r n i n g s , P o p . 11.3 m i l l . (1967) l e s s t h e n 1$ n o n - A f r i c a n . A f r i c a n s m a i n l y B a n t u . L a n g , i s Swah i i i . 1/4 a r e Mus M m . Dar e s S a l a a m 2 7 2 , 5 0 0 . ( c a p i t a I ) Moshi - a g r i c . c e n t r e . A g r i c . b a s e , c o t t o n , c o f f e e , s i s a I , Di amonds, 80$ o f p o p . in a g r i c , 80$ o f f o r e i g n e x . , 50*$ o f ' G D P , and 50% o f a g r i c . o u t p u t i s from s u b s i s t e f a r m e r s . nee Z a m b i a 2 9 0 , 5 8 7 s q . m i . h i g h p l a t e a u , 3 , 5 0 0 - 4 , 5 0 0 ' , r i s i n g t o 7 , 0 0 0 ' . s a v a n n a h s h r u b . t h r e e d i s t i n c t s e a s o n s , c o o l , d r y s e a s o n , M a y - A u g . 5 0 - 8 0 ° . H o t , d r y s e p t - n o v . H o t , r a i n y D e c - A p r . 3 4 " a n n u a l r a i n f a l I . 5 0 " i n N . , 2 0 - 3 0 " i n S . 4 , 0 6 5 , 0 0 (1968) 3% a n n u a l g r o w t h r a t e . 8 2 , 7 0 0 n o n - A f r i c a n s . P o p . c o n c e n t r a t i o n i n N . c i t i e s o f K i t w e , N d o l a , K u f u l i r a , L u a n s h y a . L u s a k a , 138,000 ( c a p i t a l ) \9% o f p o p . i s u r b a n . 73 d i f f e r e n t t r i b e s . m i n i n g i n d u s t r y b a s e . 50% o f GDP; e x p o r t e a r n i n g s a r e 90-95f> d e r i v e d f r o m c o p p e r . W o r l d ' s 3 r d l a r g e s t c o p p e r p r o d u c e r , c o p p e r i s s o u r c e o f 2/3 o f g o v e r n m e n t r e v e n u e s . CD G r o s s D o m e s t i c P r o d u c t ( a t f a c t o r c o s t ) . ( 3 . 2 ) C u r r e n c y : $ U . S . Z a m b i a 1 T a n z a n i a 2 K e n y a 3 Uganda A g r i c u I t u r e 1964 1966 1964 . 1966 1964 . 1 9 6 6 1964 1966 7 4 . 6 2 8 4 . 7 0 3 9 2 . 7 0 4 0 6 . 6 9 3 3 1 . 6 5 3 6 3 . 8 7 169.39 187.60 F o r e s t r y & • F i s h e r i e s 13.59 16.25 6 . 7 2 7 . 5 6 Mi n i ng & Q u a r r y i ng . 309. 12 3 3 6 . 1 4 16.94 . 19.74 4 . 0 6 4 . 6 2 14.84 18.20 - M a n u f a c t u r i ng 3 9 . 4 8 8 4 . 2 8 27. 16 3 9 . 6 2 9 4 . 8 2 118.07 2 4 . 0 8 4 9 . 2 8 Bu i i d i ng and C o n s t r u c t i o n . 2 8 . 0 0 7 5 . 0 6 2 1 , 5 6 2 4 . 2 2 3 5 . 2 9 4 6 . 7 8 9 . 8 0 12.89 E l e c t r i c i t y and Water 7 . 0 0 10.36 4 . 9 0 6 . 7 2 19.47 2 1 . 8 5 8. 12 10.64 T r a n s . & C o m m u n i c a t i o n 4 5 . 3 6 2 7 . 5 8 3 4 . 5 7 7 0 . 4 5 8 9 . 2 2 17.36 2 0 . 4 4 W h o l e s a l e and R e t a i 1 t r a d e 6 4 . 12 109.62 8 4 . 0 0 107.24 9 6 . 3 6 135.90 5 4 . 8 8 6 7 . 7 6 B a n k i n g , i n s u r a n c e and r e a l e s t a t e 15:68 3 7 . 3 8 3 3 . 4 7 4 2 . 5 7 R e n t 31 . 0 8 3 7 . 3 8 5 2 . 9 4 5 8 . 6 8 10.92 13.44 G o v e r n m e n t S e r v i c e s 2 9 . 6 8 4 9 . 9 8 115.27 131.09 2 5 . 0 6 . 2 7 . 1 6 M i s c . S e r v i c e s 5 4 . 8 8 6 8 . 8 8 7 1 . 2 5 8 6 . 10 4 8 . 8 9 5 8 . 2 6 3 9 . 2 0 5 5 . 4 4 TOTAL G . D . P . a t F a c t o r C o s t 6 6 9 . 4 5 9 0 2 . 3 0 6 7 7 . 1 6 7 6 2 . 1 4 9 1 5 . 8 6 1064.85 5 4 6 . 2 7 6 5 2 . 9 5 S o u r c e s : 1 E c o n o m i c R e p o r t 1968 R e p u b l i c o f Zambia 3 S u r v e y s o f A f r i c a n E c o n o m i e s , V o l . 2 , p . 2 1 4 2 S u r v e y s of A f r i c a n E c o n o m i e s , V o l . 2, p . 2 1 4 4 " " " " p i 2 9 6 3 0 , p r o d u c t a t f a c t o r c o s t f o r t h e y y e a r s 1964 and 1966. We c a n s e e t h a t , e v e n w i t h Zambia i n c l u d e d , Kenya s t i II l e a d s w i t h t h e h i g h e s t G . D . P . i n b o t h y e a r s . In 1964 Z a m b i a r a n k e d t h i r d b e h i n d T a n z a n i a b u t i n 1966, b e c a u s e o f h i g h c o p p e r p r i c e s , ^ h e r G . D . P . r o s e t o r a n k s e c o n d o n l y t o K e n y a . By s c a n n i n g t h e f i g u r e s in t a b l e 3 . 2 , a n o t h e r b a s i c d i f f e r e n c e between Z a m b i a and t h e o t h e r c o u n t r i e s becomes a p p a r e n t . F o r t h e EACM c o u n t r i e s t h e l e a d i n g s e c t o r o f t h e economy i s a g r i c u l t u r e w h i l e i n t h e Z a m b i a n economy t h e major s e c t o r i s m i n i n g and q u a r r y i n g . - In b o t h c a s e s t h e s e , s e c t o r s a r e t h e l e a d i n g e x p o r t s e c t o r s . A l t h o u g h t h e a g r i c u l t u r a l s e c t o r s o f t h e v a r i o u s c o u n t r i e s d i f f e r i n s i z e t h e y s h a r e a number o f common f e a t u r e s i n t h e i r h i s t o r i c a l d e v e l - o p m e n t . A p p e n d i x II p r e s e n t e d a d e t a i l e d a n a l y s i s o f t h e e c o n o m i c d e v e l - opment o f t h e a g r i c u l t u r a l s e c t o r s o f U g a n d a , Kenya and T a n z a n i a . I p r o p o s e h e r e o n l y t o c o n s i d e r a few o f t h e h i g h l i g h t s t h a t a r e r e l e v a n t t o t h e q u e s t i o n o f Z a m b i a n e n t r y i n t o t h e Common M a r k e t . As m e n t i o n e d e a r l i e r , f o r a l l t h r e e E a s t A f r i c a n c o u n t r i e s t h e a g r i c u l t u r a l s e c t o r has been t h e l e a d i n g s e c t o r . In t h e c a s e o f Z a m b i a t h e a g r i c u l t u r a l s e c t o r has been d e v e l o p e d i n r e s p o n s e t o l o c a l demand. W i t h t h e d e v e l o p m e n t o f t h e c o p p e r b e l t i n t h e 1 9 2 0 ' s t h e r e was c r e a t e d a l o c a l demand f o r b a s i c f o o d s t u f f s . The m i n i n g c o m p a n i e s p a i d p a r t o f t h e i r wages i n k i n d and i t was c h e a p e r t o e n c o u r a g e l o c a l p r o d u c t i o n r a t h e r t h a n i m p o r t i n g . W i t h t h e m i n e s c o m i n g i n t o f u l l p r o d u c t i o n i n 1930, dom- e s t i c c o n s u m p t i o n o f m a i z e r o s e f r o m 106,000 bags i n 1928 t o 3 0 0 , 0 0 0 bags i n 1930. C a t t l e p u r c h a s e d by t h e m i n e s l i k e w i s e i n c r e a s e d f r o m 5 , 0 0 0 t o 1 8 , 0 0 0 head between 1926 and 1930. 2 Number o f M a n u f a c t u r i n g E s t a b l i s h m e n t s 1965 T a n z a n ia Z a m b i a Number o f E s t a b - Ii shments Emp1oyment . O u t p u t T h o u s . S h . Number o f Estab.l i s h - ments EmpIoyment O u t p u t T h o u s . S h . Food M a n u f a c t u r i n g 125 9 , 2 2 3 3 4 5 , 8 8 3 66 . 4 , 122 13,524 ' B e v e r a g e s T o b a c c o m a n u f a c t u r i n g • 1 1 - ! 3 64 • 1,097 4 9 , 2 7 6 19,307 29 .2,194 11,226 T e x t i Ies F o o t w e a r & w e a r i n g a p p a r e l 158 10 21,911 .1,083 5 3 3 , 0 9 5 2 3 , 1 6 4 70 3 , 154 4 , 6 6 5 M a n u f . o f wood e x c e p t f u r n i t u r e 73 3 , 4 9 2 3 7 , 7 3 2 F u r n i t u r e & f i x t u r e s 17 • 440 7 , 6 6 4 P a p e r p r o d u c t s , . p r i n t i ng & pub I. 22: 813 2 0 , 0 2 7 25 1,218 2 , 0 5 6 L e a t h e r p r o d u c t s 8 242 '. 3 2 , 8 0 8 R u b b e r p r o d u c t s 5 • " 104 3 , 2 2 9 ChemicaI & chemi c a I . p r o d u c t s 18 • • ••; 709 5 9 , 6 7 7 , Non-metaI Ii c mi n e r a I p r o d u c t s . 9 2 2 , 7 5 4 A s s e m b l y and r e p a i r . o f . t r a n s p o r t a t i o n e q u i p . 120 3 , 4 7 6 • 3 , 7 6 0 O t h e r m a n u f a c t u r i n g 213 12,042 2 0 , 3 4 2 TOTAL 459 4 0 , 0 6 5 1 , 2 4 2 , 0 5 2 523 2 6 , 2 0 3 . 5 5 , 5 7 3 3 2 . U n t i l 1924, N o r t h e r n R h o d e s i a was a d m i n i s t e r e d by t h e B r i t i s h S o u t h A f r i c a n Company. I t was t h e i r p u r p o s e t o m a x i m i z e t h e i r s h a r e - h o l d e r s p r o f i t s . M i n i n g was t h e most p r o f i t a b l e a c t i v i t y and a g r i c u l - t u r a l d e v e l o p m e n t was o n l y e n c o u r a g e d t o g i v e t h e m i n e e m p l o y e e s a c h e a p s o u r c e o f f o o d s u p p l y . R a t h e r t h a n r e l y on l o c a l A f r i c a n p r o d u c t i o n t h e y e n c o u r a g e d E u r o p e a n s e t t l e r s t o i m m i g r a t e t o c h o i c e l a n d s t h a t w o u l d be a l l o c a t e d t o t h e m . Thus by 1958 t h e r e were a b o u t 1,200 E u r o p e a n - f a r m e r s e m p l o y i n g 4 5 , 0 0 0 A f r i c a n s and f a r m i n g more t h a n 5 , 0 0 0 , 0 0 0 a c r e s . ^ Most o f t h i s land was a l o n g t h e r a i l r o a d l i n e and t h e r e f o r e had e a s y a c c e s s t o t h e c o p p e r b e l t m a r k e t s . In 1960 t h e E u r o p e a n f a r m e r s m a r k e t e d o v e r 11% o f t o t a I . m a r k e t e d a g r i c u l t u r a l p r o d u c t i o n . N a t i v e A f r i c a n f a r m e r s l i v e d i n N a t i v e r e s e r v e s and N a t i v e t r a c t l a n d w h i c h made up 94$ of t h e ' t o t a I ' a r e a o f Z a m b i a b u t o n l y 1% o f w h i c h was c l a s s i f i e d " g o o d " f o r a g r i c u l t u r a l c r o p s . A t p r e s e n t t h e g o v e r n m e n t i s u n d e r t a k i n g a p r o g r a m t o i m p r o v e t h e l o t o f t h e A f r i c a n f a r m e r by i n t r o d u c i n g new f a r m i n g t e c h n i q u e s , f e r t i l i z e r s and modern, s o i I management. In t h i s r e s p e c t , t h e r e f o r e , t h e r e i s a marked s i m i l a r i t y between Z a m b i a n and Kenyan d e v e l o p m e n t . .. T u r n i n g now t o t h e m a n u f a c t u r i n g s e c t o r we c a n s e e a g r e a t d e a l o f s i m i l a r i t y between t h e f o u r r e g i o n s . A l l have r e l a t i v e l y s m a l l i n d u s t r i a l s e c t o r s , w i t h Kenya l e a d i n g w i t h t h e h i g h e s t l e v e l o f m a n u f a c t u r i n g o u t p u t . From t a b l e 3 . 3 we see t h a t Z a m b i a has a l m o s t t h e same number o f i n d u s t r i a l e s t a b l i s h m e n t s as T a n z a n i a , y e t e m p l o y s o n l y h a l f t h e number o f w o r k e r s . In s p i t e o f t h i s Zambia p r o d u c e d o n l y 20% l e s s o u t p u t (by v a l u e ) t h a n T a n z a n i a . The r e a s o n f o r t h e s m a l l m a n u f a c t u r i n g s e c t o r i s t w o f o l d . F i r s t , most o f t h e e c o n o m i c a c t i v i t y has been p l a c e d upon t h e c o p p e r i n d u s t r y • T a b l e 3 . 4 A g r i c u l t u r a l E x p o r t s as P e r c e n t a g e o f T o t a l T r a d e ( O u t s i d e EACM) 1961 1962 1963 1964 1965 1966 K e n y a : " A g r i c u l t u r a l E x p o r t s 2 7 . 4 3 0 . 4 3 4 . 4 3 5 . 4 3 2 . 1 41 . 1 ( i n mi 1 1 ions o f p o u n d s ) Tota1 E x p o r t s . 3 5 . 3 3 7 . 9 4 3 . 8 4 7 . 1. 4 7 . 2 5 8 . 1. A g r i c u 1 t u r e a s $ o f T o t a 1 77$ 8 0 . 2 $ 7 8 . 5 $ 75.1$" 60$ 7 0 . 7 $ T a n z a n i a : A g r i c u l t u r a l E x p o r t s 3 6 . 8 3 9 . 4 5 0 . 8 5 3 . 8 4 6 . 3 5 8 . 8 ( i n m i l l i o n s o f p o u n d s ) Tota1 E x p o r t s 4 8 . 7 5 1 . 2 6 3 . 6 7 0 . 1 6 2 . 8 7 9 . 1 A g r i c u I t u r e as % of T o t a l 7 5 . 6 $ 7 6 . 9 $ 80$ 7 6 . 7 $ 7 3 . 7 $ 7 4 . 3 $ U g a n d a : A g r i c u l t u r a l E x p o r t s 3 5 . 0 3 2 . 5 46.1 5 6 . 6 5 2 . 6 ' 1 5 7 . 4 • ( i n m i l l i o n s o f p o u n d s ) Tota1 E x p o r t s 39.1 3 7 . 5 5 1 . 5 6 4 . 4 6 2 . 7 • ' 6 5 . 9 - A g r i c u 1 t u r e as $ o f T o t a 1 8 9 . 5 $ ' 8 6 . 6 $ 8 9 . 5 $ 8 7 . 8 $ 8 3 . 8 $ 8 7 . 1 $ 3 4 . and t h e i n p u t s demanded f o r s u c h a m i n i n g o p e r a t i o n r e q u i r e c a p i t a l - i n t e n s i v e p r o d u c t i o n and e n j o y l a r g e e c o n o m i e s o f s c a l e . T h u s , l o c a l p r o d u c t i o n i s g e n e r a l l y n o t p o s s i b l e . L o c a l m a n u f a c t u r i n g p r o d u c t i o n i s , t h e r e f o r e , l i m i t e d t o p r o d u c t s f o r l o c a l f i n a l c o n s u m p t i o n . T h i s b r i n g s us t o t h e s e c o n d l i m i t i n g f a c t o r : t h e s i z e , o f t h e l o c a l m a r k e t . W i t h s u c h a l i m i t e d m a r k e t , l o c a l p r o d u c t i o n must be c o n f i n e d t o s m a l l s c a l e p r o d u c t i o n of l o c a l c o n s u m e r goods and s i m p l e f o o d p r o c e s s i n g i n - d u s t r i e s . T h i s a g a i n i s r e f l e c t e d i n t h e breakdown o f t h e m a n u f a c t u r i n g s e c t o r shown i n t a b l e 3 . 3 . T h u s in t h e s p e c t r u m o f E a s t A f r i c a n i n d u s - t r i a l d e v e l o p m e n t , Z a m b i a c a n be l i s t e d as a ' h a v e n o t ' c o u n t r y . As w i l l be d i s c u s s e d l a t e r , e x p a n s i o n o f m a r k e t s i z e r e p r e s e n t s one of t h e ' o b v i o u s b e n e f i t s f r o m i n t e g r a t i o n . ' -v E x p o r t O r i e n t a t i o n of E c o n o m i e s As m e n t i o n e d e a r l i e r , a l l f o u r c o u n t r i e s r e l y h e a v i l y upon p r i m a r y g o o d s e x p o r t s as an i m p o r t a n t s o u r c e o f f o r e i g n e x c h a n g e . C o n s i d e r i n g E a s t A f r i c a n t r a d e w i t h c o u n t r i e s o u t s i d e t h e EACM, t a b l e 3 . 4 i n d i c a t e s t h e r e l e v a n t s i t u a t i o n . B e c a u s e o f t h i s heavy r e l i a n c e on a g r i c u l t u r a l e x p o r t s a l l t h r e e c o u n t r i e s a r e e x t r e m e l y v u l n e r a b l e t o s u c h e x o g e n o u s v a r i a b l e s as c l i m a c t i c c o n d i t i o n s , d i s e a s e and w o r l d p r i c e f l u c t u a t i o n s . U n f o r t u n a t e l y t h e EACM c o u n t r i e s have a t one t i m e o r a n o t h e r i n t h e l a s t f i v e y e a r s been p l a g u e d w i t h one o r o t h e r o f t h e s e p l i g h t s . The most d e v a s t a t i n g e x a m p l e o f t h i s phenomenon i n r e c e n t h i s t o r y a f f e c t e d t h e s i s a l i n d u s t r y i n T a n z a n i a . S i s a l e x p o r t s have t r a d i t i o n a l l y been t h e m a i n e x p o r t o f T a n z a n i a and s u b s e q u e n t l y she has been p r o d u c i n g 2/5 o f t h e w o r l d m a r k e t s u p p l y . T h i s i n d u s t r y has been f o r c e d t o n e a r b a n k r u p t c y f o r two r e a s o n s . The f i r s t i s t h e d e c l i n e i n t h e w o r l d p r i c e o f s i s a l . From t h e 1964 p r i c e o f 2 , 2 2 0 T a n z a n i a s h i I I i n g s ( T . S h . ) p e r t o n t o an a l l t i m e 4 low o f 1,290 T . S h . p e r t o n i n 1967. T h i s has meant a f a l l i n e x p o r t 3 5 . r e v e n u e s from a 1963 l e v e l o f 2 2 . 7 m i l l i o n pounds t o 10 m i l l i o n pounds 5 i n 1967, and l i k e w i s e e x p o r t t a x r e v e n u e f e l l f r o m 1.5 m i l l i o n pounds i n 1964-65 t o .61 m i l l i o n i n 1 9 6 5 - 6 6 . ^ T h i s f a l l i n p r i c e was p r e c i p - i t a t e d l a r g e l y by t h e i n c r e a s e d use o f s y n t h e t i c s and i n c r e a s e d c o m p e t - i t i o n f r o m more modern p l a n t a t i o n s i n B r a z i I. The s e c o n d f a c t o r p r e c i p i t a t i n g t h e n e a r c o l l a p s e o f t h e i n d u s t r y i s t h e i n h e r e n t c h a r a c t e r o f s i s a l p r o d u c t i o n i t s e l f . The p r o d u c t i o n o f s i s a l r e q u i r e s a v e r y l a r g e i n i t i a l c a p i t a l i n v e s t m e n t i n t h e f o r m o f c u r i n g h o u s e s and p r o c e s s i n g p l - a n t s . I n i t i a l c a p i t a l e x p e n d i t u r e s were e s t i m a t e d in 1956 t o be a t l e a s t ±200 t o . p r o d u c e one ton., o f f i b r e a n n u a l l y on a p p r o x i m a t e l y 2 . 6 a c r e s o f land."' ' Combined w i t h t h i s l a r g e i n v e s t m e n t i s a h i g h wage e x p e n d i t u r e t h a t was e s t i m a t e d i n 1956 t o c o n s i s t o f 38$ o f t h e t o t a l c o s t . W i t h t h e s u b s e q u e n t i n c r e a s e s i n A f r i c a n wages i n t h e p a s t 10 y e a r s t h e wage s h a r e of c o s t s w i l l have i n c r e a s e d g r e a t l y . A f u r t h e r c o m p l i c a t i n g f a c t o r i s t h a t s i s a l p r o d u c t i o n must be p l a n n e d w e l l i n a d v a n c e s i n c e t h e g r o w t h c y c l e i s a b o u t 10 y e a r s . T h i s i n e l a s t i c i t y o f s u p p l y e x p l a i n s why i n 1967 e v e n w i t h low p r i c e s and h i g h l a b o u r c o s t s , s i s a l p r o d u c t i o n d i d n o t d e c r e a s e by more t h a n 4$ f r o m t h e 1963 p r o d u c t i o n l e v e l o f 2 2 0 , 0 0 0 t o n s . • S i s a l i s n o t t h e o n l y crop, w h i c h has been a d v e r s e l y a f f e c t e d . The c o f f e e c r o p s have been h i t by d i s e a s e as w e l l as h a v i n g t o f a c e o s c i l l a t i n g w o r l d p r i c e s . Kenyan c o f f e e p r o d u c t i o n f e i I 11$ i n 1965 as a r e s u l t o f b e r r y d i s e a s e . As w e l l c o f f e e p r i c e s f e l l f r o m an a l l t i m e h i g h i n 1960 o f 7 , 9 4 0 E . A . S h . p e r t o n t o 5 , 6 6 0 S h . p e r t o n i n 1963 and b a c k up t o 6 , 9 0 0 i n 1966. 8 W e - s e e t h a t t h e E a s t A f r i c a n c o u n t r i e s a r e v u l n e r a b l e t o a number o f e x o g e n o u s t h r e a t s t o t h e m a i n s o u r c e o f t h e i r f o r e i g n e x c h a n g e . A w e l l 3 6 . known l i m i t i n g c o n s t r a i n t t o d e v e l o p m e n t i s t h e a v a i Iabi I i t y o f . f o r e i g n e x c h a n g e and when t h i s s o u r c e of s u p p l y i s i n a p r e c a r i o u s p o s i t i o n t h e n t h e w h o l e p r o c e s s o f d e v e l o p m e n t i s e n d a n g e r e d . How wi II Z a m b i a n e n t r y i n t o t h e Common M a r k e t l e s s e n t h e s e v e r i t y o f t h i s p r o b l e m ? Zambia t o o , d e p e n d s upon t h e e x p o r t o f one p a r t i c u l a r p r i m a r y g o o d , c o p p e r . Z a m b i a i s t h e t h i r d l a r g e s t w o r l d c o p p e r p r o d u c e r . A l t h o u g h t h i s e x p o r t a l s o i s s u b j e c t t o w o r l d p r i c e f l u c t u a t i o n s , i t has a more s t a b l e r e s o u r c e b a s e . W i t h Zambia i n c l u d e d a s a member o f t h e EACM i t i s i n e f f e c t a p r o c e s s w h i c h w'idens t h e e x p o r t a b l e r e s o u r c e b a s e . T r u e , e a c h c o u n t r y w i l l c o n t i n u e t o r e l y on t h e i r own f o r e i g n e x c h a n g e s o u r c e b u t i n t i m e o f c r i s i s e a c h s i d e c a n c a l l on t h e o t h e r s f o r a s s i s - t a n c e , d i r e c t l y o r i n d i r e c t l y , t h r o u g h t h e E a s t A f r i c a n D e v e l o p m e n t B a n k s . T h u s , i n t i m e o f c r o p f a i l u r e , Z a m b i a c a n be c a l l e d upon f o r a s s i s t a n c e , w h i l e i n a . t i m e o f s a g g i n g c o p p e r p r i c e s , Zambia may t u r n f o r a s s i s t a n c e t o one o f h e r two n e i g h b o u r s . . A more i m p o r t a n t r e s u l t o f t h e c o u n t r i e s ' e x p o r t o r i e n t e d n a t u r e i s t h e i r m u t u a l d e s i r e t o l e s s e n t h i s d e p e n d e n c y by d e v e l o p i n g more e f f e c t i v e m a n u f a c t u r i n g s e c t o r s . It i s t o t h i s s u b j e c t we w i l l now a d d r e s s o u r - s e l v e s . B e n e f i t s f r o m I n t e g r a t i o n When i n t e g r a t i o n i s d i s c u s s e d as a method o f e c o n o m i c d e v e l o p m e n t , c e r t a i n t r a d i t i o n a l a r g u m e n t s i n v a r i a b l y a p p e a r . S u c h c o n s i d e r a t i o n s a s i n c r e a s e d e c o n o m i e s o f s c a l e , i n c r e a s e d c o m p e t i t i v e e f f i c i e n c y , i m p r o v e d a l l o c a t i o n o f r e s o u r c e s and s t r e n g t h e n e d b a r g a i n i n g power v i z - a - v i z t h i r d p a r t i e s , a r e p u t f o r t h as a r g u m e n t s f o r i n t e g r a t i o n . In t h e E a s t A f r i c a n s i t u a t i o n a l s o t h e y c a n be a r g u e d t o be r e l e v a n t c o n s i d e r a t i o n s , o p e r a t i n g t o i m p r o v e t h e e n g i n e o f g r o w t h . B u t we c a n t a k e o u r a r g u m e n t f u r t h e r , 3 7 . and show t h a t c e r t a i n p e c u l i a r i t i e s w i t h i n t h e E a s t A f r i c a n s e t t i n g make e c o n o m i c i n t e g r a t i o n an e v e n more a t t r a c t i v e p r o p o s i t i o n . F i r s t , l e t us d e a l w i t h t h e t r a d i t i o n a l a r g u m e n t s . As m e n t i o n e d e a r l i e r in t h i s c h a p t e r , Zambia i s a c o u n t r y o f o n l y 4 m i l l i o n p e o p l e . O u t of t h e e n t i r e p o p u l a t i o n , o n l y 3 3 6 , 8 2 8 . o r 8.5% 9 a r e in t h e wage e a r n i n g l a b o u r f o r c e . S e v e n t y - f i v e p e r c e n t o f t h e p o p u l a t i o n a r e s m a l l s c a l e s u b s i s t e n c e f a r m e r s . ^ F o r t h i s r e a s o n one o f t h e g r e a t e s t o b s t a c l e s t o t h e d e v e l o p m e n t o f a m a n u f a c t u r i n g s e c t o r i s t h e l i m i t e d s i z e o f t h e d o m e s t i c m a r k e t . U n f o r t u n a t e l y t h e r e i s a l i m i t e d d o m e s t i c l i n k a g e e f f e c t a s s o c i a t e d w i t h c o p p e r , as t h e " l e a d i n g s e c t o r " o f t h e economy. Once t h e o r e has been s m e l t e d and e l e c t r i c a l l y r e f i n e d , t h e r e i s v e r y l i t t l e a d d i t i o n a l v a l u e a d d e d t h a t c a n be. c o n t r i b u t e d s i n c e most i m p o r t i n g c o u n t r i e s p o s s e s s t h e i r own p r o c e s s i n g i n d u s t r i e s w h i c h t h e y a l s o p r o t e c t . B e c a u s e s m e l t i n g and r e f i n i n g i s a h i g h l y t e c h n i c a l o p e r a t i o n , t h e d o m e s t i c backward . I i n k a g e s from t h e e a r l i e r s t a g e s . a r e a l s o v e r y l i m i t e d . T h e o n l y s i g n i f i c a n t , n o t i c e a b l e e f f e c t i s t h e e s t a b l i s h m e n t o f s m a l l s c a l e e n g i n e e r i n g f i r m s t o s e r v i c e t h e e q u i p m e n t o f t h e m i n i n g . 1 1 -. c o m p a n i e s . • M a n u f a c t u r i n g i n d u s t r y , t h e r e f o r e , has been l i m i t e d t o s m a l l s c a l e p r o d u c t i o n o f f o o d p r o c e s s i n g , b e v e r a g e s , t e x t i l e s and p r i n t e d m a t e r i a l s w h i c h i n t o t a l makes up 9% o f t h e t o t a l G . D . P . o r i n a b s o l u t e t e r m s 12 6 3 , 0 3 1 , 0 0 0 K s . B e c a u s e l o c a l m a n u f a c t u r i n g d e v e l o p e d as a r e s p o n s e t o l o c a l demand, i n d u s t r i e s w h i c h had l a r g e e c o n o m i e s o f s c a l e c o u l d n o t be l o c a l l y u n d e r t a k e n and t h e r e f o r e were i m p o r t e d . ^ I t i s t r u e t h a t n o t a l l i m p o r t e d g o o d s c o u l d be p r o d u c e d w i t h i n t h e e x t e n d e d EACM, b u t by Zambia e n t e r i n g t h e u n i o n t h e m a r k e t f o r h e r l o c a l p r o d u c t i o n w o u l d i n c r e a s e from t h e p r e s e n t m a r k e t o f 4 mi I I i o n t o a p o t e n t i a l m a r k e t o f 33 mi I I i o n . E x i s t i n g Z a m b i a n i n d u s t r y may have t o c o m p e t e w i t h EACM p r o d u c t s , t h u s T a b l e 3 . 5 K t ' 0 0 0 • 1 ! K t ' o o o 2 U t ' 0 0 0 3 T t ' 0 0 0 . K ' 0 0 0 S o u r c e : Kenya Uganda T a n z a n i a Zamb i a 1966 1967 1968 1966 1967 1968 1966 1967 1968 1966 1967 1968 I m p o r t s U . K . % o f t o t . 37752 3 3 . 6 1 34983 . 3 2 . 8 4 36110 31.46".. .11 103 3 3 . 8 4 15679" 3 8 . 3 6 15498 3 6 . 0 6 16850 3 1 . 5 5 20600 3 0 . 3 2 1 9200. 2 8 . 5 6 54435 2 2 . 1 . 62860 17.2 76231 2 3 . 4 • E . E . C . % o f t o t a 1 8056 7. 17 10560 . 9.91 91 12 7 .94 5970 18.19 7052 17.25 8395 . 19.54 12850 2 4 . 0 6 14600 21 . 4 9 17200 2 5 . 5 9 20142 8. 18 37485 12.2 41240 12.8 . U . S . A . . • % o f t o t a 1 11275 10.04 .7764 7 . 2 9 7922 6 . 9 1372 . 4 . 18 1937 4 . 7 4 1650 3 . 8 4 2025 3 . 8 0 4800 . 7 . 0 6 6850 10. 19 27151 11.03 32899 10.7 33349 10.2 T O T . I M P . 112304 106534 1 14764 32807 40870 42947 53400 67950 67225 246116 306350 325184 E x p o r t s U . K . % o f t o t a l 13511 21 . 8 0 14781 2 4 . 9 2 15879 2 5 . 2 3 8006 12.43 10697 17.05 12271 18.61 19100 2 9 . 0 9 24300 2 9 . 14 23605 2 8 . 7 160171 3 2 . 4 128336 . 2 7 . 3 160337 2 9 . 3 E . E . C . % o f t o t a l 14524 2 3 . 4 3 9871 16.64 1 1797 .18.74 • 1 1416 17.72 12325 19.65 8288 12.56 12050 18.35 1 1200 13.43 12500 15.2 167522 3 3 . 9 125079 2 6 . 6 174185 3 1 . 9 U . S . A . % o f t o t a l 5384 8 . 6 9 3828 6 . 4 5 4202 6 . 6 7 , 18239 2 8 . 3 14092 2 2 . 4 7 17039 2 5 . 8 4 .5850 8.91 8450 19. 13 5850 7. 11 179 23923 5 . 9 10805 19.8 TOTAL E X P . 61989 59308 62935 64430 62714 65936 65650 .83400 82250 593458 470009 544415 EACM S o u r c e s : .1 E c o n o m i c R e p o r t J 9 6 9 , K e n y a , p . 4 0 , 4 5 2 Uganda S t a t i s t i c a l A b s t r a c t , 1967. p.. 2 0 , 24 3 B a c k g r o u n d t o t h e B u d g e t , 1968, 6 9 . p . 2 3 3 9 . f o r c i n g l o c a l p r o d u c e r s t o be more e f f i c i e n t , b u t s i n c e a l l f o u r c o u n t r i e s j h a v e r e l a t i v e l y s m a l l m a n u f a c t u r i n g s e c t o r s , much p o t e n t i a l s t i l l l i e s i n t h e f u t u r e f o r t h e e s t a b l i s h m e n t o f new i n d u s t r i e s . T h e d e g r e e t o w h i c h Z a m b i a i s a b l e t o c a p t u r e r e g i o n a l l y b a s e d i n d u s t r y w i l l d e t e r m i n e t o what e x t e n t she w i l l e n j o y t h e b e n e f i t s o f i n c r e a s e d e c o n o m i e s o f s c a l e . We saw i n t h e l a s t c h a p t e r how t h e s h a r i n g o f s u c h b e n e f i t s has been a p r o b l e m i n t h e p a s t and we s h a l l c a r r y t h i s d i s c u s s i o n f u r t h e r . By a g r e e i n g on some k i n d o f r e g i o n a l p l a n , a d v a n t a g e c o u l d ' b e t a k e n . o f l o c a t i o n and s p e c i a l i z a t i o n . A l t h o u g h some c o n s u m e r goods m i g h t be e c o n o m i c a l-ly p r o d u c e d f o r l o c a l m a r k e t s , i n t e r m e d i a t e g o o d s s u c h as p r o d u c t i o n m a c h i n e r y , c h e m i c a l p r o d u c t s , a g r i c u l t u r a l e q u i p m e n t r e q u i r e a l a r g e r m a r k e t b a s e . F o r t h i s r e a s o n t h e a r g u m e n t has been s t r o n g l y u p h e l d by t h e E c o n o m i c C o m m i s s i o n f o r A f r i c a s i n c e t h e i n d u s t r i a l 14 p r o d u c t r e c o m m e n d a t i o n s o f . t h e E . C . A . have been made on a r e g i o n a l b a s i s . The l a s t o f t h e t r a d i t i o n a l a r g u m e n t s d e a l s w i t h t h e e f f e c t o f . i n t e g r a t i o n on b a r g a i n i n g power. T a b l e 3 . 5 shows t h a t a l l f o u r c o u n t r i e s s h a r e t h e same m a j o r t r a d i n g p a r t n e r s , most n o t a b l y t h e U . K . T h i s i s n o t . s u r p r i s i n g s i n c e b o t h t h e EACM and Zambia a r e p a r t o f t h e B r i t i s h Common- w e a l t h t r a d e p r e f e r e n c e a g r e e m e n t . E n t r a n c e o f Z a m b i a i n t o EACM m i g h t i n c r e a s e t h e b a r g a i n i n g power o f the.common m a r k e t w i t h B r i t a i n and t h e r e - f o r e s e c u r e b e t t e r c o n s i d e r a t i o n s f o r t h e i r e x p o r t i n t e r e s t s . , . A d d i t i o n a l f e a t u r e s t h a t make E a s t A f r i c a p a r t i c u l a r l y a m e n a b l e t o f u r t h e r i n t e g r a t i o n i n c l u d e a r g u m e n t s b o t h o f a p o l i t i c a l and an e c o n o m i c n a t u r e . We s h a l l d e a l b r i e f l y w i t h p o l i t i c a l a s p e c t s f i r s t . Zambia (known as N o r t h e r n R h o d e s i a i n p r e i n d e p e n d e n c e t i m e s ) was e c o n o m i c a l l y t i e d t o S o u t h e r n R h o d e s i a and S o u t h A f r i c a . H e r i n f r a - s t r u c t u r e was p a r t o f a n o r t h - s o u t h n e t w o r k and a l l e x p o r t s were s e n t v i a 4 0 . t h e s o u t h e r n p o r t s . In 1964, 34$ o f Z a m b i a n i m p o r t s came f r o m S o u t h e r n R h o d e s i a and 20$ f r o m S o u t h A f r i c a . W i t h R h o d e s i a ' s u n i l a t e r a l d e c l a r a t i o n o f i n d e p e n d e n c e (UDI) i n 1965, Zambia was l e f t i n a p r e c a r i o u s e c o n o m i c and p o l i t i c a l p o s i t i o n . The Z a m b i a n r a i l r o a d : , w h i c h had p r e v i o u s l y been o p e r a t e d by t h e R h o d e s i a n s was p u t i n t o t h e hands o f Z a m b i a n o f f i c i a l s . . B u t t h e s e r a i l l i n e s were a l m o s t c o m p l e t e l y u s e l e s s s i n c e t h e y l e d o n l y t o t h e s o u t h e r n p a r t o f R h o d e s i a . When S . R h o d e s i a d e c l a r e d i n d e p e n d e n c e , Z a m b i a r e s o l v e d t o t e r m i n a t e t r a d e w i t h t h e s o u t h as s o o n as. p o s s i b l e a n d , t h e r e f o r e , Zambia was l e f t a c o m p l e t e l y i s o l a t e d and l a n d - l o c k e d n a t i o n . Not o n l y . w e r e h e r c o m m u n i c a t i o n s c u t w i t h t h e o u t s i d e w o r l d b u t a l s o h e r s o u r c e o f raw I m a t e r i a l s was c u t o f f . . Zambia r e l i e d h e a v i l y upon S o u t h e r n R h o d e s i a f o r c o a l and f u e l ' oi-1 and w i t h UDI had t o l o o k f o r a l t e r n a t e s o u r c e s o f s u p p l y . L o c a l c o a l f i e l d s were d e v e l o p e d and t h e two Z a m b i a n c o a l f i e l d s , Nkandabwe and Maamba, i n c r e a s e d t h e i r o u t p u t . . By 1968 Zambia was s e l f - s u f f i c i e n t i n coaI p r o d u c t i o n . In s e a r c h o f a new t r a n s p o r t a t i o n r o u t e , Z a m b i a l o o k e d t o h e r e a s t e r n n e i g h b o u r , T a n z a n i a . T o r e l i e v e t h e i m m e d i a t e t r a n s p o r t a t i o n p r o b l e m , a r o a d was c o n s t r u c t e d f r o m Zambia t o Dar es S a l a a m . T h i s r o a d r e p r e s e n t e d Z a m b i a ' s o n l y new l i n k w i t h t h e o u t s i d e w o r l d . In o r d e r t o r e l i e v e t h e f u e l p r o b l e m , a p i p e l i n e was a l s o b u i l t from D a r es S a l a a m , 1,058 m i l e s i n t o Z a m b i a . On S e p t e m b e r 2, 1968, t h e l i n e was o p e n e d by P r e s i d e n t s N y e r e r e 15 and K a u n d a . P r i o r t o t h e o p e n i n g o f t h e p i p e l i n e t h e b u l k o f f u e l was c a r r i e d by t a n k t r u c k s o v e r t h e a b o v e m e n t i o n e d r o a d . T h i s method was v e r y c o s t l y and f u e l was r a t i o n e d i n Zambia f o r 2\ y e a r s . W i t h t h e c o m p l e t i o n o f t h e p i p e l i n e t h e r a t i o n i n g was d i s c o n t i n u e d and more t r u c k s were f r e e d 4.1 t o c a r r y c o n s u m e r goods i n l a n d from Dar es S a l a a m . N e e d l e s s t o s a y , t r u c k i n g i s an e x p e n s i v e means of t r a n s p o r t , e s p e c i a l l y f o r b u l k y m a t e r i a l s , and f o r t h i s r e a s o n a r a i l l i n k i s b e i n g c o n s t r u c t e d from D a r es S a l a a m t o Z a m b i a . The c o n s t r u c t i o n of t h e " T a n Z a n " r a i l r o a d i s b e i n g u n d e r t a k e n by a C h i n e s e T e c h n i c a l A i d p r o g r a m . S u r v e y work has been c o m p l e t e d and 1975 i s t h e d a t e s e t f o r c o m p l e t i o n . The t r a i n o f e v e n t s o f t h e p a s t few y e a r s t h u s i n d i c a t e s why Z a m b i a has an u r g e n t d e s i r e t o s t r e n g t h e n h e r t i e s w i t h E a s t A f r i c a . Up u n t i l now t h e r e have been p h y s i c a l t i e s i n t h e f o r m m e n t i o n e d a b o v e b u t t h e r e i s good r e a s o n t o b e l i e v e t h a t a g e n u i n e d e s i r e now e x i s t s t o s t r e n g t h e n t h e s e bonds i n t o s t r o n g e r e c o n o m i c and p o l i t i c a l a s s o c i a t i o n s . A s t r o n g p o l i t i c a l a r g u m e n t c a n be made h e r e t o s u p p o r t o u r g e n e r a l t h e s i s . W i t h o u t g o i n g i n t o a d e t a i l e d a n a l y s i s o f t h e p o l i t i c s o f t h e . e n t i r e c o n t i n e n t i t i s e a s y t o s e e t h e p o l i t i c a l i n s e c u r i t y i n v o l v e d i n b e i n g s u r r o u n d e d by c o u n t r i e s s u c h as S o u t h e r n R h o d e s i a , P o r t u g e s e E a s t A f r i c a , and A n g o l a . A l l t h r e e a r e v e r y much p a r t o f a c o l o n i a l t y p e p o l i t i c a l s t r u c t u r e and f o l l o w s i m i l a r d o m e s t i c p o l i c i e s , t h a t a r e p e c u l i a r t o S o u t h e r n A f r i c a . . Zambia has c h o s e n a p o l i t i c a l s t r u c t u r e t h a t i s on t h e o t h e r s i d e o f t h e p o i i t i c a I s p e c t r u m . Z a m b i a n d o m e s t i c p o l i c i e s a r e more i n l i n e w i t h t h o s e o f T a n z a n i a . B o t h c o u n t r i e s a r e . f o l l o w i n g t h e p a t h o f " A f r i c a n S o c i a l i s m " . B a s i c c h a n g e s were i n t r o d u c e d i n t h e economy by t h e " M a l u n g u s h i D e c l a r a t i o n " . P r e s i d e n t K a u n d i a n n o u n c e d i n A p r i l 1968 t h e g o v e r n m e n t t a k e - o v e r o f 25 p r i v a t e f i r m s , t i g h t e r c o n t r o l on t h e o u t f l o w of p r o f i t s , r e s t r i c t i o n s on c r e d i t e x t e n s i o n t o n o n - Z a m b i a n s a n d t h e l i m i t a t i o n o f r e t a i l l i c e n c i n g t o Z a m b i a n s a l o n e . T h i s d e c l a r a t i o n has a f a m i l i a r r i n g t o i t . J u s t a y e a r e a r l i e r on F e b r u a r y 1, 1967, P r e s i d e n t N y e r e r e o f T a n z a n i a made t h e " A d r u s h a D e c l a r a t i o n " w h i c h a n n o u n c e d 42. t h e n a t i o n a l i z a t i o n o f t h e banks and most o f t h e l a r g e i n d u s t r y . T h u s , i t makes s e n s e t h a t Z a m b i a w o u l d d e s i r e a c l o s e r a s s o c i a t i o n w i t h E a s t A f r i c a s i m p l y t o s t r e n g t h e n h e r p o l i t i c a l s t a n d i n a a o t h e r w i s e h o s t i l e p o l i t i c a l e n v i r o n m e n t . T u r n i n g now t o e c o n o m i c c o n s i d e r a t i o n s o f t h e p r o p o s e d i n t e g r a t i o n , we need n o t l o o k f a r f o r f u r t h e r s u p p o r t i n g a r g u m e n t s . Z a m b i a , as most d e v e l o p i n g c o u n t r i e s , i s f a c e d w i t h a s k i l l e d manpower s h o r t a g e . I t i s t r u e t h a t w i t h i n t h e c o p p e r b e l t t h e r e a r e a l a r g e number o f h i girl y ' t r a i ned e x p a t r i a t e s , b u t I am s p e a k i n g more o f t h e g e n e r a l l e v e l o f e d u c a t i o n amongst t h e l o c a l i n h a b i t a n t s . T h i s p r o b l e m was f u r t h e r c o m p l i c a t e d when R h o d e s i a d e c l a r e d U . D . I . M o s t o f t h e a d m i n i s t r a t i v e h e a d q u a r t e r s f o r t r a n s p o r t a t i o n and c o m m u n i c - a t i o n s were i n t h e s o u t h . As p a r t o f g o v e r n m e n t p o l i c y t o s e v e r r e l a t i o n s .with S o u t h e r n R h o d e s i a , t h e a d m i n i s t r a t i o n o f t h e s e s e r v i c e s were d e c e n t r a l - i z e d and l o c a l p e o p l e were needed t o man t h e s e new p o s t s . ^ One o f t h e b e n e f i t s o f f e r e d t o Z a m b i a by t h e EACM i s t h e s o p h i s t i c a t e d a d m i n i s t r a t i v e n e t w o r k w h i c h e x i s t s as p a r t o f t h e common m a r k e t . The s e r - v i c e s o f t h e " E a s t A f r i c a n Common S e r v i c e O r g a n i z a t i o n " (EACSO) c o u l d e a s i l y be e x t e n d e d t o Zambia and t h u s r e l i e v e some o f h e r a d m i n i s t r a t i v e p r e s s u r e s . T h i s would f r e e a c e r t a i n p r o p o r t i o n o f s k i l l e d manpower t h a t cou.ld be b e n e f i c i a l l y used i n o t h e r s e c t o r s o f t h e economy. A f i n a l b e n e f i t t h a t would be e n j o y e d by Z a m b i a as p a r t o f t h e EACM w o u l d be t h e i n c r e a s e d a c c e s s a b i I i t y t o t h e m a r k e t s o f t h e E u r o p e a n E c o n o m i c communi t y . The EACM has been an a s s o c i a t e member o f t h e EEC s i n c e t h e 2 6 t h J u l y , 1968. S h o r t l y a f t e r t h e r e n e w a l o f t h e Yaounde C o n v e n t i o n n e g o t i a t i o n s begun between t h e EEC and EACM t o e x t e n d t h e a s s o c i a t i o n t o 1975. The Y a o u n d e C o n v e n t i o n i s an e x t e n s i o n o f t h e T r e a t y o f Rome w h i c h was d e v i s e d 4 3 . t o g i v e p r e f e r e n t i a l t r e a t m e n t t o f o r m e r c o l o n i e s o f t h e s i x members o f t h e E E C . T h e e i g h t e e n a s s o c i a t e A f r i c a n s t a t e s would r e c e i v e d u t y - f r e e e n t r y o f t h e i r e x p o r t s i n t o t h e s i x community c o u n t r i e s . . In r e t u r n , d u t i e s would have t o be d r o p p e d on EEC i m p o r t s u n l e s s n e c e s s a r y as a r e v e n u e s o u r c e , o r as p r o t e c t i o n o f l o c a l i n f a n t i n d u s t r y . The a s s o c i a t e members would r e c e i v e d e v e l o p m e n t a i d f r o m t h e E u r o p e a n D e v e l o p m e n t Bank i n r e t u r n f o r E E C ' s " r i g h t o f e s t a b l i s h m e n t whereby n a t i o n a l s and c o m p a n i e s o f t h e S i x a r e e n t i t l e d t o i n v e s t i n and t o e s t a b l i s h , c o m m e r c i a l e n t e r p r i s e s i n t h e E i g h t e e n on t h e same b a s i s as n a t i o n a l s and c o m p a n i e s o f t h e f o r m e r c o l o n i a l power and on a b a s i s as f a v o u r a b l e as t h a t on w h i c h any t h i r d c o u n t r y n a t i o n a l s may i n v e s t " . T h i s " r i g h t o f e s t a b l i s h m e n t " ^ has o v e r - t o n e s o f what Nkrumah s o a p t l y c a l l s " N e o - c o l . o n i a I i s m " . F o r t h i s r e a s o n b o t h N i g e r i a and t h e E . A . c o u n t r i e s u n d e r t o o k s e p a r a t e n e g o t i a t i o n s w i t h t h e EEC w h i c h c o n c e n t r a t e d m o s t l y on t r a d e p r e f e r e n c e and b y p a s s e d t h o s e p a r t s w h i c h had p o l i t i c a l i n f e r e n c e s . Under t h e new a g r e e m e n t s i g n e d i n B r u s s e l s on J u l y 9 , 1969, i t s t a t e d : " E a s t A f r i c a n c o u n t r i e s w i l l remove a l l c u s t o m s d u t i e s on i m p o r t s f r o m EEC e x c e p t s u c h as a r e n e c e s s a r y t o meet 18 t h e d e v e l o p m e n t needs o r i n t e n d e d t o c o n t r i b u t e t o t h e i r b u d g e t s " . T h i s means t h e EEC w i l l r e c e i v e t a r i f f c o n c e s s i o n s on some 60 i t e m s a t r a t e s r a n g i n g f r o m 2% t o 9%. B a s e d on t h e 1968 s t a t i s t i c s t h i s w i l l c o v e r o n l y 1% o f 19 E . A f r i c a ' s t o t a l i m p o r t s and 11$ o f i t s i m p o r t s f r o m E E C . A s s o c i a t i o n w i t h t h e EEC w i l l n o t be an o b s t a c l e t o Z a m b i a n e n t r y as i t i s w r i t t e n i n t o t h e a g r e e m e n t " t h a t t h e r e i s f r e e d o m t o e s t a b l i s h c u s t o m s u n i o n s , f r e e t r a d e a r e a s and e c o n o m i c c o - o p e r a t i o n a g r e e m e n t s among t h e m - " 2 0 s e l v e s . T h e a g r e e m e n t c o v e r s p r e f e r e n t i a l t r e a t m e n t o f E . A f r i c a ' s a g r i c u l t u r a l 4 4 . p r o d u c t s b u t w i t h t h e i n c l u s i o n o f Z a m b i a , amendments c a n be made t o " t h e t r e a t y f o r t h e i n c l u s i o n o f t h o s e goods r e l e v a n t t o Z a m b i a . A ' f e w a g r i c u l t u r a l p r o d u c t s s u c h as t o b a c c o , m a i z e , and t i m b e r , a r e e x p o r t e d by Z a m b i a . - P r e f e r e n t i a l t r e a t m e n t o f t h o s e p r o d u c t s m i g h t be a g r e a t a i d i n s t i m u l a t i n g t h e a g r i c u l t u r a l s e c t o r and t h u s a d v a n c i n g t h e g o v e r n r n e n t - d e s i r e d p o l i c y o f d i v e r s i f i c a t i o n . ' Up u n t i l now, we have been m e n t i o n i n g t h e b e n e f i t s t h a t w i l l a c c r u e t o Z a m b i a from o u r p r o p o s e d i n t e g r a t i o n . F o r a moment l e t us l o o k a t i t f r o m t h e E . A . p o i n t o f v i e w . T h e r e i s t h e o b v i o u s b e n e f i t t o t h e EACM t h a t t h e m a r k e t s i z e f o r t h e i r p r o d u c t s would a l s o i n c r e a s e . . S i n c e t h e EACM e n j o y s a more d i v e r s i f i e d m a n u f a c t u r i n g s e c t o r i t w i l l ' e n j o y m o s t o f t h e i n i t i a l b e n e f i t f r o m i n t e g r a t i o n . In t h e n e x t c h a p t e r t h i s s u b j e c t w i l l be d e a I T w i Th i n d e t a i l and i t w i l l be shown t h a t a s u b s t a n t i a I i n c r e a s e i n G . D . P . m i g h t r e s u l t f r o m t h e i n i t i a l i n t e g r a t i o n . B u t what o f t h e more s u b t l e i m p l i c a t i o n o f p r o p o s e d i n t e g r a t i o n . ' How w i l l Z a m b i a n e n t r y a f f e c t t h e p o l i t i c a l b a l a n c e o f power? E a r l i e r i n t h e c h a p t e r we e s t a b l i s h e d t h a t Zambia was a ' h a v e n o t ' n a t i o n w i t h r e s p e c t t o i n d u s t r i a l d e v e l o p m e n t i n t h e r e g i o n . Up u n t i l now Uganda and. T a n z a n i a have been u n a b l e t o e x t r a c t from Kenya an a g r e e m e n t f o r p l a n n e d r e g i o n a l a l l o c a t i o n o f i n d u s t r y . As w i l l be a r g u e d l a t e r i n t h e t h e s i s , w i t h Z a m b i a ' s v o i c e a d d e d t o t h e c r y o f t h e ' h a v e n o t ' members p e r h a p s t h e b a l a n c e w i l l be t i l t e d i n t h e i r f a v o u r . The s i m i l a r i d e o l o g i e s h e l d by Zambia and T a n z a n i a , a l s o c o n f e r a d v a n t a g e s on T a n z a n i a w h i c h has been t h e o n l y c o u n t r y s u p p o r t i n g A f r i c a n s o c i a l i s m w i t h i n t h e EACM. New s u p p o r t f r o m w i t h i n an e x t e n d e d common m a r k e t w o u l d be a welcome r e l i e f f o r h e r . We c a n n o t o v e r l o o k s u c h p o l i t - i c a l and i d e o l o g i c a l p r o b l e m s o f , t h e r e g i o n s j n e e o f t e n t h e s e a s p e c t s may o v e r r i d e e c o n o m i c c o n s i d e r a t i o n s i n m a k i n g d e c i s i o n s t h a t d e t e r m i n e t h e f u t u r e s u c c e s s of t h e r e g i o n . 4 5 . In t h e n e x t c h a p t e r we w i l l c o n s i d e r t h e i m m e d i a t e b e n e f t h a t w i l l be e n j o y e d by T a n z a n i a and Kenya f r o m o u r p r o p o s e d i n t e g r a t i o n . 4 6 . CHAPTER [V Impact e f f e c t o f Z a m b i a n e n t r y i n t o t h e Common M a r k e t . In C h a p t e r I we d i s c u s s e d t h e a p p r o a c h o f t h e c l a s s i c a l c u s t o m u n i o n t h e o r i e s and c o n c l u d e d t h a t t h e d i r e c t i o n o f t h e i r i n v e s t i g a t i o n g a v e them l i m i t e d a p p l i c a t i o n t o t h e d e v e l o p i n g w o r l d . O u r major : c r i t i c i s m was t h a t t h e s t a t i c a s s u m p t i o n s l a i d down by t h e s e t h e o r i e s c o u l d n o t be a c c e p t e d as a . v a l i d a n a l y s i s o f most d e v e l o p i n g c o u n t r i e s . F u r t h e r - m o r e , we r e c a l l t h a t most o f t h e t h e o r i s t s were c o n c e r n e d w i t h t h e c o n d i t i o n s l e a d i n g . t o t r a d e c r e a t i o n and t r a d e d i v e r s i o n and w i t h t h e w e l f a r e i m p l i c - a t i o n s o f s u c h s i t u a t i o n s . The p u r p o s e o f t h e p r e s e n t c h a p t e r i s t o e x a m i n e e x i s t i n g ! t r a d e f l o w and t h e e f f e c t i n t e g r a t i o n w i l l have on t h e f u t u r e p a t t e r n . B u t / u n l i k e t h e c l a s s i c a l t h e o r i e s t we w i l l d i r e c t o u r a t t e n t i o n n o t t h e q u e s t i o n of t r a d e d i v e r s i o n v s . c r e a t i o n , b u t t h e a c t u a l i n c r e a s e s i n v o l u m e o f t r a d e t h a t a r e l i k e l y t o o c c u r between EACM and Z a m i b a . The 'new t r a d e ' i n some c a s e s wi I I be t r a d e d i v e r t i n g from a low c o s t p r o d u c e r t o h i g h e r c o s t member c o u n t r y p r o d u c e r . T h i s would most c e r t a i n l y be t h e c a s e f o r Z a m b i a n t r a d e t h a t was p r e v i o u s l y c o n d u c t e d w i t h S o u t h e r n , R h o d e s i a , s i n c e t e r m i n a t e d by t h e g o v e r n m e n t o f Zambia f o r p o l i t i c a l r e a s o n s . B e f o r e t h e proposed i n - t e g r a t i o n , i m p o r t s f r o m EACM, S o u t h A f r i c a n and S o u t h e r n R h o d e s i a were s u b j e c t t o s i m i l a r t a r i f f t r e a t m e n t and competed f r e e l y w i t h i n t h e Z a m b i a n d o m e s t i c m a r k e t . T h e r e f o r e , we c a n assume t h a t i n t h e p r e - i n t e g r a t i o n s i t u a t i o n , Z a m b i a was p u r c h a s i n g i t s i m p o r t s from t h e l o w e s t c o s t s u p p l i e r . T h e r e f o r e , t h e s h o r t r u n c o s t o f i n t e g r a t i o n would be t h e h i g h e r p r i c e o f i m p o r t s as w e l l a s t h e l o s s o f t a r i f f r e v e n u e . We w i l l d i s c u s s t h i s i n more d e t a i l l a t e r i n t h e t h e s i s . 47. The f o r m a t o f t h e r e m a i n d e r o f t h i s c h a p t e r w i l l be t h e r e f o r e : (1) t o e x a m i n e t h e c o n c e p t u a l and t h e o r e t i c a l p r o b l e m s e n c o m p a s s e d by o u r s t u d y , (2) t o s t a t e t h e a s s u m p t i o n s we must make, (3) t o p o s t u l a t e t h e c o n d i t i o n s u n d e r w h i c h i n t e g r a t i o n wi I I p r o c e e d , (4) t o . o f f e r a g e n e r a l s t a t e m e n t of t h e model and d a t a t o be u s e d , (5) t o a p p l y t h e model t o t h e i n d i v i d u a l c o u n t r i e s i n v o l v e d , and f i n a l l y , (6) t o c a l c u l a t e t h e i m p a c t e f f e c t upon b o t h EACM and Z a m b i a . C o n c e p t u a l and T h e o r e t i c a l P r o b l e m s In o r d e r t o e x a m i n e t h e c h a n g e i n v o l u m e o f t r a d e l i k e l y t o r e s u l t f r o m c h a n g e s i n t h e t a r i f f r a t e , we must d e t e r m i n e some o f t h e b a s i c c h a r a c - t e r i s t i c s o f t h e demand f o r i m p o r t s . More s p e c i f i c a l l y , the. p r i c e e l a s t i c i t y o f demand f o r d i f f e r e n t i m p o r t s must be-made e x p l i c i t . I t i s f a i r t o assume t h a t t h e p r i c e e l a s t i c i t y o f demand f o r i m p o r t e d f o o d s t u f f s i s low compared t o t h e e l a s t i c i t y o f demand f o r n o n - e s s e n t i a l i m - p o r t g o o d s . T h a t i s , an i n c r e a s e i n ' the p r i c e o f i m p o r t e d f o o d s w o u l d n o t m a r k e d l y a f f e c t t h e q u a n t i t y demanded i n t h e s h o r t r u n . In t h e long r u n t h e r e would be i n c r e a s e d p r e s s u r e t o d e v e l o p g r e a t e r a g r i c u l t u r a l s e l f - s u f f i c i e n c y . S i n c e i t i s t h e a i m o f t h e Z a m b i a n g o v e r n m e n t t o do j u s t t h a t , t h i s i n c r e a s e d i n c e n t i v e m i g h t be a welcome r e s u l t o f o u r p r o p o s e d i n t e g r a t i o n . T u r n i n g t o c o n s u m e r - g o o d s i m p o r t s , t h e p i c t u r e i s o f a d i f f e r e n t n a t u r e . C e r t a i n l y i t i s an a c c e p t e d a x i o m w i t h i n i n t e r a n t i o n a I t r a d e t h e o r y t h a t an i n c r e a s e in t h e p r i c e o f import's w i l l t e n d t o i n d u c e a h i g h e r r a t e o f i m p o r t s u b s t i t u t i o n . B u t f o r o u r ' p r o p o s e d i n t e g r a t i o n ' t h e r e s u l t s w i l l d i f f e r f r o m t h i s norm. As p a r t o f t h e i n t e g r a t i o n p r o g r a m , Z a m b i a w i l l be a l l o c a t e d c e r t a i n i n d u s t r i e s t h a t w i l l t h e n s u p p l y t h e e n t i r e E a s t A f r i c a n m a r k e t . T h e s e new i n d u s t r i e s w i l l i n c l u d e c o n s u m e r g o o d s w h i c h were p r e v i o u s l y i m p o r t e d by t h e EACM. T h e r e f o r e , t h o s e c o n s u m e r goods i m p o r t e d by Z a m b i a a t a h i g h e r p r i c e b e c a u s e " o f t r a d e d i v e r s i o n w i l l n o t n e c e s s a r i Iy 4 8 . be p r o d u c e d by Zambia as p a r t o f an i n t e g r a t e d p l a n . B e c a u s e o f t h i s p e c u l i a r i t y we s h a l l i n g e n e r a l assume t h a t t h e e l a s t i c i t y o f demand f o r i m p o r t e d c o n s u m e r goods i s r e l a t i v e l y low. T h u s , u n d e r t h e s e c o n d i t i o n s an i n c r e a s e i n p r i c e o f c o n s u m e r good i m p o r t s w i l l n o t g e n e r a l l y be f o l l - owed w i t h a g r e a t r e d u c t i o n i n v o l u m e i m p o r t e d . The e l a s t i c i t y o f demand f o r i m p o r t e d f u e l s •• and raw m a t e r i a l s w i l l be low b e c a u s e o f t h e a p p a r e n t a b s e n c e o f s u c h r e s o u r c e s w i t h i n t h e c o u n t r y and low e l a s t i c i t i e s o f s u b s t i t u t i o n between s u c h m a t e r i a l s and o t h e r i n p u t s . Most c a p i t a l and i n t e r m e d i a t e goods w i l l n o t be a f f e c t e d b y t h e p r o p o s e d i n t e g r a t i o n . T h o s e goods t h a t a r e n o t p r o d u c e d w i t h i n t h e EACM w i l l n o t be c o v e r e d i n t h e T r e a t y . As a c a p i t a l goods i n d u s t r y d e v e l o p s w i t h i n t h e r e g i o n , a p p r o p r i a t e p r o t e c t i o n w i l l l i k e l y be p r o v i d e d , b u t h o p e f u l l y Zambia w i l l a l s o b e n e f i t from t h i s p r o t e c t i o n f o r h e r own r e g i o n a l l y b a s e d i n d u s t r y . T h e r e f o r e , we c a n assume t h a t t h e demand f o r a l I f o u r t y p e s o f i m p o r t s a r e r e l a t i v e l y i n e l a s t i c w i t h i n t h e Z a m b i a n m a r k e t . A s e c o n d p r o b l e m f a c i n g us i s t h e q u a l i t y d i f f e r e n c e between i m - p o r t e d g o o d s . C e r t a i n l y t h e r e i s q u a l i t y v a r i a t i o n w i t h i n e a c h i m p o r t c a t e g o r y b u t i n o r d e r t o make t h i s t h e o r y w o r k a b l e we must make t h e a s s u m p - t i o n made by m o s t t h e o r i s t s t h a t i m p o r t s a r e composed o f homogeneous p r o d u c t s . On t h e s u p p l y s i d e we w i l l assume t h a t e l a s t i c i t y i s i n f i n i t e o v e r t h e r e l e v a n t r a n g e . T h a t i s , i n c r e a s e d q u a n t i t y w i l l n o t mean h i g h e r u n i t c o s t s . F o r o u r p a r t i c u l a r s i t u a t i o n t h i s may n o t a c t u a l l y be t h e c a s e . I n c r e a s e d p r o d u c t i o n w i t h i n t h e EACM may f o r e x a m p l e d e c r e a s e u n i t c o s t s " by t a k i n g a d v a n t a g e o f i n c r e a s e d e c o n o m i e s o f s c a l e . A l t h o u g h t h i s m i g h t be l i k e l y , t h e m a g n i t u d e c a n n o t be e s t i m a t e d e x - a n t e and we wi I I t h e r e f o r e assume i n f i n i t e s u p p l y e l a s t i c i t y ( i . e . c o n s t a n t c o s t s ) . 49. A s s u m p t i o n s T h e r e f o r e , we b e g i n o u r d i s c u s s i o n w i t h four- b a s i c a s s u m p t i o n s : (1) I n e l a s t i c demand o f i m p o r t s i n t o Zambia from EACM. (2) I n f i n i t e e l a s t i c i t y of s u p p l y of e x p o r t s from EACM. (3) E x c e s s c a p a c i t y w i t h i n t h e i n d u s t r i a l s e c t o r o f t h e EACM. (4) Imports w i t h i n t h e i r c a t e g o r i e s a r e homogeneous p r o d u c t s . C o n d i t i o n s o f P r o p o s e d I n t e g r a t i o n I n ' o r d e r t o examine t h e i m p a c t e f f e c t * o f i n t e g r a t i o n we must e x p l i c i t l y s t a t e t h e c o n d i t i o n s u n d e r which, i n t e g r a t i o n w i l l be l i k e l y t o p r o c e e d . They a r e as f o l l o w s : (1) Zambia w i l l become a f u I I member o f t h e EACM and t h e r e f o r e a l l t r a d e b a r r i e r s between t h e two m a r k e t s w i l l be e l i m i n a t e d . We make t h i s a s s u m p t i o n f o r t h e s a k e o f s i m p l i f y i n g t h e m o d e l . Of c o u r s e , t h e p a t h o f i n t e g r a t i o n i s n o t l i k e l y t o be t h a t s m o o t h . A b a s i c a d j u s t m e n t p e r i o d w i l l be r e q u i r e d f o r t h e t r a n s i t i o n t o t a k e p l a c e , , and c e r t a i n i n s t i t u t i o n a l c h a n g e s wi I I be r e q u i r e d . (A s u b s e q u e n t c h a p t e r wi I I •examine t h e T r e a t y , f o r E a s t A f r i c a n C o - o p e r a t i o n and t h e q u e s t i o n o f a c c e s s i o n o f new members, b u t f o r t h e moment we w i l l assume t o t a l member- s h i p o f Z a m b i a w i t h i n t h e EACM.) ~ (2) Zambia i n p r e - i n d e p e n d e n c e t i m e s was known as N o r t h e r n R h o d e s i a and was n a t u r a l l y s t r o n g l y c o n n e c t e d w i t h S o u t h e r n R h o d e s i a b o t h e c o n o m i c a l l y and p o i i t i c a I l y . A l l o f Z a m b i a ' s r a i l l i n e s were p r e v i o u s l y p a r t o f t h e l a r g e r S o u t h e r n R h o d e s i a n n e t w o r k and t h e n a t u r a l f l o w o f t r a d e was n o r t h - s o u t h . A f t e r t h e uni l a t e r a I d e c l a r a t i o n o f i n - d e p e n d e n c e o f S o u t h e r n R h o d e s i a i n 1965, h o w e v e r , t h e Z a m b i a n g o v e r n m e n t made t h e p o l i t i c a l d e c i s i o n t o t e r m i n a t e t r a d e w i t h R h o d e s i a as s o o n as p o s s i b l e . F o r t h i s r e a s o n we w i l l assume t h a t Zambia w i l l t r y t o s u b - * we d e f i n e ' i m p a c t e f f e c t ' as t h e i n c r e a s e i n GDP, as a r e s u l t o f i n c r e a s e d t r a d e c a u s e d by i n t e g r a t i o n . 5 0 . s t i t u t e w h e r e v e r p o s s i b l e EACM goods f o r t h o s e goods p r e v i o u s l y i m p o r t e d from S o u t h e r n R h o d e s i a . (3) On s i m i l a r g r o u n d s Zambia would a l s o l i k e t o t e r m i n a t e i t s t r a d e w i t h S o u t h A f r i c a . P o l i c y s t a t e m e n t s have been made r e c e n t l y t o back up t h i s d e s i r e . (See f o o t n o t e 9 o f t h i s c h a p t e r ) . F o r t h i s r e a s o n we w i l l make t h e a s s u m p t i o n t h a t Zambia w i l l s u b s t i t u t e w h e r e v e r p o s s i b l e goods from t h e EACM, f o r c o m m o d i t i e s t h a t were p r e v i o u s l y i m - p o r t e d f r o m S o u t h A f r i c a . Under t h e t h r e e c o n d i t i o n s p o s t u l a t e d , we w i l l n e x t p r o c e e d t o e s t i m a t e t h e c h a n g e s i n v o l u m e o f t r a d e w h i c h m i g h t be e x p e c t e d f r o m t h e p r o p o s e d i n t e g r a t i o n of Z a m b i a and t h e members o f t h e EACM. ' . S o u r c e s o f D a t a U n f o r t u n a t e l y t h e p r e s e n t r e s e a r c h s u f f e r s t h e u n i v e r s a l a i l m e n t o f .most d e v e l o p m e n t w o r k : l a c k o f s u f f i c i e n t and up t o d a t e s t a t i s t i c a l d a t a . The most r e c e n t t r a d e s t a t i s t i c s a v a i l a b l e were a 1966 f o u r d i g i t 2 S . l . T . C . c l a s s i f i c a t i o n o f i m p o r t s and e x p o r t s f o r t h e f o u r c o u n t r i e s . From t h i s s o u r c e I have t r a n s c r i b e d o v e r 1500 o b s e r v a t i o n s o f d i f f e r e n t i m p o r t and e x p o r t i t e m s and f r o m t h i s am a b l e t o d e r i v e some i n t e r e s t i n g r e s u I t s . M e t h o d o I o q y • The b a s i s o f o u r model i n v o l v e s a c o m p a r i s o n o f i m p o r t s and e x p o r t s o f t h e EACM and Z a m b i a . To d e t e r m i n e t h e 'new t r a d e ' p o t e n t i a l a c r o s s s e c t i o n e x a m i n a t i o n was n e c e s s a r y t o d e t e r m i n e w h i c h o f t h o s e goods were b e i n g i m p o r t e d by Z a m b i a f r o m S o u t h e r n R h o d e s i a , and f r o m S o u t h A f r i c a , w h i c h were a l s o b e i n g e x p o r t e d by t h e EACM c o u n t r i e s . T h i s s h o u l d g i v e some i n - d i c a t i o n o f t h e d i r e c t i m p a c t t h a t w i l l be l i k e l y t o r e s u l t f r o m i n t e g r a t i o n . In o r d e r t o e x a m i n e t h e f u l l i m p a c t e f f e c t o f t h i s 'new t r a d e ' we c o n s i d e r e d n o t o n l y t h e a b s o l u t e i n c r e a s e i n e x p o r t s b u t a l s o t h e e s t i m a t e d 51 I i n k a g e a f f e c t s w h i c h c o u l d o c c u r w i t h i n each c o u n t r y . F o r t u n a t e l y , a model e x i s t s f o r t h e E a s t A f r i c a n economy t h a t p r o v i d e s us w i t h t h i s i n f o r m a t i o n . P a u l C . C l a r k p i o n e e r e d i n model b u i l d i n g i n t h i s a r e a . " ' U s i n g a v a i l a b l e d a t a f r o m 1 9 5 4 - 1 9 6 2 , C l a r k c o n s t r u c t e d a n a t i o n a l a c c o u n t s model c o n s i s t i n g o f 37 v a r i a b l e s , 21 f u n c t i o n a l e q u a t i o n s , .11 a c c o u n t i n g i d e n t i t i e s and 5 autonomous v a r i a b l e s . 4 I t was n o t l o n g b e f o r e c r i t i c i s m a p p e a r e d i n t h e l i t e r a t u r e . C l i v e S'. G r a y o f t h e Kenyan M i n i s t r y o f E c o n o m i c P l a n n i n g t o o k i s s u e w i t h C l a r k o v e r t h e c o n c e p t u a I ' p r o b I ems o f d e v e l o p m e n t p l a n n i n g . G r a y . a r g u e s t h a t t h e r o l e o f a d e v e l o p m e n t e c o n o m i s t i n E a s t A f r i c a i s n o t t o . b u i l d m a c r o - e c o n o m i c m o d e l s , he c o n c l u d e s , ' . . . m o r e o v e r , t h e s e r e l a t i o n - s h i p s a r e s u b j e c t t o g r e a t i n s t a b i l i t y due t o c h a n g i n g c o n d i t i o n s a t home and a b r o a d , p r e d i c t i o n s o f w h i c h a r e s u b j e c t t o enormous m a r g i n s o f e r r o r ' . R a t h e r , he s u g g e s t e d a p r o j e c t - b y - p r o j e c t a p p r o a c h t o p l a n n i n g . The p o r t i o n o f t h e C l a r k model w h i c h we s h a l l use i n o u r c a l c u l - a t i o n s , h o w e v e r , has been l a u d e d a s a g r e a t c o n t r i b u t i o n t o d e v e l o p m e n t p l a n n i n g i n E a s t A f r i c a e v e n by C l a r k ' s c r i t i c s . G r a y w r i t e s , f o r e x a m p l e t h a t ' C l a r k has made a u s e f u l c o n t r i b u t i o n i n c a l c u l a t i n g ' i m p o r t (and e x p o r t ) m u l t i p l i e r s ' c o r r e s p o n d i n g t o u n i t i n c r e a s e i n a g r i c u l t u r a l e x p o r t v o l u m e , e x p o r t p r i c e s , i m p o r t s u b s t i t u t i o n , o r m a n u f a c t u r e d e x p o r t s and g o v e r n m e n t c u r r e n t e x p e n d i t u r e ' . ^ H a v i n g a r r i v e d a t a r e a s o n a b l e e s t i m a t i o n o f t h e i m p a c t o f i n t e g - r a t i o n b a s e d on t h e 1966 t r a d e s t a t i s t i c s , we have e x p r e s s e d t h e s e v a l u e s a s a p e r c e n t a g e o f t h e i n d i v i d u a l c o u n t r i e s ' 1966 GDP f i g u r e s . UGANDA Uganda i s t h e most r e m o t e c o u n t r y i n r e l a t i o n t o Z a m b i a and i s t h e c o u n t r y i n t h e EACM most u n l i k e l y t o e n j o y i n c r e a s e d t r a d e as a r e s u l t o f o u r p r o p o s e d i n t e g r a t i o n . In t h e p a s t , Uganda has c a r r i e d on v e r y l i t t l e 52. t r a d e w i t h Z a m b i a . In 1966, Uganda i m p o r t e d $ 5 1 0 , 0 0 0 ( U . S . ) f r o m Z a m b i a and e x p o r t e d o n l y $ 1 6 , 0 0 0 w o r t h o f c o m m o d i t i e s . The o b v i o u s r e a s o n s f o r t h i s phenomenon i s t h e c o m p e t i t i v e n a t u r e o f E a s t A f r i c a n e x p o r t s and t h e h i g h e r t r a n s p o r t a t i o n c o s t s f o r U g a n d i a n goods d e l i v - e r e d c . i . f . t o Z a m b i a . The o n l y e x i s t i n g commodity r o u t e l i e s t h r o u g h Kenya and t h e n d o u b l i n g b a c k t h r o u g h T a n z a n i a t o Z a m b i a . U g a n d i a n e x p o r t s t h e r e f o r e , c a n n o t u s u a l l y c o m p e t e w i t h s i m i l a r p r o d u c t s o f o t h e r E a s t A f r i c a n c o u n t r i e s w i t h i n t h e Z a m b i a n economy. C o n s t r u c t i o n o f an a l t e r n a t i v e r o u t e w o u l d seem a t p r e s e n t t o be p h y s i caI Iy i mposs i b I e . I t wouId i n v o I v e bu i Id i ng a r o a d o r r a i I Ii ne a r o u n d t h e e a s t e r n s h o r e o f Lake V i c t o r i a t h r o u g h T a n z a n i a t o Z a m b i a . B e c a u s e . o f t h e swampy, m o u n t a i n o u s r e g i o n s o f t h e r o u t e i t w o u l d be e c o n o m i c a l l y u n f e a s i b l e . A s e c o n d a l t e r n a t i v e would be a f e r r y s e r v i c e a c r o s s Lake V i c t o r i a t o T a n z a n i a and t h e n t r a n s p o r t by r a i l o r t r u c k t o Z a m b i a . In both c a s e s I am s u r e t h a t t h e e x i s t i n g r o u n d - a b o u t r o u t e i s s t i l l more e c o n o m i c t h a n t h e s e two a l t e r n a t i v e s . F u r t h e r m o r e , t h e r e l e v a n t c o m m o d i t i e s t h a t f a l l i n t o t h e ' p o t e n t i a l t r a d e c a t e g o r y ' a r e a l s o e x p o r t e d by b o t h T a n z a n i a and K e n y a . T h e r e f o r e , u n l e s s Uganda p o s s e s s e s e x c e p t i o n a l l y l a r g e a b s o l u t e c o s t a d v a n t a g e s i n one of t h e s e e x p o r t s , i t wi I I n o t be a b l e t o c o m p e t e i n t h e new e x p o r t m a r k e t . F o r t h e a b o v e r e a s o n s we w i l l make a f u r t h e r qua I i f y i n g a s s u m p t i o n t h a t t h e ' p o t e n t i a l t r a d e ' r e s u l t i n g f r o m Z a m b i a n e n t r y i n t o t h e EACM w i l l be r e a l i z e d o n l y by T a n z a n i a and K e n y a . The b e n e f i t s t h a t Uganda r e c e i v e s w i l l n o t be i n t h e f o r m o f i n c r e a s e d t r a d e b u t w i l l be of a more i n d i r e c t n a t u r e . T h e s e i n d i r e c t e f f e c t s may i n c l u d e i n c r e a s e d i n d u s t r i a l p r o d u c t i o n w i t h i n t h e EACM, b u t we w i l l r e s e r v e comment on them u n t i l l a t e r i n t h e t h e s i s . 5 3 . KENYA AND TANZANIA . L e t us now t u r n t o t h e r e s u l t s o f o u r e m p i r i c a l , s t u d y . " B e c a u s e of d a t a l i m i t a t i o n s , o u r i n v e s t i g a t i o n began w i t h an e x a m i n a t i o n o f two d i g i t S . l . T . C . s t a t i s t i c s o f goods b e i n g i m p o r t e d from S o u t h e r n R h o d e s i a and S o u t h A f r i c a by Zambia and a t t h e same t i m e b e i n g e x p o r t e d by Kenya and T a n z a n i a . T h e r e were 38 d i f f e r e n t c l a s s e s o f s u c h c o m m o d i t i e s t h a t were ' p o t e n t i a l t r a d e ' ' c a n d i d a t e s ( s e e t a b l e 6 . 3 ) . The v a l u e o f Z a m b i a n i m p o r t s f r o m S o u t h A f r i c a was $ 7 2 , 7 4 4 , 0 0 0 ( U . S . ) and from R h o d e s i a ' , $ 4 5 , 4 7 5 , 0 0 0 . T h e s e v a l u e s , h o w e v e r , r e p - r e s e n t t h e u p p e r l i m i t , f o r on s u c h a b r o a d commodity c l a s s i f i c a t i o n t h e r e a r e g o i n g t o be c o m m o d i t i e s w h i c h s h a r e t h e same two d i g i t c l a s s - i f i c a t i o n b u t a r e c o m p l e t e l y d i f f e r e n t g o o d s . F o r e x a m p l e , Z a m b i a i m p o r t s commodity 71 w h i c h i s ' M a c h i n e r y , n o n - e l e c t r i c ' w h i l e Kenya e x p o r t s c o n r n o d i t i e s 7 1 2 . 2 , 7 1 5 . 1 , 7 1 7 . 3 , 7 1 8 . 2 , 7 1 8 . 3 , 7 1 9 . 1 , 7 1 9 . 8 and 7 1 9 . 9 . A l l o f t h e s e c o m m o d i t i e s a r e i n t h e b r o a d c a t e g o r y 71 b u t t h e y w i l l n o t e x a c t l y c o r r e s p o n d t o t h e f o u r d i g i t c o m m o d i t i e s t h a t a r e b e i n g i m p o r t e d by Z a m b i a . F o r t h i s r e a s o n a c l o s e r e x a m i n a t i o n o f t h e f o u r d i g i t breakdown i s e s s e n t i a l t o e s t a b l i s h t h e lower l i m i t e s t i m a t i o n o f t h e i m p a c t e f f e c t . T h e r e s u l t s show 74 c o m m o d i t i e s b e i n g i m p o r t e d by Z a m b i a and e x p o r t e d by EACM ( s e e t a b l e 6 . 2 ) . The d o l l a r v a l u e o f t h e s e c o m m o d i t i e s a r e lower b u t p e r h a p s more r e a l i s t i c , $ 2 7 , 6 2 7 , 0 0 0 from S o u t h A f r i c a , and $ 2 7 , 1 6 6 , 0 0 0 . f r o m S o u t h e r n R h o d e s i a . In o r d e r t o use t h e m u l t i p l i e r s p r o v i d e d by C l a r k ' s m o d e l , ^ t h e s e v a l u e s must be b r o k e n down f u r t h e r i n t o a g r i c u l t u r a l e x p o r t s ( E ( a ) = 0 , 1 , 2 , 4 S I T C ) and m a n u f a c t u r e d e x p o r t s ( E . . - 3 , 5 , 6 , 7 , 8 , 9 . S I T C ) . E s t i m a t i o n o f t h e Lower L i m i t of t h e Impact E f f e c t o f Zambia j o i n i n g EACM Reg i on E ( a ) M u I t i p 1 i e r • Impact e f f e c t = o f E , , (a) E ( m ) Mu1ti p 1 i e r Impact E f f e c t o f E ( m ) T o t a I Impact E f f e c t GDC (1966) Impact E f f e c t % o f GDP Kenya & T a n z a n i a comb i ned 14,840 2 . 2 3 a 3 3 , 0 9 3 . 2 3 9 , 9 5 3 1 . 8 0 b . 7 1 , 9 1 5 . 4 1 0 5 , 0 0 8 . 6 1 , 8 2 7 , 9 9 0 5 . 7 4 $ Kenya ' 6 , 9 7 5 2 . 4 4 17,019 18,778 1.89. 3 5 , 4 9 0 5 2 , 5 0 9 1 , 0 2 4 , 3 4 0 5.12$ T a n z a ni a 7 , 8 6 5 1.94 15,258 21,175 . 1.64 3 4 , 7 2 7 5 5 , 4 0 2 7 6 2 , 1 4 0 7 . 3 3 $ . . . . T a b l e 4 . 2 E s t i m a t i o n of. t h e Upper L i m i t o f t h e Impact E f f e c t o f Z a m b i a j o i n i n g EACM Kenya & T a n z a n i a comb i ned 19,331 2 . 2 3 4 3 , 1 0 8 9 8 , 8 8 8 1.80 177,998 • 2 2 1 , 1 0 6 . 1 , 8 2 7 , 9 9 0 12.09$ Kenya 9 , 0 8 6 2 . 4 4 22,1-70 4 6 , 4 7 7 1.89 8 7 , 8 4 2 110,012 1 , 0 2 4 , 3 4 0 10.73$ T a n z a n i a 10,245 1 . 9 4 19,875 52,411 1.64 8 5 , 9 5 4 105,829 7 6 2 , 1 4 0 ' 13.88$ a C o m p u t a t i o n o f t h i s f i g u r e as f o l l o w s : 7( 1.94) + 1 0 ( 2 . 4 4 ) 17 b C o m p u t a t i o n o f t h i s f i g u r e as f o l l o w s : 7 ( 1 . 6 8 + .10(1.89) 17 55. T a b l e 4 , 3 K e n y a ' s S h a r e o f EACM E x p o r t s t o Z a m b i a Z a m b i a n 1mports ^ from E a s t A f r i c a Kenyan E x p o r t s t o Zambia . Kenyan i m p o r t s as $ o f t o t a l E a s t A f r i c a i n t r a d e 1964 389 182. : 4 6 . 7 8 $ 1965 1,402 684 4 8 . 7 8 $ 1966 3 , 0 1 3 1,833 • 6 0 . 8 3 $ 1967 . 16,693 5,341 4 3 1 . 9 9 $ Sum o f A v e r a g e s 4 7 . 0 9 $ • 4 y e a r s — C u r r e n c y i n t h o u s a n d s d o l l a r s U . S . S o u r c e : 1 F o r e i g n T r a d e S t a t i s t i c s o f A f r i c a , S e r i e s B , T r a d e by by C o m m o d i t y , U n i t e d N a t i o n s , 1966-1967 2 F o r e i g n T r a d e S t a t i s t i c s o f - A f r i c a , S e r i e s A , 1964 3 Z a m b i a n M o n t h l y D i g e s t , S e p t e m b e r 1969, p . 21 4 Kenyan E c o n o m i c R e p o r t , 1969. p . 4 5 5 6 . S. R h o d e s i a & S. A f r i c a E x p o r t s t o Zambia (Lower L i m i t ) E ( a ) E ( m ) TOTAL S o u t h A f r i c a 4 , 9 3 9 2 2 , 6 8 8 2 7 , 6 2 7 S o u t h e r n R h o d e s i a 9,901 17,265 2 7 , 1 6 6 1 4 , 8 4 0 3 9 , 9 5 3 5 4 , 7 9 3 The q u e s t i o n now a r i s e s as t o how . t h i s t r a d e wi 11 1 tween T a n z a n i a and K e n y a . We w i l l d e a l w i t h t h i s q u e s t i o n by t a k i n g two d i f f e r e n t a p p r o a c h e s . The f i r s t a p p r o a c h w i l l be t o c o n s i d e r T a n z a n i a and Kenya as one e c o n o m i c u n i t and s t u d y t h e i m p a c t e f f e c t on t h e c o m b i n e d r e g i o n . S e c o n d l y , we w i l l t r y t o d i v i d e t h e ' p o t e n t i a l t r a d e ' . b e t w e e n T a n z a n i a and Kenya b a s e d on t h e h i s t o r i c a l d i v i s i o n o f E a s t A f r i c a n t r a d e w i t h Zamb i a . . - F i nd i ngs .* The r e s u l t s o f o u r e m p i r i c a l s t u d y have been s u m m a r i z e d i n t a b l e 4 . 1 . U s i n g t h e f i r s t a p p r o a c h o f c o m b i n i n g T a n z a n i a and Kenya as o n e . e c o n o m i c u n i t we f i n d t h a t t h e lower l i m i t i m p a c t e f f e c t w o u l d be a 5 . 7 4 $ i n c r e a s e in t h e GDP o f t h e r e g i o n . T o a r r i v e a t t h i s f i g u r e we w e i g h t e d t h e i n d i v i d u a l c o u n t r y ' s m u l t i p l i e r a c c o r d i n g t o t h e i r r e s p e c t i v e s i z e o f GDP. Once t h e t o t a l i m p a c t e f f e c t was d e t e r m i n e d i t was e x p r e s s e d as a p e r c e n t a g e o f t h e c o m b i n e d GDP o f t h e two c o u n t r i e s . In o r d e r t o c o n s i d e r e a c h c o u n t r y s e p a r a t e l y we must f i r s t d e t e r m i n e how t h e p o t e n t i a l t r a d e m i g h t be d i v i d e d between t h e two o f t h e m . By e x a m i n i n g t h e d i v i s i o n o f Z a m b i a n i m p o r t s f r o m E a s t A f r i c a between Kenya and T a n z a n i a o v e r t h e p a s t f o u r y e a r s i t w i l l g i v e us a p r e t t y good i n d i c - a t i o n . T a b l e 4 . 3 s h o w s ' K e n y a n s h a r e o f Z a m b i a n t r a d e , t h e r e s i d u a l w i l l be t a k e n t o . b e T a n z a n i a ' s s h a r e . • T r u e , t h e r e i s some t r a d e between Z a m b i a and Uganda b u t t h e amount i s s o i n s i g n i f i c a n t t h a t i t c a n be i g n o r e d i n o u r 57. c a l c u l a t i o n s . Our r e s u l t s a r e what we m i g h t have s u s p e c t e d : T a n z a n i a s t a n d s t o g a i n t h e m o s t , w i t h a 7.33% i n c r e a s e i n GDP, a n d , s e c o n d l y , Kenya w i t h 5 . 1 2 $ . The most o b v i o u s r e a s o n f o r t h i s i s t h a t T a n z a n i a h o l d s a c o m - p a r a t i v e a d v a n t a g e o v e r Kenya b e c a u s e o f t h e d i f f e r e n c e i n t r a n s p o r t - a t i o n c o s t s . The o n l y s u p p l y r o u t e from E a s t A f r i c a ' t o Z a m b i a i s . a r o a d f r o m T a n z a n i a t o L u s a k a . A t p r e s e n t , a r a i l l i n e i s u n d e r c o n s t r u c t i o n f r o m D a r - e s - S a I a a m t o L u s a k a b u t e v e n w i t h t h i s new l i n k Kenyan goods w i l l s t i l l have t o p a s s t h r o u g h T a n z a n i a b e f o r e r e a c h i n g t h e Z a m b i a n m a r k e t . As we have m e n t i o n e d , t h e c a l c u l a t i o n s t h a t a p p e a r i n t a b l e 4.1 . a r e t h e lower l i m i t s o f t h e e s t i m a t e s o f t h e i m p a c t e f f e c t . To g i v e us some i n d i c a t i o n o f t h e u p p e r b o u n d a r i e s , we t u r n back t o t h e two d i g i t S . I . T . C . c l a s s i f i c a t i o n . H a v i n g e x p r e s s e d e a r l i e r t h e l i m i t a t i o n s o f t h e s e f i g u r e s t h e y s t i l l c a n p r o v i d e us w i t h q u i t e a r e l i a b l e u p p e r l i m i t . U s i n g t h e s a m e . m e t h o d as d i s c u s s e d a b o v e we a r r i v e a t a new s e t o f f i g u r e s as shown in t a b l e 4 . 2 . H a v i n g done b o t h s e t s o f c a l c u l a t i o n we now have a r a n g e w i t h i n w h i c h t h e i m p a c t e f f e c t i s I i k e I y t o f a I I. T h e s e p e r c e n t a g e c h a n g e s a r e o n c e - a n d - f o r - a I I c h a n g e s t h a t w i l l o c c u r t h e y e a r t h e p r o p o s e d i n t e g r a t i o n t a k e s p l a c e . The i m p l i c a t i o n s o f t h e s e f i n d i n g s a r e v e r y i n t e r e s t i n g and a r e o f p a r t i c u l a r i m p o r t a n c e t o t h e c o n - t i n u a n c e o f t h e EACM. As we d i s c u s s e d e a r l i e r i n t h e t h e s i s t h e r e has been d i s c o n t e n t o n t h e p a r t o f T a n z a n i a as t o t h e s h a r i n g o f t h e c o s t s and b e n e f i t s o f t h e EACM. T a n z a n i a has f e l t t h a t i t was a n e t l o s e r i n t h e e a r l y y e a r s o f t h e common m a r k e t a n d - a s a r e s u l t c o n c e s s i o n s were made t o h e r o u t l i n e d i n t h e T r e a t y f o r E a s t A f r i c a n C o - o p e r a t i o n . B u t t h e p o s i t i o n o f T a n - z a n i a w i t h i n t h e EACM i s s t i I I q u i t e t e n u o u s . U n d e r t h i s p r o p o s e d i n t e g - r a t i o n T a n z a n i a s t a n d s t o g a i n t h e most w i t h a t o t a l i m p a c t e f f e c t o f T a b l e .4.4 S o u r c e s o f Zambian Imports S o u t h e r n R h o d e s i a E . E . C . S o u t h A f r i c a 1965 9 9 , 5 0 7 2 1 , 7 3 0 5 7 , 9 3 0 1966 6 4 , 9 0 4 2 8 , 1 9 8 8 1 , 8 5 5 1967 4 5 , 1 2 9 5 2 , 4 7 9 101,040 1968 3 1 , 5 9 3 5 7 , 8 6 9 120,758 . A b s o I u t e c h a n g e f r o m - 6 7 , 9 1 4 + 3 6 , 1 3 9 . +62,828 1965-68 C u r r e n c y t h o u s a n d s $US S o u r c e : Z a m b i a n M o n t h l y D i g e s t , S e p t e m b e r 1969 c o n v e r t e d from k ' s t o US$ a t $ 1 . 4 = 1 K 5 9 . 7 . 3 3 $ t o 1 3 . 8 8 $ . . Kenya a l s o . s t a n d s t o g a i n from 5.12$ t o 1 0 . 7 3 $ . B u t what seems t o . b e more i m p o r t a n t t o t h e c o n t i n u a n c e o f t h e EACM i s t h a t T a n z a n i a ' s p o s i t i o n w i l l be improved w i t h i n t h e new e x p a n d e d Common M a r k e t . P r o j e c t i o n o f Model • Our c a l c u l a t i o n o f t h e i m p a c t e f f e c t has been b a s e d on t h e most r e c e n t d e t a i l e d f o r e i g n t r a d e s t a t i s t i c s a v a i l a b l e ( 1 9 6 6 ) . H a v i n g made t h e s e c o m p u t a t i o n s what c a n be s a i d a b o u t t h e i m p a c t e f f e c t i f i n t e g r a t i o n were t.o t a k e p l a c e i n 1970? To make any k i n d o f s t a t e m e n t we must e x a m i n e t h e t r a d e f l o w s o f t h e l a s t few y e a r s and t r y ' t o e s t a b l i s h t h e t r e n d t h e ' s t a t i s t i c s a r e t a k i n g . In 1966 Zambia s t i l l r e l i e d h e a v i l y upon S o u t h e r n R h o d e s i a , b u t w i t h UDI t h e g o v e r n m e n t moved t o t e r m i n a t e . t r a d e .with h e r . The r e s u l t s o f t h i s p o l i c y d e c i s i o n has been a r e d i r e c - t i o n o f t r a d e i n t h e p a s t t h r e e y e a r s . Z a m b i a n i m p o r t s f r o m S o u t h e r n R h o d e s i a have been r e d u c e d from t h e a l l t i m e h i g h i n 1965 o f $ 9 9 , 5 0 7 , 8 0 0 down t o $ 3 1 , 5 9 3 , 800 i n 1968. T o w h i c h c o u n t r i e s has t h i s t r a d e been d i v e r t e d ? "A b r i e f l o o k a t t a b l e 4 . 4 w i l l g i v e t h e a n s w e r . . O v e r t h e r e l e v a n t y e a r s i m p o r t s f r o m S o u t h e r n R h o d e s i a have d i m i n i s h e d by $ 6 7 , 9 1 4 , 0 0 0 b u t t h i s s l a c k has a l m o s t t o t a l l y been t a k e n up by S o u t h A f r i c a . How d o e s t h i s a f f e c t o u r m o d e l ? S i n c e t h e r e has been a s h i f t o f . t h i s n a t u r e i t w i l l n o t a f f e c t o u r c a l c u l a t i o n s t o any g r e a t e x t e n t . B u t , i t seems i r o n i c t h a t S o u t h A f r i c a n t r a d e has i n c r e a s e d as a r e s u l t o f R h o d e s i a ' s U D I . The c o n d i t i o n s w h i c h c a u s e d t h e t e r m i n a t i o n o f t r a d e w i t h R h o d e s i a e x i s t e q u a l l y i n S o u t h A f r i c a . O b v i o u s l y t h i s s h i f t i n t r a d e has o n l y b e e n an i n t e r i m s o l u t i o n t o t h e p r o b l e m . As t h e l i n e s o f c o m m u n i c a t i o n d e v e l o p i n an e a s t - w e s t d i r e c t i o n t h e Z a m b i a n g o v e r n m e n t w i l l move away f r o m S o u t h A f r i c a n i m p o r t s and w i l l s u b s t i t u t e o t h e r s o u r c e s , o f s u p p l y 6 0 . w h e r e v e r p o s s i b l e . T h i s b e l i e f was c o n f i r m e d on A p r i l 1, 1969, when t h e Z a m b i a n g o v e r n m e n t made a p o I i c y . s t a t e m e n t e x t e n d i n g i t s . l i s t o f i m p o r t s 9 w h i c h were p r o h i b i t e d from e n t e r i n g t h e c o u n t r y f r o m t h e s o u t h . We have i n c o r p o r a t e d t h i s p o l i c y d e c i s i o n i n t o o u r model by a s s u m i n g t h a t Zambia w i l l s u b s t i t u t e w h e r e v e r p o s s i b l e E a s t A f r i c a n goods f o r c o m m o d i t i e s t h a t were p r e v i o u s l y i m p o r t e d f r o m S o u t h A f r i c a . Up u n t i I now o u r d i s c u s s i o n has been c e n t r e d upon t h e i m p a c t e f f e c t on t h e EACM c o u n t r i e s and l i t t l e has been m e n t i o n e d a b o u t t h e e f f e c t on Z a m b i a . B u t t h e r e has been good r e a s o n f o r t h i s . Z a m b i a i s an e x p o r t o r i e n t e d economy b a s e d on one m a j o r e x p o r t - c o p p e r . 93$ o f Z a m b i a ' s e x p o r t r e v e n u e i s d e r i v e d f r o m t h e e x p o r t o f u n w r o u g h t and worked c o p p e r . The E a s t A f r i c a n c o u n t r i e s have a v e r y l i m i t e d demand f o r c o p p e r and Z a m b i a has f o u n d m a r k e t s f o r t h e s e e x p o r t s i n t h e deve | oped c o u n t r i e s . ^ The amount t h a t i s i m p o r t e d by t h e EACM i s i n s i g n i f i c a n t . The b e n e f i t s t h a t Z a m b i a w i l l d e r i v e f r o m j o i n i n g t h e EACM a r e more o f a l o n g r u n n a t u r e . The o p e n i n g up o f a l a r g e r m a r k e t f o r Z a m b i a n i n d u s t r y w i l l c e r t a i n l y be a s t i m u l u s f o r e c o n o m i c d e v e l o p m e n t . The m a n u f a c t u r i n g s e c t o r has been s a d l y l a g g i n g f a r b e h i n d t h e r e s t o f t h e economy and i t has c a u s e d g r e a t c o n c e r n f o r t h e g o v e r n m e n t . One o f t h e m a i n o b s t a c l e s t o t h i s s e c t o r has • 11 been t h e s i z e o f t h e d o m e s t i c m a r k e t . E n t r y i n t o t h e common m a r k e t w o u l d i n c r e a s e t h e m a r k e t s i z e s e v e n t i m e s and t h u s s h o u l d be a t r e m e n d o u s i m p e t u s f o r i n c r e a s e d e c o n o m i c a c t i v i t y . B e c a u s e o f t h e p a r a m o u n t i m p o r t a n c e o f i n d u s t r i a I i z a t i o n , b o t h t o Z a m b i a and t o t h e EACM, t h e n e x t c h a p t e r w i l l d e a l d i r e c t l y w i t h t h i s t o p i c . 61. CHAPTER V The e f f e c t of i n t e g r a t i o n on t h e t i m e h o r i z o n o f i n d u s t r i a l d e v e l o p m e n t . In t h e p r e v i o u s , c h a p t e r we d e a l t w i t h t h e i m p a c t e f f e c t o f i n t e g - r a t i o n and f o u n d t h a t T a n z a n i a was l i k e l y t o be t h e l a r g e s t g a i n e r . As we p o i n t e d o u t e a r l i e r t h i s i m p a c t e f f e c t was a o n c e - a n d - f o r - a I I i n c r e a s e i n the. G . D . P . C e r t a i n l y t h i s e f f e c t i s an i m p o r t a n t c o n s i d e r a t i o n o f i n t e g r a t i o n b u t i s n o t t h e o n l y e f f e c t o f e c o n o m i c u n i o n . A more i m p o r t - a n t a s p e c t o f e c o n o m i c i n t e g r a t i o n i s t h e l o n g r u n i n f l u e n c e i t w i l l have on t h e i n d u s t r i a l i z a t i o n o f t h e r e g i o n . F o r most d e v e l o p i n g n a t i o n s , a n d E a s t A f r i c a i n p a r t i c u l a r , t h i s c o n s i d e r a t i o n i s o f p a r a m o u n t i m p o r t a n c e . T h e r e f o r e , t h i s c h a p t e r wi II c o n s i d e r t h e e f f e c t o u r p r o p o s e d i n t e g r a t i o n w i l l have on i n d u s t r i a l d e v e l o p m e n t o f t h e a r e a . The f o r m a t o f t h e c h a p t e r wi I I be (1) t o g i v e a b r i e f summary o f t h e p a s t i n d u s t r i a l d e v e I o p m e n t . o f t h e a r e a , (2) t o e x a m i n e t h e l i k e l y e f f e c t s w h i c h Z a m b i a n e n t r y i n t o t h e Common M a r k e t w i l l have on f u t u r e d e v e l o p m e n t , (3) t o p r e s e n t a model o f i n d u s t r i a l i z a t i o n t h a t w i l l i n d i c a t e t h e e f f e c t s o f i n t e g r a t i o n , and f i n a l l y , (4) t o show how t h e model m i g h t be a p p l i e d t o t h e E a s t A f r i c a n Common M a r k e t s i t u a t i o n . H i s t o r i c a l B a c k g r o u n d Al l f o u r c o u n t r i e s i n t h e r e g i o n have t r a d i t i o n a l l y had v e r y s m a l l i n d u s t r i a l s e c t o r s w i t h i n t h e i r e c o n o m i e s . The e c o n o m i c d e v e l o p m e n t o f t h e a r e a was d i c t a t e d by t h e same c o l o n i a l p o l i c i e s . T h e r e f o r e , F i g u r e 5.1 ' N e t v a l u e of f a c t o r c o s t o f m a n u f a c t u r i n g o u t p u t * T h o u s a n d s o f pounds 1954 1955 1956 . 1957 1958 1959 1960 1961 1962 . 1963 1964 1965 1966 1967 E 15,030 18,720 19,540 2 1 , 0 6 0 2 1 , 7 5 0 2 1 , 3 5 0 2 2 , 7 1 0 2 3 , 5 8 0 2 3 , 8 7 0 " 2 5 , 2 7 0 2 7 , 3 2 0 3 9 , 1 0 0 4 3 , 9 0 0 4 5 , 9 0 0 N t o f Y * 51$ 52$ ' 53$ . 54$ 52$ . 50$ 50$ 50$ 52$ 53$ 50$ 52$ 53$ A u G. 6 , 1 6 4 7 , 8 4 2 8 , 2 0 3 7 ,594 7 ,565 7,871 7,910 8 , 3 7 2 8,811 9 , 6 0 0 13,200 17,700 18,500 A Q f0°l\ 2]% 2 2 $ 2 2 $ 1 9 $ 1 8 $ 1 8 $ 1 7 $ 1 8 $ ]9?° 20<7° 24$ 24$ 22$ A T . ' • ' * 8 , 3 3 5 . 9 , 1 4 5 9 , 0 4 0 10,711 12,936 13,672 14,511 14,964 12,842 12,509 14,343 17,750 2 1 , 2 0 0 2 3 , 4 0 0 Z - A - . *j t °J . 28$ 26$ 25$ 27$ 30$ 32$ 33$ 32$ 29$ 27$' 26$ 24$ 25$ I t o t a I A TOTAL 2 9 , 5 2 9 3 5 , 7 0 7 3 6 , 7 8 3 3 4 , 3 6 5 42,251 4 2 , 8 9 3 45,181 4 7 , 3 1 6 4 5 , 5 2 8 4 7 , 3 7 9 5 4 , 8 6 3 7 4 , 5 5 0 8 3 , 6 0 0 S o u r c e s : 1954-1964 Data from C l a r k , P. D e v e l o p m e n t P l a n n i n g i n E a s t A f r i c a , p . 3 0 - 3 6 1965-1967 Data from S u r v e y of A f r i c a n E c o n o m i c s , p . 1 4 1 , 214, 296 • T a n z a n i a n 1967 Data from B a c k g r o u n d t o t h e B u d g e t : An e c o n o m i c s u r v e y 1 9 6 8 - 6 9 . p . 9 * N o t e : t h e s e c a l c u l a t i o n s i n c l u d e d m i n i n g . 63.. e m p h a s i s was p l a c e d on t h e e x p o r t o f p r i m a r y p r o d u c t s and t h e i m p o r t o f m a n u f a c t u r e d g o o d s . K e n y a , . U g a n d a , and T a n z a n i a were e x p o r t e r s o f a g r i - c u l t u r a l p r o d u c t s w h i l e Z a m b i a e x p o r t e d c o p p e r . T h i s was t h e a c c e p t e d p a t h f o r e c o n o m i c d e v e l o p m e n t in t h e e a r l y s t a g e s o f c o l o n i a l r u l e . B u t , as t h e . . e c o n o m i c and e d u c a t i o n a l l e v e l o f t h e t e r r i t o r i e s i m p r o v e d , t h e r e d e v e l o p e d a m a r k e t f o r , and d e s i r e t o p r o d u c e , c e r t a i n b a s i c c o n s u - mer g o o d s . B e c a u s e a l l t h r e e t e r r i t o r i e s . w e r e u n d e r t h e same c o l o n i a l r u l e r ( a l t h o u g h t h e r e were t h r e e s e p e r a t e c o l o n i a l , g o v e r n o r s ) t h e t e r r i - t o r i e s were a d m i n i s t e r e d as one e c o n o m i c u n i t . F o r t h i s r e a s o n r e g i o n a l d i s t r i b u t i o n o f i n d u s t r y was l e f t t o marke-t f o r c e s . As t h e p r o s p e c t s o f c o n t i n u e d c o l o n i a l r u l e d i m i n s h e d and i n d e p e n d e n c e c o u l d be s e e n on - t h e h o r i z o n , e x a m i n a t i o n o f t h e . l o c a t i o n a I d i s t r i b u t i o n o f i n d u s t r y found Kenya w i t h ' t h e g r e a t e s t p o r t i o n o f t h e i n d u s t r i a l d e v e l o p m e n t . As i n d i c a t e d i n t a b l e 5 . 1 , Kenya has t r a d i t i o n a l l y p r o d u c e d o v e r h a l f t h e m a n u f a c t u r e d and m i n i n g o u t p u t o f t h e a r e a . If we were t o e x c l u d e m i n i n g f r o m t h e m a n u f a c t u r i n g s e c t o r , K e n y a ' s s h a r e o f p r o d u c t i o n would b e . e v e n g r e a t e r . I The m a i n r e a s o n f o r t h i s t y p e o f d e v e l o p m e n t was t h a t N a i r o b i had become, f o r c l i m a t i c and g e o g r a p h i c r e a s o n s , t h e a d m i n i - s t r a t i v e and f i n a n c i a l c e n t e r f o r t h e e n t i r e a r e a . In 1957 o v e r 40$ o f " " ' 2 a l l t h o s e e n g a g e d in m a n u f a c t u r i n g i n Kenya were e m p l o y e d i n N a i r o b i . As t h i s d i s p a r i t y grew l a r g e r Uganda and T a n z a n i a b o t h c o m p l a i n e d b i t t e r l y . T h e s i t u a t i o n r e a c h e d c r i s i s p r o p o r t i o n s i n 1964 when T a n - z a n i a t h r e a t e n e d t o p u l l o u t o f t h e EACM. The o b v i o u s and most l a s t i n g s o l u t i o n t o t h i s p r o b l e m w o u l d be t o s e t up a c o m p r e h e n s i v e r e g i o n a l i n d u s t r i a l d e v e l o p m e n t p l a n , whereby e a c h c o u n t r y i s g u a r a n t e e d an a g r e e d upon s h a r e o f t h e i n d u s t r y . K e n y a p p p o s e d s u c h a p l a n and f a v o u r e d a m a r k e t f o r c e d e t e r m i n a t i o n o f t h e l o c a t i o n o f i n d u s t r y . The r e a s o n s 64. were o b v i o u s s i n c e Kenya p o s e s s e d a c o m p a r a t i v e a d v a n t a g e when i t came jfo i n d u s t r i a l i z a t i o n . But u n d e r t h e t h r e a t o f T a n z a n i a n w i t h d r a w a l , Kenya o f f e r e d a s e c o n d b e s t s o l u t i o n i n t h e form o f t h e Kampala A g r e e m e n t . As p o i n t e d o u t e a r l i e r , t h i s a g r e e m e n t was o f a m a k e s h i f t n a t u r e p r o m i - s i n g c e r t a i n i n d u s t r i e s t o Uganda and T a n z a n i a and p l a c i n g q u a n t i t a t i v e r e s t r i c t i o n s o n ' t h e f low o f t r a d e . It was o n l y w i t h i n a few s h o r t months t h a t t h e a g r e e m e n t was b r o k e n by Kenya (who had i n i t i a l l y g i v e n h a l f h e a r t e d a g r e e m e n t ) . T h i s a c t i o n was t h e n f o i l o w e d by i m p o r t r e s t r i c t i o n s on Kenyan goods e n t e r i n g Uganda and T a n z a n i a . The o u t l o o k was gloomy f o r t h e EACM. It was n o t u n t i l J u n e I, 1967, w i t h t h e s i g n i n g o f t h e " T r e a t y ' f o r E a s t A f r i c a n C o - o p e r a t i o n " , t h a t t h e f u t u r e o f t h e EACM was made c l e a r . A g a i n ' t h e q u e s t i o n o f r e g i o n a l p l a n n i n g o f i n d u s t r i a l d e v e l o p m e n t was s i d e s t e p p e d , t h o u g h . I n s t e a d a t r a n s f e r t a x s y s t e m was i n t r o d u c e d w h i c h was d e s i g n e d t o p r o m o t e i n d u s t r i a l d e v e l o p m e n t w i t h i n t h e d e f i - c i t c o u n t r i e s A r t i c l e 20 p r e s e n t s t h i s as " . . . . a measure t o p r o m o t e new i n d u s t r i a l d e v e l o p m e n t in t h o s e P a r t n e r S t a t e s w h i c h a r e l e s s d e v e l o p e d i n d u s t r i a l l y . " T h e s t r u c t u r e o f t h e t r a n s f e r t a x i s s t r a i g h t f o r w a r d , and i s d e - s i g n e d t o e n c o u r a g e i n d u s t r i a l d e v e l o p m e n t i n T a n z a n i a and U g a n d a . An -y p a r t n e r s t a t e i s a l l o w e d t o impose t h e t r a n s f e r t a x on a n o t h e r member s t a t e i f i t has an o v e r a l l ' t r a d e d e f i c i t i n m a n u f a c t u r e d goods w i t h t h a t same c o u n t r y . T h e s i z e o f t h i s t a x c a n n o t e x c e e d one h a l f t h e ad v a l o r e m t a r i f f a p p l i e d t o o u t s i d e c o u n t r i e s , and l o c a l p r o d u c t i o n o f t h e g o o d must f o l l o w w i t h i n t h r e e m o n t h s . W i t h i n t h e y e a r l o c a l p r o d u c t i o n must s u p p l y 15$ o f t h e d o m e s t i c m a r k e t o r have a v a l u e "of $ 1 0 0 , 0 0 0 . Once -30$ o f t h e p r o t e c t e d commodity i s e x p o r t e d t h e t r a n s f e r t a x on t h a t p a r t i c u d S r good must be e l i m i n a t e d . The o v e r a l l l i m i t i n g c a s e . i s when t h e v a l u e o f 6 5 . c o m m o d i t i e s b e i n g p r o t e c t e d e x c e e d s t h e amount o f t h e t r a d e d e f i c i t i n m a n u f a c t u r e d g o o d s . At t h i s p o i n t t h e c o u n t r y f o r f e i t s a l l r i g h t s t o f u r t h e r use o f t h e t r a n s f e r t a x p r i v i l e g e s . ' - The p u r p o s e o f t h i s scheme was t o a i d t h e d e f i c i t c o u n t r i e s i n e s t a b l i s h i n g s m a l l s c a l e p r o d u c t i o n . w i t h o u t h a v i n g t o compete w i t h lower c o s t Kenyan i m p o r t s . P r o t e c t i o n o f any one p a r t i c u l a r commodity c o u l d l a s t o n l y e i g h t y e a r s o r u n t i l t h e l e v e l o f p r o d u c t i o n s t a t e d above was . r e a c h e d , and t h e o v e r a l l programme was t o l a s t f o r o n l y 15 y e a r s . As good as t h e i n t e n t i o n s m i g h t have been t h e r e a r e s e r i o u s i m p I i - c a t i o n s in t h i s programme t h a t w i l l have t h e l o n g run e f f e c t , i f n o t c o u n t e r e d i n some way, o f e n c o u r a g i n g e c o n o m i c s e p e r a t i o n r a t h e r t h a n i n t e g r a t i o n . T h e most o b v i o u s r e s u l t o f t h i s t a x s y s t e m w o u l d be d u p l i c a t i o n o f i n d u s t r y w i t h i n t h e r e g i o n s and an i n c r e a s e i n e m p h a s i s p l a c e d on s m a l l s c a l e p r o d u c t i o n . Such a t r e n d w o u l d d e c r e a s e t h e c h a n c e s o f s p e c i a l i - z a t i o n and t h e r e f o r e t h e l o s s o f i m p o r t a n t e c o n o m i e s o f s c a l e . If t h i s t r e n d was a l l o w e d t o c o n t i n u e u n c h e c k e d i t w o u l d d e f e a t t h e p u r p o s e o f i n t e g r a t i o n , s i n c e t h e s t r e n g t h o f i t s argument l i e s i n t h e f a c t t h a t , i m p o r t a n t e c o n o m i e s o f s c a l e e x i s t t h a t c o u l d o n l y be t a k e n a d v a n t a g e o f i n t h e l a r g e r r e g i o n a l m a r k e t . P r o p o n e n t s o f t h e s y s t e m have a r g u e d t h a t l a r g e r e g i o n a l l y b a s e d i n d u s t r i e s would l o c a t e i n t h e d e f i c i t c o u n t r i e s s i n c e t h e y w o u l d be q u a r a n t e e d t h e l o c a l m a r k e t . B u t t h e a r g u e m e n t i s i n v a l i d a t e d on two p o i n t s . F i r s t , i f t h e i n d u s t r y i s b a s e d on a r e g i o n a l m a r k e t , w i t h i n a s h o r t t i m e i t would have t o f o r f e i t i t s t r a n s f e r t a x p r i v i l e g e s ' o n c e 30$ o f i t s p r o d u c t i o n i s e x p o r t e d t o a n o t h e r member c o u n t r y . S e c o n d l y , t h i s s h o r t p e r i o d o f p r o t e c t i o n may n o t j u s t i f y t h e e x t r a c o s t s i n v o l v e d 6 6 . i n l o c a t i n g i n remote a r e a s o f t h e r e g i o n . As m e n t i o n e d e a r l i e r , N a i r o b i i s t h e i n d u s t r i a l and f i n a n c i a l - c e n t r e o f t h e r e g i o n , and a c e n t r a l p o i n t t o a l l t h e m a r k e t s . The p r o b l e m s i n v o l v e d i n m o v i n g from t h i s a r e a most l i k e l y w o u l d d i s c o u r a g e any t y p e o f m a j o r i n d u s t r i a l s p r e a d . T h e s e c o n d p r o b l e m o f t h e new t a x s y s t e m i s a f e a t u r e g e n e r a l t o any p r o t e c t i v e t a r i f f . W i t h i n t h e p r o t e c t e d a r e a s t h e r e i s t h e c o n s t a n t t h r e a t t h a t i n e f f i c i e n t i n d u s t r y w i l l d e v e l o p . The s t r u c t u r e o f t h e t a x makes t h i s p r o b l e m an e v e n g r e a t e r t h r e a t . The t r a n s f e r t a x i s a p p l i e d n o t o n l y t o Kenyan v a l u e added b u t a l s o t h e i m p o r t c o n t e n t . If t h e t r a n s f e r t a x a p p l i e s o n l y t o t h e v a l u e added p o r t i o n o f t h e c o m m o d i t y , t h e i m p o - s i n g c o u n t r y r e c e i v e s e f f e c t i v e p r o t e c t i o n w h i c h e q u a l s n o m i n a l p r o t e c - t i o n . T h e r e f o r e e f f e c t i v e p r o t e c t i o n b a s e d on t h e i m p o s i n g c o u n t r y ' s v a l u e added i n c r e a s e s . a s t h e i m p o r t c o n t e n t becomes l a r g e r . 4 A s t u d y o f t h i s s o r t has been c o n d u c t e d by P e t e r A . Diamond who has c a l c u l a t e d t h e e f f e c t i v e p r o t e c t i o n a f f o r d e d T a n z a n i a by t h e t r a n s f e r t a x u n d e r v a r y i n g c o m b i n a t i o n s o f t a r i f f , r a t e s and i m p o r t c o n t e n t . C h o s i n g t h e most a p p r o p r i a t e c o m b i n a t i o n o f v a r i a b l e s by a s s u m i n g i n p u t t a r i f f = 0 and f i n a l good t a r i f f = 3 0 $ ; . ' t h e n as i m p o r t c o n t e n t i n c r e a s e s from 0$ t o 70$ t h e e f f e c t i v e p r o t e c t i o n r a t e i n c r e a s e s from 15$ t o 3 9 $ . ' ' U n d e r s u c h an urnb re I I a o f p r o t e c t i on i t i s d i f f i c u l t t o c o n c e i v e t h a t none o f t h i s p r o t e c t i o n w i l l be b u i l t i n t o p r o d u c t i o n c o s t s . T h e s i t u a t i o n f o r Kenya i s j u s t t h e o p p o s i t e . Up u n t i l t h e i m p l e - m e n t a t i o n o f t h e t r a n s f e r t a x s y s t e m , Kenyan p r o d u c e r s had e n j o y e d a p r o t e c t e d m a r k e t f o r t h e e n t i r e EACM. Now, f a c e d w i t h new i n t r a t e r r i - t o r i a l t r a d e r e s t r i c t i o n s , l o c a l f i r m s w i l l be f o r c e d t o become more c o m p e t i t i v e i n o r d e r t o s e c u r e t h e i r s h a r e o f t h e l o c a l m a r k e t and a t t h e same t i m e compete w i t h l o c a l l y p r o d u c e d goods i n t h e U g a n d i a n and 6 7 . T a n z a n i a n m a r k e t s . I n c r e a s e d c o m p e t i t i o n w i t h i n t h e Kenyan m a r k e t w o u l d make i t e v e n more d i f f i c u l t f o r T a n z a n i a n goods t o be s o l d t h e r e . T h i s a c t u a l l y was t h e c a s e in m i d - 1 9 6 5 when T a n z a n i a r a i s e d i m p o r t r e s t r i c t i o n s as a r e s u l t o f t h e breakdown o f t h e Kampala A g r e e m e n t . T h u s i t i s a r e a l p r o b l e m t h a t w i l l f a c e T a n z a n i a i n t h e f u t u r e . W i t h t h e s e two f o r c e s a t work t h e w h o l e f u t u r e o f t h e EACM wi I I be p u t i n j e o p a r d y . As t h e 15 y e a r l i f e of t h e a g r e e m e n t r e a c h e s m a t u r i t y t h e r e i s l i k e l y t o be g r e a t p r e s s u r e t o c o n t i n u e i n t r a t e r r i t o r i a I t r a d e b a r r i e r s o r i n t h e most e x t r e m e c a s e , a c a l l f o r c o m p l e t e s e p a r a t i o n . What p r e c a u t i o n s have been t a k e n t o p r e v e n t t h i s s i t u a t i o n from a r i s i n g ? The s o l u t i o n seems o b v i o u s . What i s l a c k i n g i n t h e E a s t A f r i c a n T r e a t y f o r C o - o p e r a t i o n i s a f i r m commitment t o i m p l e m e n t a r e g i o n a l p l a n f o r i n d u s t r i a l d e v e l o p m e n t . O n l y l i p s e r v i c e i s p a i d t o t h i s i d e a i n A r t i c l e 23 o f t h e t r e a t y t h a t s t a t e s , " . . . t h e P a r t n e r S t a t e s a g r e e t o c o n t i n u e - t h e i n d u s t r i a l l i c e n s i n g s y s t e m f o r m u l a t e d i n t h e . t h r e e E a s t A f r i c a n I n d u s t r i a l L i c e n s i n g laws how in o p e r a t i o n in t h e P a r t n e r S t a t e s . " 6 T h e b e g i n n i n g . , o f t h e l i c e n s i n g s y s t e m goes b a c k t o 1948 when t h e t h r e e i n d i v i d u a l t e r r i t o r i e s l e g i s l a t e d i d e n t i c a l i n d u s t r i a l l i c e n s i n g o r d i n a n c e s t o be e n a c t e d i n 1952-3. The o b j e c t i v e s were t o i n d u c e i n d u s - t r y t o l o c a t e in E a s t A f r i c a by g u a r a n t e e i n g monopoI i s t i c - powers f o r a s t a t e d p e r i o d and s e c o n d l y t o i s s u e I i c e n c e s t o i n d u s t r i e s and d i r e c t them t o s i t e s t h a t , were p a r t o f a g e n e r a l d e v e l o p m e n t p l a n . B u t by 1949 any i n t e n t i o n t o d e v e l o p d e t a i l e d p I a n s ; c o n c e r n i n g l o c a t i o n o f i n d u s t r y had been a b a n d o n e d . As i t became a p p a r e n t t h a t t h e t h r e e t e r r i t o r i e s were d e v e l o p i n g a t d i f f e r e n t . r a t e s , t h e two t e r r i t o r i e s t h a t were d e v e l o p i n g a t a s l o w e r r a t e were l e s s a g r e e a b l e t o a p p r o v i n g new i n d u s t r i e s t o t h e 68. l i c e n s i n g s c h e d u l e . The Raisman C o m m i s s i o n o f 1961 c o n c l u d e d on t h i s i s s u e t h a t " T h e s c o p e o f t h e l i c e n s i n g s y s t e m has t h e r e f o r e been s m a l l , i t has n o t a c h i e v e d t h e o b j e c t s f o r w h i c h i t was e s t a b l i s h e d , and now s e r v e s v e r y l i t t l e u s e f u l p u r p o s e in r e l a t i o n t o i n d u s t r i a l d e v e l o p - ment i n E a s t A f r i c a as a w h o l e . ' 7 ' L i t t l e improvement on t h i s s i t u a t i o n has been made i n t h e p a s t n i n e y e a r s . - An a t t e m p t was made i n 1965 as p a r t o f t h e Kampala Agreement t o - improve t h e i n d u s t r i a l l i c e n s i n g a c t s and t o e x p a n d t h e f u n c t i o n of t h e E a s t A f r i c a n I n d u s t r i a l C o u n c i l . A g r e e m e n t was r e a c h e d by t h e t h r e e g o v e r n m e n t s t o a p p o i n t a c o m m i t t e e o f i n d u s t r i a l e x p e r t s t o s t u d y t h e p r o b l e m o f r e g i o n a l l y p l a n n e d i n d u s t r i a l d e v e l o p m e n t . 8 U n f o r t u n a t e l y , t h e Kampala A g r e e m e n t was abandoned b e f o r e any a c t i o n c o u l d be t a k e n . As we have s e e n , t h e T r e a t y f o r E a s t A f r i c a n C o - o p e r a t i o n has done l i t t l e t o change t h e n a t u r e o f t h e l i c e n s i n g s y s t e m . It has i n c r e a s e d i t s r i g i d i t y b y - s t a t i n g i n p a r a g r a p h 2 o f A r t i c l e 2 3 ' . " . . . t h a t t h e i n d u s t r i a l l i c e n s i n g s y s t e m s h a l l c o n t i n u e u n t i l , t h e e x p i r a t i o n o f t w e n t y y e a r s from t h e commencement o f t h e s a i d E a s t A f r i c a n I n d u s t r i a l L i c e n s i n g l a w s . " B o t h T a n z a n i a and Uganda, a r e v i t a l l y i n t e r e s t e d i n r e a c t i v a t i n g t h e E a s t A f r i c a n I n d u s t r i a l C o u n c i l b u t u n t i l now have been u n s u c c e s s f u l ' i n p r e s s u r i n g Kenya t o a c c e p t . On two e a r l i e r o c c a s i o n s t h e y have a c c e p - t e d s e c o n d b e s t s o l u t i o n s , f i r s t l y i n t h e Kampala A g r e e m e n t and s e c o n d l y t h r o u g h t h e t r a n s f e r t a x . '• Z a m b i a n e n t r y i n t o t h e EACM w o u l d have t h e e f f e c t o f o f f e r i n g Uganda and T a n z a n i a a t h i r d c h a n c e , and t h i s t i m e t h e p r o b a b i I i.ty o f s u c c e s s s h o u l d be i n c r e a s e d . As m e n t i o n e d e a r l i e r , one o f t h e p r e c o n d i - t i o n s t o Z a m b i a n e n t r y i n t o +he EACM s h o u l d be t h e a s s u r a n c e o f some r e g i o - n a l l y b a s e d i n d u s t r i e s . T h i s a s s u r a n c e c o u I d come as p a r t o f a l a r g e r 6 9 . r e g i o n a l p l a n f o r • i n d u s t r i a I d e v e l o p m e n t . With' t h e a d d i t i o n a l w e i g h t o f Z a m b i a , - e n o u g h ' p r e s s u r e m i g h t be e x e r t e d on Kenya t o make h e r a g r e e t o t h e r e a c t i v a t i o n o f t h e I n d u s t r i a l C o u n c i l and a c c e p t a n c e o f a r e g i o n a l c o m p r e h e n s i v e p l a n . Kenya depends most h e a v i l y upon E a s t A f r i c a n t r a d e i n m a n u f a c t u r e d g o o d s , and f o r t h i s r e a s o n w i l l have t h e most t o l o s e i f t h e EACM i s d i s b a n d e d . Z a m b i a ' s e n t r y i n t o t h e EACM, t h e r e f o r e , may be t h e e v e n t t h a t w i l l s a v e t h e o r g a n i z a t i o n from d i s a s t e r . It m i g h t t i p . t h e s c a l e s i n f a v o u r o f t h e ' h a v e n o t ' c o u n t r i e s and a s s u r e t h e c o n t i n u a t i o n o f t h e u n i o n on a more e q u i t a b l e b a s i s . Tire Mode I In t h e p r e v i o u s c h a p t e r we c o n c l u d e d t h a t Z a m b i a n e n t r y c o u l d have a c e r t a i n i m p a c t a f f e c t m e a s u r e d i n t e r m s o f i n c r e a s e i n 6 . D . P . T h i r d , c o u n t r y e n t r y i n t o t h e EACM w i l l a l s o have an e f f e c t on i n d u s t r i a l d e v e l - opment and f o r t h i s r e a s o n a . t h e o r e t i c a l model i s p r e s e n t e d t h a t w i l l i I i u s t r a t e - t h i s e f f e c t . T h i s model has been d e v e l o p e d w i t h t h e hope t h a t i t w i l l have u n i - v e r s a l a p p l i c a t i o n t o any g r o u p o f d e v e l o p i n g c o u n t r i e s . t h a t a r e c o n s i d - e r i n g e c o n o m i c ' i n t e g r a t i o n as p o s s i b l e e n g i n e o f i n d u s t r i a l g r o w t h . The p u r p o s e o f t h e model i s t o show how i n t e g r a t i o n w i l l e f f e c t t h e t i m e h o r i z o n o f i n d u s t r i a l d e v e l o p m e n t . The a p p r o a c h u s e d w i l l d e a l w i t h i n d i v i d u a l i n d u s t r i e s and w i l l f o c u s on t h e e f f e c t o f i n c r e a s e d m a r - k e t s i z e on t h e p r o c e s s of i n d u s t r i a l i z a t i o n . Demand S i d e F o r any g i v e n commodity t h e r e e x i s t s w i t h i n t h e d o m e s t i c m a r k e t a c e r - t a i n l e v e l of.d e m a n d . T h e q u a n t i t y demanded w i l l depend upon t h e n a t u r e of t h e p r o d u c t as w e l l as upon p r i c e , t a s t e , d i s t r i b u t i o n f a c i I i t i e s , and 7 0 . o t h e r f a c t o r s . In t h e d e v e l o p i n g w o r l d t h e income e l a s t i c i t y o f d e m a n d — f o r b a s i c . c o n s u m e r goods i s l a r g e r t h a n t h e demand f o r t h e same good i n t h e more d e v e l o p e d w o r l d . The n a t u r e o f commodity demanded i s h i g h l y c o r r e l a t e d w i t h t h e s t a g e o f d e v e l o p m e n t , as i n d i c a t e d by t h e l e v e l o f p e r c a p i t a i n c o m e . As P r o f e s s o r H a r v e y L e i b e n s t e i n n o t e s , one o f t h e c h a r a c t e r i s t i c s , o f u n d e r d e v e l o p e d a r e a s i s " t h a t a m a j o r p o r t i o n o f e x p e n d - i t u r e s a r e made on f o o d and n e c e s s i t i e s " . ^ As p e r c a p i t a income i n c r e a s e s demand s h i f t s t o more s o p h i s t i c a t e d . c o n s u m e r g o o d s , and t o i n t e r m e d i a t e c a p i t a l goods as w e l l . T h e r e f o r e , i n t h e e a r l y s t a g e s o f d e v e l o p m e n t t h e c o u n t r y m i g h t be a n e t e x p o r t e r o f p r i m a r y p r o d u c t s and i m p o r t a l l o f i t s m a n u f a c t u r e d g o o d s . In a l a t e r s t a g e , t h e c o u n t r y i s l i k e l y t o d e v e l o p a m a n u f a c t u r i n g s e c t o r and t h e r e f o r e s u b s t i t u t e d o m e s t i c a l l y p r o d u c e d g o o d s i n p l a c e o f c o n s u m e r good i m p o r t s . A t t h i s p o i n t o f d e v e l o p m e n t t h e n a t u r e o f i m p o r t s w o u l d c h a n g e and t h e r e would be i n c r e a s e d i m p o r t s o f c a p - i t a l and i n t e r m e d i a t e g o o d s . . ' S i m i l a r l y , l o c a l g o v e r n m e n t p o l i c y m i g h t d i c t a t e t h e t y p e s o f p r o - d u c t s demanded. P u b l i c works p r o j e c t s a i m e d a t d e v e l o p i n g an i n f r a - s t r u c t u r e o f s o c i a l o v e r h e a d c a p i t a l w i l l d i c t a t e a c e r t a i n t y p e o f demand w h i j e g o v e r n - ment p o l i c y e m p h a s i z i n g a g r i c u l t u r a l p r o d u c t i o n wi I I d e r i v e a demand f o r s t i l l , o t h e r p r o d u c t s . F o r t h i s r e a s o n t h e model has been d e v e l o p t e d t o t a k e a c c o u n t of t h e s e p e c u l i a r i t i e s . T h e model d o e s n o t make u s e o f t h e c l a s s i c demand f u n c t i o n o f p l o t t i n g p r i c e a g a i n s t q u a n t i t y . We a r e i n t e r e s t e d i n e x a m i n i n g t h e q u a n t i t y demanded o f a p a r t i c u l a r p r o d u c t o v e r t i m e . We w i l l assume t h a t t h e r e l a t i v e p r i c e i s c o n s t a n t . T h i s a s s u m t p i o n i s l e s s wie.ldy i n a d e v e l o p i n g c o u n t r y s i t u a t i o n s i n c e t h e p r i c e l e v e l o f d o m e s t i c a l l y p r o d u c e d g o o d s wi I I be p r o t e c t e d by 71. F i g u r e 5.I Q u a n t i t y Demanded Y ( t ) 72. F i g u r e 5 . 2 7 3 . i m p o r t t a r i f f s and t u s g u a r a n t e e l o c a l p r o d u c e r s t h e d o m e s t i c m a r k e t T " ~ ~ ~ W i t h p r i c e c o n s t a n t t h e v e r t i c a l a x i s . w i l l m e a s u r e q u a n t i t y d e - manded and t h e h o r i z o n t a l w i l l m e a s u r e income. In t h e l ower q u a d r a n t o f o u r d i a g r a m ( f i g u r e 5 . 1 ) t h e r e l a t i o n s h i p between income and t i m e i s i n d i c - a t e d . We assume t h a t income grows o v e r t i m e a t a c o n s t a n t r a t e ( e . g . 5%). We d e f i n e Y as a f u n c t i o n o f t i m e . T h u s , we c a n r e a d o f f o u r d i a g r a m t h e r e l a t i o n s h i p o f q u a n t i t y demand 'at d i f f e r e n t l e v e l s o f Y t o t h e t i m e p e r i o d i n w h i c h i t o c c u r s . F i g u r e 5.1 shows t h e e x p e n d i t u r e f u n c t i o n f o r t h e p a r t i c u l a r commodity ' i ' w h i c h i s d e f i n e d a s : R e l a t e d t o t h e p r e v i o u s y e a r : , . o r r e l a t e d t o base y e a r o where b = income e l a s t i c i t y of demand f o r commodity 1 i 1 y ' = t h e p e r c e n t a g e c h a n g e i n N a t i o n a l Income D = q u a n t i t y o f good ' i ' demanded i n y e a r ' n ' . • T h e s h a p e and s l o p e of t h e c u r v e i s d e t e r m i n e d by. ' b ' and s i n c e income e l a s t i c i t y w i l l d i f f e r f r o m p r o d u c t t o p r o d u c t t h e n i t w i l l be r e f l e c - t e d i n t h e s h a p e of D ( t ) . F o r e x a m p l e , i n t h e e a r l y s t a g e s o f d e v e l o p m e n t l u x u r y , g o o d s w o u l d have a low income e l a s t i c i t y w h i l e f o r b a s i c c o n s u m e r g o o d s i t w o u l d be much h i g h e r . T h i s phenomenon i s d e p i c t e d i n d i a g r a m s 5 . 2 ( a ) and 5 . 2 ( b ) . S u p p l y S i d e T u r n i n g now t o t h e s u p p l y s i d e o f o u r model we w i l l a g a i n p a r t from t h e c l a s s i c a l a p p r o a c h . R a t h e r t h a n p l o t t i n g p r i c e a g a i n s t q u a n t i t y we w i l l p l o t income on t h e h o r i z o n t a l a x i s and I n d u s t r i a l C a p a c i t y on t h e 74. v e r t i c a l a x i s . T h e r e f o r e we a r e d e r i v i n g a p o t e n t i a l c a p a c i t y f u n c t i o n ( P . C . ) . An i m p o r t a n t p a r t o f o u r a n a l y s i s i s t h e i m p l e m e n t a t i o n o f a t e r m d e v e l o p e d by J o s e p h S . B a i n i n h i s w e l l known book B a r r i e r s t o New Corn- p e t i t i o n . He d e v e l o p s t h e c o n c e p t , o f ' M i n i m u m O p t i m a l S c a l e ' w h i c h he d e f i n e s as " t h e s m a l l e s t s c a l e a t w h i c h a p l a n t o r f i r m may a c h i e v e t h e l o w e s t a t t a i n a b l e u n i t c o s t . " Of c o u r s e t h e m i n i m a l o p t i m a l s c a l e (MOS) w i l l v a r y between i n d u s - t r i e s d e p e n d i n g upon t h e e c o n o m i e s o f s c a l e o f t h e d i f f e r e n t p r o d u c t i v e p r o c e s s e s . L e t us assume t h a t t h e MOS o f a p a r t i c u a l r i n d u s t r y i s X . If we assume t h a t a l l t h e p l a n t s t o be c o n s t r u c t e d were t o be o f X c a p a c i t y we w o u l d have a d i a g r a m m e w h i c h c o n s i s t e d o f a s e r i e s o f h o r i z o n t a l l i n e s p a r a l l e l t o e a c h o t h e r and X u n i t s d i s t a n c e a p a r t ( s e e f i g u r e 5 . 3 ) . If we assume t h a t i n d u s t r y d e v e l o p s one f i r m a t a . t i m e t h e n t h e r e w i I I be a s t e p f u n c t i o n . The p o s i t i o n i n g o f t h e s e s t e p s w i l l i n d i c a t e t h e t i m i n g o f i n d u s t r i a l e x p a n s i o n . U l t i m a t e l y demand c o n d i t i o n s w i l l d e t e r m i n e t h e s h a p e o f t h e P . C . c u r v e . An i m p l i c i t a s s u m p t i o n made h e r e i s t h a t e a c h p l a n t w i l l o n l y p r o d u c e up t o t h e MOS c a p a c i t y . T h i s i s a s i m p l i f y i n g a s s u m p t i o n and i t w i l l be r e l a x e d l a t e r i n o u r a n a l y s i s . We a r e now r e a d y t o c o m b i n e t h e demand and s u p p l y s i d e s o f o u r a n a l y s i s t o i n d i c a t e t h e t i m e h o r i z o n o f i n d u s t r i a l d e v e l o p m e n t . We w i l l c o n s i d e r t h r e e d i f f e r e n t methods and t h e n c h o o s e t h e method t h a t b e s t s u i t s o u r p u r p o s e . CASE I. In t h e f i r s t c a s e we w i l l assume t h a t t h e g o v e r n m e n t p r e f e r s t o c o n s t r u c t a n MOS p l a n t o n l y when demand has r e a c h e d t h e a p p r o p r i a t e  76. l e v e l . By c o m b i n i n g f i g u r e 5.1 and 5 . 3 we have t h e s i t u a t i o n d e p i c t e d i n f i g u r e 5 . 4 . T h i s d i agram shows t h a t i n y e a r t t h e f i r s t pI a n t w i l l be c o n s t r u c t e d and wi I I c o n t i n u e t o p r o d u c e a t X c a p a c i t y u n t i I t ' , when a s e c o n d p l a n t w i l l be c o n s t r u c t e d in r e s p o n s e t o i n c r e a s e d demand. CASE 2 F i g u r e 5 . 5 shows, an a l t e r n a t i v e p l a n n i n g d e c i s i o n t h a t as s o o n as demand i s g r e a t e r t h a n p r e s e n t MOS c a p a c i t y a new p l a n t wi I I be c o n s t r u c - t e d . U n d e r t h e s e c o n d i t i o n s t h e r e would a l w a y s be e x c e s s c a p a c i t y and u n l e s s t h e s e , goods a r e e x p o r t a b l e t h e r e w i l l be a w a s t e o f r e s o u r c e s . CASE 3 * T h i s f i n a l s i t u a t i o n , as d e p i c t e d i n f i g u r e 5 . 6 , i s a c o m p r o m i s e between t h e two c a s e s m e n t i o n e d a b o v e , and a l s o t h e most p l a u s i b l e of t h e t h r e e . B u t t h e q u e s t i o n t h e n a r i s e s as t o what p o i n t in t i m e s h o u l d t h e n e x t p l a n t be c o n s t r u c t e d . Between t h e t i m e o f c o n s t r u c t i o n o f t h e n t h and n=l p l a n t , demand w i l l have t o be met by i m p o r t s . T h i s i s p a i d f o r o u t o f . the c o u n t r y ' s f o r e i g n e x c h a n g e r e s e r v e s . The p r o b l e m t h e n becomes a q u e s t i o n o f a t r a d e - o f f between d e p l e t i o n o f f o r e i g n r e s e r v e s and e x c e s s c a p a c i t y p r o d u c t i o n . A t what p o i n t i s i t w o r t h w h i l e t o s t o p i m p o r t i n g and commence d o m e s t i c p r o d u c t i o n . We must remember t h a t t h e d e v e l o p i n g c o u n t r y has a . p r e f e r e n c e f o r d o m e s t i c i n d u s t r i a l p r o d u c t i o n and t h i s p r e f e r e n c e has been b u i l t i n t o o u r m o d e l . Of c o u r s e , each s i t u a t i o n wi I I d i f f e r i n . e a c h c o u n t r y b u t o u r model p r e s e n t s a c r i t e r i o n t o be u s e d a s a g u i d e l i n e i n m a k i n g t h e d e c i s i o n . F i r s t we w i l l assume t h a t t h e demand c o n d i t i o n s i n d i c a t e t h a t w i t h i n a c e r t a i n t i m e p e r i o d , ( e . g . t e n y e a r s ) t h e q u a n t i t y demanded o f t h e commodity w i l l i n c r e a s e an amount e q u a l t o t h e MOS o f an a d d i t i o n a l p l a n t . The q u e s t i o n i s when s h o u l d t h i s p l a n t be b u i l t ? T h r o u g h o u t t h i s 1 0 - y e a r p e r i o d t h e r e w i l l be a f l o w o f c o s t s i n v o l v e d 77. i n s u p p l y i n g t h i s commodity t o t h e m a r k e t . In y e a r s when t h e good i s ^ i m p o r t e d , t h e c o s t w i l l be s i m p l y t h e c o s t s o f i m p o r t s . Once l o c a l p r o d - u c t i o n i s u n d e r t a k e n , c o n s i d e r a t i o n must be g i v e n t o t h e c o s t o f t h e i n i t i a l i n v e s t m e n t ' p l u s t h e v a r i a b l e c o s t s o f o p e r a t i n g t h e p l a n t . T h e r e - f o r e we a r e f a c e d w i t h t e n a l t e r n a t i v e c o s t f l o w s d e p e n d i n g upon, t h e t i m i n g o f c o n s t r u c t i o n of t h e p l a n t . The d e c i s i o n c r i t e r i a s u g g e s t e d by t h i s mode] i s t o c h o o s e t h e y e a r f o r c o n s t r u c t i o n t h a t wi II g e n e r a t e t h e l o w e s t p r e s e n t v a l u e o f t h e s t r e a m o f c o s t s . F o r e x a m p l e , a s s u m i n g f u l l o p e r a t i o n o f t h e p l a n t i s u n d e r t a k e n i n t h e y e a r o f c o n s t r u c t i o n , a l t e r n a t i v e I i s c o n s t r u c t i o n i n t h e f i r s t y e a r : a l t e r n a t i v e 2 i s c o n s t r u c t i o n i n t h e s e c o n d y e a r : ' a \7 - + t ..  v> ' * *. —14— a l t e r n a t i v e 5 i s c o n s t r u c t i o n i n t h e f i f t h y e a r : and a l t e r n a t i v e 10 i s c o n s t r u c t i o n i n t h e 10th y e a r : w h e r e : Pvh i s t h e p r e s e n t v a l u e o f t h e s t r e a m o f c o s t s i f t h e c o n s t r u c t i o n i s u n d e r t a k e n i n t h e n t h y e a r . Mn i s t h e . v a l u e of i m p o r t s o f commodity i n t h e n t h y e a r . I. i s t h e i n i t i a l c o s t o f c o n s t r u c t i o n . Vn i s t h e v a r i a b l e c o s t s o f t h e n t h y e a r . * '. ' ' i i s t h e r a t e of d i s c o u n t . * V a r i a b l e C o s t i s a n e t c a l c u l a t i o n as w e l l as t h e o p e r a t i n g c o s t s o f p r o d u c - t i o n , t h e c o s t o f p r o t e c t i o n must be i n c l u d e d as w e l l as t h e c o s t i n l o c a l c u r r e n c y o f i m p o r t e d i n p u t s . From t h e s e c o s t s must be s u b t r a c t e d t h e b e n e f i t s f r o m d o m e s t i c i n d u s t r i a l p r o d u c t i o n s u c h a s t h e e x t e r n a l i t i e s . e n j o y e d by t h e s o c i e t y . T h e r e f o r e , r e p r e s e n t s t h e n e t c o s t s o f l o c a l i n d u s t r i a l p r o d u c t i o n . If P.V.7 g a v e us t h e l o w e s t p r e s e n t v a l u e c a l c u l a t i o n we w o u l d u n d e r t a k e c o n s t r u c t i o n o f t h e n e x t p l a n t i n s e v e n y e a r s . T h i s mechanism i s t h e b a s i s o f o u r model b u t f u r t h e r c o n s i d e r a t i o n 78. must be g i v e n t o t h e c a l c u l a t i o n o f t h e s e v a r i a b l e s . I n ' o r d e r t o g i v e a c l o s e r e s t i m a t i o n o f t h e t r u e s i t u a t i o n in d e v e l o p i n g c o u n t r i e s we must c o n s i d e r d i f f e r e n t c o s t v a r i a b l e s i n v a r i o u s w a y s . To g i v e t h e r e a l c o s t o f l o c a l f a c t o r s o f p r o d u c t i o n we w i l l u s e a shadow p r i c e s y s t e m . B e - c a u s e t h e f a c t o r s e m p l o y e d in t h e i n d u s t r i a l s e c t o r u s u a l l y have a v e r y low o p p o r t u n i t y c o s t , t h e c o s t t o s o c i e t y i s n o t r e f l e c t e d i n t h e wage t h e y r e c e i v e . T h e r e f o r e by u s i n g shadow p r i c i n g t h e c o s t o f l.ocal v a r i a b l e s w i l l , be l e s s and 'w i I I , t h e r e f o r e , b i a s o u r ' c a leu l a t i o n s t o w a r d e a r l i e r c o n s t r u c t i o n . T h o s e i n p u t s w h i c h must be i m p o r t e d a r e o f c o u r s e n o t s u b j e c t t o shadow p r i c i n g . •.• Q u i t e t h e o p p o s i t e i s t h e c a s e . When f o r e i g n e x c h a n g e i s used t o p u r c h a s e i m p o r t s t h e c o s t t o s o c i e t y i s n o t u s u a l l y r e f l e c t e d by t h e o f f i c i a l f o r e i g n e x c h a n g e r a t e . The e x i s t e n c e o f a f o r e i g n c u r r e n c y b l a c k m a r k e t i n most d e v e l o p i n g c o u n t r i e s d e m o n s t r a t e s t h e d i s - c r e p e n c y between t h e o f f i c i a l . a n d a c t u a l r a t e o f e x c h a n g e . When c a l c u - l a t i n g t h i s c o s t s t r e a m i n t e r m s o f l o c a l c u r r e n c y t h e n t h e a c t u a l e x c h a n g e r a t e s h o u l d be u s e d . T h i s means t h a t i f l o c a l p r o d u c t i o n o f t h e commo- d i t y i n v o l v e s a hi.gh i m p o r t component t h e t e n d e n c y w i l l be t o w a r d s l a t e r c o n s t r u c t i o n . "" . F i n a l l y , any e x t e r n a l i t i e s t h a t w i l l r e s u l t f r o m l o c a l p r o d u c t i o n must be c o n s i d e r e d i n o u r c a l c u l a t i o n s . Such t h i n g s as i n c r e a s e d s k i l l s o f the. l a b o u r f o r c e , i n c r e a s e d e n t r e p e n e u r i a I s k i l l , and I i n k a g e e f f e c t s must be c o n s i d e r e d as b e n e f i t s and i n some way be d e d u c t e d from t h e c o s t s . The e x i s t e n c e o f s u c h p o s i t i v e e x t e r n a l i t i e s w i l l e n c o u r a g e e a r l y c o n - s t r u c t i o n o f t h e p l a n t . T h e f i n a l d e c i s i o n , t h e r e f o r e , depends upon many v a r i a b l e s . On t h e one h a n d , we may. c o n e Iude t h a t an i n d u s t r y w i t h a low i n i t i a l i n v e s t m e n t ,  s m a l l i m p o r t c o m p o n e n t , and h i g h p r i c e d f i n a l p r o d u c t w h i c h g e n e r a t e s p o s i t i v e e x t e r n a l i t i e s w i l l f a v o u r e a r l y c o n s t r u c t i o n . On t h e o t h e r h a n d , i n d u s t r y r e q u i r i n g a l a r g e i n i t i a l i n v e s t m e n t t o p r o d u c e a low v a l u e d f i n a l p r o d u c t w i t h a h i g h i m p o r t c o m p o n e n t w i l l t e n d t o d i s c o u r a g e c o n s t r u c t i o n u n l e s s t h e p o s i t i v e e x t e r n a l i t i e s a r e s o g r e a t as t o c o u n t e r t h e h i g h r e a l c o s t s o f p r o d u c t i o n . B a s e d on t h i s c r i t e r i o n , f i g u r e 5 . 6 i n d i c a t e s t h e t i m i n g o f i n d u s - t r i a l i z a t i o n . The i n t e r s e c t i o n of D ( t ) and P . C . c u r v e s a t p o i n t s t ' and 2 t i n d i c a t e s t h e a p p r o p r i a t e t i m e f o r c o n s t r u c t i o n s o f t h e s e c o n d and t h i r d p l a n t s . E f f e c t o f I n t e g r a t i o n L e t us assume t h a t a s e c o n d c o u n t r y i s i n t r o d u c e d t o o u r m o d e l . A s s u m i n g t h a t c o u n t r y p r e v i o u s l y i m p o r t e d commodity X t o s a t i s f y i t s d o m e s t i c demand, t h e e f f e c t o f i n t e g r a t i o n wi II be t o move t h e D ( t ) f u n c t i o n upward t o D ( t ) ' as i n f i g u r e 5 . 7 . T h i s i n e f f e c t i s i n c r e a s i n g t h e s i z e o f t h e d o m e s t i c m a r k e t and t h e q u a n t i t y demanded i n c r e a s e s f r o m D ( t ) t o D ( t ) ' . T h i s w i l l a c c e l e r a t e t h e r a t e o f i n d u s t r i a l d e v e l o p m e n t . C o u n t r y A would have c o n s t r u c t e d p l a n t s 1, 2 , and 3 i n y e a r s t ° , t ' , and t r e s p e c t i v e l y . But now w i t h c o m b i n e d e x p e n d i t u r e f u n c t i o n D ( t ) , c o n - o 2' s t r u c t i o n o f t h e same p l a n t s w i l l t a k e p l a c e i n y e a r s t and t ,. w i t h an 3 ' a d d i t i o n a l p l a n t i n t . U n d e r t h e i n t e g r a t i o n scheme i t i s u n l i k e l y t h a t a l l t h r e e p l a n t s w o u l d be b u i l t i n c o u n t r y A . The f i r m s o f t h e i n d u s t r y w i l l be d i v i d e d between A and B and i t i s q u i t e I i k e Iy t h a t B wi I I r e c e i v e i n d u s t r i e s t h a t i t would o t h e r w i s e n o t be a b l e t o s u p p o r t . C o u n t r y A wi I I e n j o y a l a r g e r d o m e s t i c m a r k e t and a s h o r t e r t i m e h o r i z o n f o r i t s i n d u s - t r i a l d e v e l o p m e n t . 81 . F i g u r e 5 . 8 8 2 . M o d i f i c a t i o n s o f M o d e l ' As we m e n t i o n e d e a r l i e r o u r s i m p l i f y i n g a s s u m p t i o n o f c o n s t a n t p r o - d u c t i o n a t MOS c a p c i t y w i l l now be d r o p p e d . In B a i n ' s s t u d i e s he i n d i - c a t e s t h a t t h e r e i s a range w i t h i n w h i c h a f i r m c a n o p e r a t e t o p r o d u c e a t t h e l o w e s t a t t a i n a b l e u n i t c o s t . How w i l l t h i s a f f e c t o u r P . C . c u r v e ? We w i l l m a i n t a i n t h e lower MOS bound o f x u n i t s b u t now e x t e n d t h e u p p e r l i m i t . T h e r e i s a c e r t a i n r a n g e o f p r o d u c t i o n beyond w h i c h c o s t s w i l l b e g i n t o r i s e and i t i s a t t h i s p o i n t t h a t we w i l l s t o p f u r t h e r p r o d u c - t i o n . A c a s e c o u l d be made t h a t e v e n t h o u g h u n i t c o s t w i l l r i s e a f t e r a c e r t a i n l e v e l : o f p r o d u c t i o n i s r e a c h e d , i t would s t i I I be w o r t h w h i l e t o p r o d u c e r a t h e r t h a n use f o r e i g n r e s e r v e s t o p u r c h a s e i m p o r t s . The s t r e n g t h o f t h i s a r g u m e n t depends on t h e l o c a l g o v e r n m e n t ' s f o r e i g n r e s e r v e p o s i - t i o n as w e l l as g o v e r n m e n t p o l i c y c o n c e r n i n g t h e t r a d e - o f f between e f f i - c i e n c y and p r o d u c t i o n . F o r o u r p u r p o s e , we s h a l l assume t h a t t h e company w i l l p r o d u c e o n l y w i t h i n t h e r a n g e o f l o w e s t a t t a i n a b l e u n i t c o s t . T h i s m o d i f i c a t i o n c a n be s e e n in f i g u r e 5 . 8 . The P . C . c u r v e has c h a n g e d i t s shape b u t has n o t c h a n g e d o u r a n a l y s i s . What in e f f e c t i t does i s t o i n f e r t h a t t h e MOS i s 50$ l a r g e r and t h e r e - . f o r e f e w e r p l a n t s a r e r e q u i r e d t o s a t i s f y t h e same l e v e l o f q u a n t i t y d e m a n - d e d . U s i n g t h i s P . C . c u r v e and i n t r o d u c t i o n o f a s e c o n d c o u n t r y , t h e model w i l l g i v e t h e same r e s u l t s ; .. ; i n c r e a s i n g t h e r a t e o f i n d u s t r i a l g r o w t h . A p p l i c a t i o n o f Model t o E a s t A f r i c a n C a s e , T o u t i l i z e t h e model t h e r e i s c e r t a i n i n f o r m a t i o n w h i c h must be a v a i l a b l e . In t h i s s e c t i o n we w i l l d i s c u s s t h i s p r o b l e m . F i r s t , f r o m t h e s u p p l y s i d e o f t h e model t h e most p e r t i n e n t d a t a i s t h e Minimum O p t i m a l S c a l e i n f o r m a t i o n . B a i n has p r o v i d e d us w i t h MOS s t a t i s t i c s f o r 20 i n d u s t r i e s i n t h e U . S . A . H i s c a l c u l a t i o n s were b a s e d 83. i on a 1949 c e n s u s of A m e r i c a n i n d u s t r y . ; T h e r e a r e o b v i o u s o b j e c t i o n s r a i s e d t o t h e use o f s u c h d a t a when d e a l i n g w i t h d e v e l o p i n g c o u n t r i e s . D i f f e r i n g l e v e l s of t e c h n o l o g y and q u a l i t y o f t h e l a b o u r f o r c e make t h e s e c a l c u l a t i o n s l e s s c r e d i b l e . 11 F o r t h i s r e a s o n we t u r n t o a s i m i l a r s t u d y done by M. M. M e t w a l l y w h i c h d e a l s w i t h t h e E g y p t i a n economy. In h i s s t u d y he c o n s i d e r s a n number o f m a n u f a c t u r i n g i n d u s t r i e s and e s t i m a t e s (1) t h e most e f f i c i e n t s c a l e o f p r o d u c t i o n w h i c h he d e f i n e s as " t h a t q u a n t i t y o f t h e p r o d u c t w h i c h must be p r o d u c e d t o e n a b l e t h e p l a n t t o work a t f u l l c a p a c i t y when u s i n g t h e b e s t a v a i l a b l e t e c h n i q u e s o f p r o d u c t i o n " , and (2) minimum e c o n o m i c s c a l e o f p r o d u c t i o n d e f i n e d as " t h e s c a l e o f p r o d u c t i o n a t w h i c h t h e a r t i c l e c a n be p r o d u c e d d o m e s t i c a l l y on a c o m p e t i t i v e b a s i s " . T h i s o u t p u t i s d e t e r m i n e d by t h e p o i n t a t w h i c h t h e c o s t o u t p u t c u r v e c u t s t h e i m p o r t p r i c e l i n e . T h e s e v a l u e s were c a l c u l a t e d f r o m s t u d i e s done i n t h e U . S . A . and t h e n " t r a n s p o s e d t o E g y p t t h r o u g h a p p r o p r i a t e a d - 12 j u s t m e n t s o f r e l e v a n t d a t a " . T a b l e 5 . 2 shows t h e minimum e c o n o m i c s c a l e o f p r o d u c t i o n f o r 55 m a n u f a c t u r i n g i n d u s t r i e s i n E g y p t . When we t u r n t o t h e demand s i d e o f o u r model t h e t a s k i s much h a r d e r . R e c a l l i n g o u r E x p e n d i t u r e f u n c t i o n 2>„ = 3„., * t>i )n we a r e a b l e t o i m m e d i a t e l y d e t e r m i n e two o f t h e t h r e e v a r i a b l e s . As we m e n t i o n e d e a r l i e r "3V<" ' s s i m p l y t h e q u a n t i t y demanded o f t h e commodity i n y e a r " »-i " . The v a r i a b l e y we wi I I assume i s g r o w i n g a t a c o n s t a n t r a t e . E a c h o f t h e t h r e e c o u n t r i e s w i l l have a d i f f e r e n t n a t i o n a l income g r o w t h b u t a l l w i l l be somewhere i n t h e r a n g e between 3 - 6 $ . T h a t l e a v e s o n l y one v a r i a b l e t o c o n s i d e r . Income e l a s t i c i t y ' b ' i s t h e o n l y v a r i a b l e f a c t o r . The v a l u e o f ' b ' w i l l c h a n g e from y e a r t o y e a r . In o r d e r t o a r r i v e a t some k i n d o f e s t i m a t e o f ' b ' , i t w o u l d be n e c e s s a r y t o r u n a 8 4 . T a b l e 5 . 2 E c o n o m i c S c a l e o f P r o d u c t i o n i n R e l a t i o n t o S i z e o f E g y p t i a n D o m e s t i c M a r k e t i n 55 M a n u f a c t u r i n g C o m m o d i t i e s A . 2. 3 . .4. 5 . 6 . .7 . I tern Food and K i n d r e d P r o d u c t s . C r e a m e r y B u t t e r . N a t u r a l C h e e s e Raw Cane S u g a r R e f i n e d Cane S u g a r B e e t S u g a r B e e r M a l t ce 9 . S o f t d r i n k s 10... M a c a r o n i & S p a g e t t i B . T o b a c c o P r o d u c t s I. C i g a r e t t e s C. T e x t i l e M i l l P r o d u c t s 1. P u r e C o t t o n Y a r n 2. Woven C o t t o n f a b r i c s ' 3 . Rayon y a r n & f i b r e s 4 . V i s c o s e y a r n 5 . M o t o r c a r c l o t h D. Lumber & Wood P r o d u c t s 1. PIywood , . 2. P a c k i n g c a s e s E . P a p e r and A l I i e d P r o d u c t s 1. C i g a r e t t e p a p e r 2. P a p e r c i g a r e t t e f i l t e r s 3 . V i s c o s e c i g a r e t t e f i l t e r s F . C h e m i c a l & A l l i e d P r o d u c t s . I. C h I o r o s u I p h o n i c a c i d 2. N i t r o b e n z e n e 3 . Ani Ii ne 4 . M a t c h e s 5 . Soap & d e t e r g e n t s ••",6. Ammonium n i t r a t e 7. P e t r o l e u m p r o d u c t s U n i t o f M e a s u r e m e n t t o n s - d o - - d o - t h . t o n s - d o - t h , h e c t o l i t r e s t h . t o n s t h . t o n s m i l l , b o t t I es. t h . t o n s bi i o n s t h . m e t r i c t o n s m i l l , m e t r e s m i l l , pands - d o - t o n s c u b i c m e t r e s t h o u s a n d s t o n s m i l l , - d o - r o d s t o n s - d o - - d o - t h , m i l l , s t i c k s m i l l . Ib s . t o n s o f ammonia c o n t e n t t h . b a r r e l s Economi c S c a l e o f P r o d , ( p e r annum) 747 5 , 3 5 - 1 , 0 7 1 7 , 3 5 6 - 1 4 , 7 1 2 360 2 1 - 5 2 1,970 3 3 - 6 6 158 6 - 15 7 - 17 4 - 3 5 5.7-1 I .4 3 0 . 7 - 7 6 . 7 2 6 - 6 4 I I N . A . 4 , 0 0 0 I , 150 I , 100 135 205 850 750 600 19-38 150-225 4 3 - 3 0 0 6 5 - 1 6 2 G. R u b b e r P r o d u c t s 1. T y r e s & t u b e s f o r c a r s 2. R u b b e r f o o t w e a r t h o u s a n d s t h . p a i r s 4050 4 , 7 2 5 - 1 1 , 8 0 0 8 5 . T a b l e 5 . 2 c o n t i n u e d I tern U n i t o f Measurement Econom i c S c a l e o f P r o d ( p e r annum) H . L e a t h e r P r o d u c t s I. L e a t h e r f o o t w e a r I. S t o n e , C l a y & G l a s s P r o d u c t s I. GI a s s b o t t l e s 2 . . C e m e n t , P o r t l a n d 3 . Gypsum p r o d u c t s 4 . C l a y f l o o r & w a l l t i l e s J . F a b r i c a t e d M e t a l P r o d u c t s 1. M e t a l C a s e s 2. M e t a l b a r r e l s 3 . Co I Iaps i bIe t u b e s K. M a c h i n e r y . E x c e p t E l e c t r i c a l I. A g r i c u l t u r a l t r a c t o r s ( a s s e m b l e d ) . 2. Ba I I & r o I I e r bea r i n.gs 3 . T y p e w r i t e r s t h . pa i r s m i l l , b o t t l e s • t h . t o n s - d o - t h , s q . f t . m i l l . t h o u s a n d s $ 1 , 0 0 0 N o . $ 1,000 t h o u s a n d s 577-1 , 154 N . A . 3 2 9 - 6 5 8 221 4 , 3 3 0 - 8 , 6 6 0 100-600 3 1 5 - 7 8 0 2 , 4 0 0 - 4 , 8 0 0 2 , 6 5 0 10,000- 2 0 , 0 0 0 154 . P r i m a r y M e t a l I n d u s t r i e s 1. P i g i ron 2. S t e e l ( f i n i s h e d ) 3 . S t e e l S h e e t s & s t r i p s 4 . P r i m a r y a l u m i n u m 5 . C o p p e r p r o d u c t s 6. E l e c t r o l y t i c Z i n c t h . t o n s - d o - - d o - - d o - - d o - . t o n s 700 600 206 4 0 - 8 0 ' I 5 - 3 0 8 , 6 0 0 M. E l e c t r i c a l M a c h i n e r y I. T r a n s f o r m e r s . 2 , M o t o r s & G e n e r a t o r s 3 . H o u s e h o l d r e f r i g e r a t o r s . 4 . H o u s e h o l d w a s h i n g m a c h i n e s 5. H o u s e h o l d vacuum c l e a n e r s 6 . P r i m a r y b a t t e r i e s , d r y 7. F l o u r e s c e n t lamps $ 1 , 0 0 0 - d o - . t h o u s a n d s -do-- - d o - mi I I i o n s t h o u s a n d s 1 7 , 0 0 0 - 4 3 , 0 0 0 1 9 , 0 0 0 - 4 6 , 0 0 0 240 2 0 3 - 5 0 9 2 0 8 - 5 6 0 18-35 N.A. N. T r a n s p o r t E q u i p m e n t I . C a r s ( a s s e m b l y ) t h o u s a n d s 6 0 - 1 8 0 8 6 . r e g r e s s i o n a n a l y s i s on c o n s u m p t i o n o f a p a r t i c u l a r commodity and t h e r e l e v a n t i n c r e a s e s i n income.. In t h i s way a t r e n d c o u l d be e s t a b l i s h e d as t o t h e f u t u r e b e h a v i o r o f ' b ' . U n f o r t u n a t e l y t h e s t a t i s t i c s f o r t h i s c a l c u l a t i o n a r e n o t a v a i l a b l e a t t h i s t i m e b u t i t w i l l be a f r u i t f u l e x e r c i s e t o c a l c u l a t e ' b ' and t h e n e x a m i n e q u a n t i t a t i v e l y t h e e f f e c t o f Z a m b i a n e n t r y i n t o t h e EACM. I t i s t h e hope o f t h e a u t h o r t o be i n E a s t A f r i c a i n t h e n e a r f u t u r e , where t h e r e q u i r e d d a t a c a n be more e a s i I y • e s t i m a t e d . T h u s t h e p u r p o s e o f t h i s c h a p t e r has been t o d e v e l o p a s o u n d t h e o - r e t i c a l model t h a t c a n be u s e d t o e s t i m a t e t h e e f f e c t o f i n t e g r a t i o n on i n d u s t r i a l d e v e l o p m e n t . 8 7 . CHAPTER VI C o s t c o n s i d e r a t i o n s o f p r o p o s e d i n t e g r a t i o n . In t h e p r e c e d i n g c h a p t e r s , we d i s c u s s e d and a t t e m p t e d t o q u a n t i f y the' b e n e f i t s o f Zambian e n t r y i n t o t h e common m a r k e t . Our a n a l y s i s would n o t be c o m p l e t e i f we d i d n o t s t o p t o c o n s i d e r t h e c o s t s i d e as w e l l . T h e r e f o r e , t h i s f i n a l c h a p t e r w i l l d e a l w i t h some o f t h e n e g a t i v e a s p e c t s of i n t e g r a t i o n . The f o r m a t o f t h e c h a p t e r w i l l be t o c o n s i d e r : (1) some o f t h e c o s t s o f i n t e g r a t i o n a c c r u i n g t o b o t h Z a m b i a n and t h e EACM c o u n t r i e s , i , (2) t h e s t e p s t h a t s h o u l d be t a k e n i n o r d e r t o m i n i m i z e t h e s e e f f e c t s . The f i r s t and most o b v i o u s n e g a t i v e e f f e c t i s t h e l o s s o f r e v e n u e i t h a t Z a m b i a w i l l s u s t a i n by d i v e r t i n g t r a d e f r o m S o u t h e r n R h o d e s i a and S o u t h A f r i c a t o t h e EACM c o u n t r i e s . As r e c e n t as 1968, a p p r o x i m a t e l y 33$ o f a l l Z a m b i a n i m p o r t s came from t h e s e t w o s o u r c e s . ^ In o r d e r t o e s t i m a t e t h e c u s t o m r e v e n u e c o l l e c t e d from t h e s e s o u r c e s we r e t u r n t o 2 o u r 1966 d a t a . T a b l e 6.1 s u m m a r i z e s t h e r e l e v a n t i n f o r m a t i o n . T h e s e c a l c u l a t i o n s were b a s e d on t h e i m p o r t e s t i m a t i o n s o f c h a p t e r f o u r . The u p p e r l i m i t c a l c u l a t i o n was based on a two d i g i t S . I . T . C . c l a s s i f i c a t i o n and t h e lower e s t i m a t e on a more d e t a i l e d e x a m i n a t i o n o f t h e f o u r d i g i t c l a s s i f i c a t i o n . The t a r i f f r a t e s t h a t were a p p l i e d were t h o s e p u b l i s h e d i n t h e t a r i f f s c h e d u l e o f t h e Z a m b i a n g o v e r n m e n t . " ' T h e r e was some d i f f i c u l t y f i n d i n g t h e a p p r o p r i a t e c u s t o m d u t y f o r e a c h commodity s i n c e t h e Z a m b i a n s c h e d u l e i s n o t b a s e d on t h e S . I . T . C . c l a s s i f i c a t i o n b u t o n . a d e s c r i p t i v e c o m m o d i t y by commodity b a s i s . T h u s , by m a t c h i n g t h e S . I . T . C . c o m m o d i t y d e s c r i p t i o n w i t h t h e r e l e v a n t t a r i f f r a t e we have a r r i v e d a t a c l o s e e s t i m a t i o n o f t h e t a r i f f r e v e n u e c o l l e c t e d . 8 8 . _ T a b l e 6.1 Z a m b i a n Revenue L o s s e s f o r R e l e v a n t Impact E f f e c t E s t i m a t i o n s S o u t h e r n S o u t h TOTAL Rhodes i a A f r i c a T h o u s . $ U S T o t a I i m p o r t s 6 4 , 9 0 4 - 8 3 , 9 3 6 U p p e r l i m i t e s t i m a t i o n o f i m p a c t e f f e c t 4 5 , 4 7 5 7 2 , 7 4 4 Revenue l o s s f o r U . L . e s t i m a t i on 6 , 1 0 4 . 8 6 . 6 , 9 8 5 . 2 1 3 , 0 9 0 . 0 6 Lower l i m i t e s t i m a t i o n o f i m p a c t e f f e c t 2 7 , 1 6 6 2 7 , 6 2 7 Revenue l o s s f o r L . L . est. i mati on 5 , 1 8 3 . 6 5 3 , 0 1 9 . 8 8 , 2 0 3 . 4 5 S o u r c e : U n i t e d N a t i o n s , Commodity T r a d e S t a t i s t i c s 1966 S e r i e s D, V o l . X V I , No. 1-36. T a b l e . 6.4 A d j u s t e d C a l c u l a t i o n o f T a r i f f Revenue L o s s e s S o u t h e r n S o u t h TOTAL Rhodes i a A f r i c a T h o u s . $ U S Upper l i m i t r e v e n u e l o s s 3 , 1 8 4 . 1 6 5 , 0 2 9 . 9 7 8 , 2 1 4 . 1 3 Lower l i m i t r e v e n u e l o s s 2 , 3 2 0 . 7 5 • 2 , 7 7 7 . 6 5 , 0 9 8 . 3 5 8 9 . An i n t e r e s t i n g o b s e r v a t i o n i s t h a t t h e r e i s n o t much d i f f e r e n c e i n r e v e n u e l o s s between t h e u p p e r and lower l i m i t s f o r R h o d e s i a , w h i l e f o r S o u t h A f r i c a t h e r e v e n u e l o s s more t h a n d o u b l e s . The r e a s o n f o r t h i s i s t h a t most o f t h e S o u t h A f r i c a n goods i n t h e lower l e v e l e s t i m a t e c a r r y a low t a r i f f r a t e o r a r e d u t y f r e e ( s e e t a b l e 6 . 2 ) w h i l e t h e l a r g e r e v e n u e e a r n e r s s u c h as c o m m o d i t i e s 110 ( a l c o h o l i c b e v e r a g e s ) , 710 ( m a c h - i n e r y ) , and 840 ( c l o t h i n g ) , were i n c l u d e d i n t h e u p p e r l i m i t e s t i m a t i o n ( t a b l e 6 . 3 ) . J u s t t h e o p p o s i t e - i s t h e c a s e f o r R h o d e s i a , h i g h r e v e n u e . e a r n i n g c o m m o d i t i e s s u c h as 122.3 ( m a n u f a c t u r e t o b a c c o ) i s i n c l u d e d i n b o t h e s t i m a t e s and i t was o n l y t h e f r e e o r n o m i n a l l y t a x e d goods t h a t a r e added t o make t h e u p p e r bound e s t i m a t e . We s h o u l d n o t e , h o w e v e r , t h a t t h e s e r e v e n u e l o s s f i g u r e s a r e n o t t r u l y r e p r e s e n t a t i v e . . E v e n i f t h e i m p o r t e f f e c t were c o m p l e t e i t w o u l d n o t mean s u c h a l a r g e r e v e n u e l o s s . Such g o o d s as l i q u o r , t o b a c c o and l u x u r y goods w h i c h c a r r y a h i g h i m p o r t r a t e w i l l n o t be t o t a l l y t a x f r e e i f i m p o r t e d f r o m EACM. C e r t a i n l y an e x c i s e t a x w o u l d be l e v i e d on t h e s e goods and t h u s m o s t , i f n o t a l l , t h e r e v e n u e l o s s on t h e s e goods would be r e c o u p e d . T h i s w o u l d n o t a f f e c t t h e t r a d e f l o w between t h e EACM and Z a m b i a , s i n c e E a s t A f r i c a n goods would s t i l l e n j o y a c o m f o r t a b l e l e v e l o f p r o t e c t i o n . A d j u s t i n g t h e c a l c u l a t i o n s f o r t h i s f a c t , r e s u l t s a r e shown i n t a b l e 6 . 4 ( t h e c a l c u l a t i o n s a r e d e t e r m i n e d by a s s u m i n g t h a t an e x c i s e t a x w i l l r e p l a c e t h e t a r i f f r a t e on s u c h c o m m o d i t i e s as p e r - fumes ( # 5 5 3 ) , m a n u f a c t u r e d t o b a c c o ( 1 2 2 . 3 ) , l i q u o r and w i n e ( # 1 1 0 ) ) . T h e s e v a l u e s a r e s u b s t a n t i a l l y lower t h a n t h e f i r s t s e t of f i g u r e s and t h e y r e p r e s e n t a t r u e r p i c t u r e o f t h e s i t u a t i o n . T h e n e x t q u e s t i o n t h a t must be c o n s i d e r e d i s , " t o what e x t e n t d o e s Z a m b i a r e l y on c u s t o m d u t i e . s as a s o u r c e o f r e v e n u e ? " As we m e n - t i o n e d e a r l i e r , Z a m b i a i s one o f t h e w o r l d ' s l e a d i n g p r o d u c e r s o f c o p p e r 9 0 . T a b l e 6 . 2 Lower L i m i t Impact A f f e c t E s t i m a t i o n & R e l a t e d Revenue L o s s S o u t h e r n R h o d e s i a S o u t h A f r i c a S . T . T . C . Amount T a r . R a t e Revenue Amount T a r . R a t e Revenue 0 0 1 . I 786 O h I . t 1108 5$ . 5 5 . 4 705 F r e e 01 1.3 454 5$ 2 2 . 7 F r e e 0 1 2 . 1 321 5$ 16.05 F r e e 0 1 3 . 8 782 20$ 156.4 F r e e 02 2 . 2 481 l i d / l b ; 12.4 02 3 . 160 F r e e 04 5 . 9 • 652 F r e e 04 6 453 5% 2 2 . 6 5 ' 04 8 . I 143 F r e e • 0 4 8 . 4 448 ' 20$ 8 9 . 6 0 05 1.9 151 F r e e 05 4 . 5 155 I d / l b . 3 4 . 8 05 .5. 195 20$ 3 9 . 0 291. 20$ 5 8 . 2 0 06 6. I 1602 5$ 8 0 . 1 0 06 2 . 448 . F r e e 07 I.I 120 5$ 6 , 0 07 3 . 244 F r e e 07 4 . I 126 2 d / l b . 4 . 8 07 5 . 2 132 10$ 13.2 09 I . 4 240 20$ • 4 8 . 0 09 9 . I I 178 5$ 5 8 . 9 0 y i . T a b l e 6 . 2 c o n t i n u e d S . R h o d e s i a S . A f r i c a S . T . T . C Amount T a r . R a t e Revenue Amount T a r . R a t e Revenue 12 2 . 3 2190 5 s h / l b . 2 8 6 2 . 9 0 d 24 2 . 2 '"205 F r e e 27 6 . 2 259 F r e e 29 2 . 5 665 F r e e 3 3 . 2 . 9 118 F r e e 183 F r e e 42 1.3 106 5$ 5 . 3 0 51 4. . 244 F r e e 53 3 . 3 278 20$ 5 5 . 6 0 309 F r e e 54 1.7 328 25$ 8 2 . 0 0 823 25$ 2 0 5 . 7 5 5 4 1 . 9 222 25$ 5 5 . 5 0 5 5> 3 . 692 35$ . 2 4 2 . 2 0 55 4.1 137 20$ 2 7 . 4 0 55 4 . 2 156 . 20$ 31 .20 256 20$ 51 .20 55 4 . 3 . 439 20$ 8 7 . 8 0 59 9 . 2 807 F r e e 59 9 . 5 200 5* 10.00 59 9.9. 730 5$ 3 6 . 5 0 62 9 . 1 • 506 5$ 2 5 . 3 0 1891 5$ 9 4 . 5 5 63 2 . 4 554 5$ 2 7 . 7 0 165 5$ 8 . 2 5 64 2. 1 1297 10$ 129.70 £51 ' 5$ 6 3 . 10 64 2 . 3 138 F r e e 259 F r e e 64 2 . 9 202 20$ 4 0 . 4 0 185 20$ 3 7 . 0 0 65 2 . 2 299 F r e e 131 F r e e 65 5 . 6 194 . F r e e 9 2 . Tab le 6 . 2 c o n t i nued S. R h o d e s i a . S. A f r i c a S . T . T . C Amount T a r . R a t e Revenue Amount T a r . R a t e Revenue 65 6 . I 395 F r e e 65 6 . 9 164 ; F r e e 66. 1.2 1156 5$ - 5 7 . 8 0 932 5$ 4 6 . 6 0 6 6 . 5 . 1 152 35$ 5 3 . 2 0 804 35$ 2 8 1 . 4 0 69 I.I 530 25$ 132.50 69 2 . 2 326 10$ 3 2 . 6 6 9 . 3 . 2 176 . 15$ 2 6 . 4 69 4 . 2 353 5$ , ' 17.65 415 5$ . 2 0 . 7 5 69 5.1 110 5$ 5 . 5 0 6 9 . 7 . 2 317 25$ 7 9 . 2 5 69,3. 928 5$ 4 6 . 4 837 5$ 4 1 . 8 5 7 1 . 2 . 2 124 . 5$ 6 . 2 0 7 1 2 . 9 143 5$ 7.15 414 5$ 2 0 . 7 0 71 9 . 8 326 . 5$ 16.3 1047 5$ 5 2 . 3 5 7 1 9 . 9 267 5$ 13.35 72 3.1 2396 5$ 119.80 502 5$ 2 5 . 1 0 .72 9 . 9 404 5$ 2 0 . 2 1265 5$ 6 3 . 2 5 7 3 3 . 3 769 5$ 3 8 . 4 5 587 5$ 2 9 . 3 5 8 1 2 . 4 145 25$ 3 6 . 2 5 8 2 1 . 584 30$ 2 9 . 2 0 910 30$ 2 7 3 . 0 0 831. 371 F r e e 841.1 1177 20$ 2 3 5 . 4 2845 20$ 5 6 9 . 0 0 8 4 1 . 4 ' 377 25$ 9 4 . 2 5 9 3 . T a b l e 6 . 2 c o n t i n u e d S . R h o d e si i a S. A f r i c a S . T . T . C Amount T a r . R a t e Revenue Amount T a r . R a t e Revenue 841 . 4 377 25$ 9 4 . 2 5 851 . 1728 15$ 2 5 9 . 2 1602 15$ 2 4 0 . 3 0 891 .2 169 ' 2 5 $ 4 2 . 2 5 8 9 2 . 9 366 10$ 3 6 . 6 0 368 .10$ 3 6 . 8 0 893 317 470 0 5 4 . 1 3 M F r e e T o t a 1 t h o u s . 2 7 , 166 $US 5 , 1 8 3 , 6 5 2 7 , 6 2 7 3 , 0 1 9 . 8 0 a . $ 3 3 / t o n , 376 t o n s . b . 2 2 $ / m e t r i c t o n , 1580 t o n s . c . 4 4 $ / m e t r i c , t o n , 109 t o n s . d . . $ I , 4 3 0 / m e t r i c t o n , 2002 t o n s . S o u r c e s : U n i t e d N a t i o n s ; Commodity T r a d e S t a t i s t i c s , 1966, S e r i e s D, V o l . X V I , N o . 1-36. R e p u b l i c o f Z a m b i a , I n t e r n a t i o n a l Customs J o u r n a l , M a r c h , 1965. y4. T a b l e 6 . 3 Upper L i m i t Impact E f f e c t E s t i m a t i o n & R e l a t e d R e v e n u e ' L e s s S . R h o d e s i a S . A f r i c a S . T . T . C Amount T a r . R a t e Revenue Amount T a r . R a t e Revenue 001 , 108 807 010 2861 5$ 145.05 F r e e 020 620 F r e e ' 203 040 815 20$ 163.00 1350 20$ 2 7 0 . 0 0 050 856 F r e e 1396 060 1693 5$. 527 5$ 090 1421 5$ 8 4 . 6 5 797 1 10 772 1649.8 a 1 10 10.07" b 120 2208 5 s h / l b . 2 , 8 6 2 . 9 0 240 210 F r e e 380 F r e e 270 • 246 F r e e 498 F r e e 2 9 0 : 716 F r e e 126 F r e e 330 253 F r e e 1948 F r e e 420 560 5$ 2 8 . 0 0 : 161 5$ 8 . 5 0 510 : 195 5% 9 . 7 5 651 5$ 3 2 . 5 5 530 36 1 F r e e 330 F r e e 541 426 25$ 106.50 1096 25$ 2 7 4 . 0 0 550 289 20$ 5 7 . 8 1527 • 20$ 3 0 5 . 4 0 581 497 : 5$ 2 4 . 8 5 599 265 5$ 13.25 1738 5$ 8 6 . 9 0 620 586 5$ 2 9 . 3 3242 •5$ 162.30 630 1220 5$ 61 . 0 0 400 5$ 2 0 . 0 0 640 2366 10$ 2 3 6 . 6 1846 10$ 184.60 650 2548 1944 • • • 660 2779 $ 5 . 5 0 / t o n 457.81 3563 3 5 4 . 5 0 670 1916 5$ 9 5 . 8 0 10692 5$ 5 3 4 . 6 0 680 198 5$ 9 . 9 0 918 5$ 4 5 . 9 0 690 4433 10$ 4 4 3 . 3 0 5019 10$ 5 0 1 . 9 0 710 1712 5$ 8 5 . 6 0 14520 5$ 7 2 6 . 0 0 Tab Ie 6 . 3 c o n t i nued ^ • T . T . C . Amount T a r . R a t e Revenue Amount T a r . R a t e Revenue S . R h o d e s i a S . A f r i c a 720 4727 5$ 2 3 6 . 3 5 3597' 5$ 179.85 730 2427 5$ 121.35 ' 5682 .5$ 2 8 4 . 1 0 812 600 25% 150.00 387 25$ 9 6 . 7 5 831 37 1 ... 840 1419 20$ 2 8 3 . 8 0 < 3720 20$ 7 4 4 . 0 0 851 1728 15$ 2 5 9 , 2 0 1 602 15$ 2 4 0 . 3 0 890 1561 10$ 156. 10 2158 10$ 2 1 5 . 8 : 070 197 5$ 9 . 8 5 650 5$ 3 2 . 5 T o t a 1 : t h o u s . 5 US 4 5 , 4 7 5 6 , 104.86 7 2 , 7 4 4 6 , 9 8 5 . 1 7 a . L i q u o r , 55-, 14 s h . / g a l . b . W i n e , 10 sh'-./gal . S o u r c e s : U n i t e d N a t i o n s , Commodity T r a d e S t a t i s t i c s , 1966, S e r i e s D, V o l . X V I , No. i - 3 6 R e p u b l i c o f Z a m b i a , I n t e r n a t i o n a l Customs J o u r n a l , M a r . , 1965. 9 6 . T a b l e 6 . 5 Z a m b i a n G o v e r n m e n t Revenue from I n d i r e c t T a x e s , 1966 Customs $ 2 1 . 5 6 E x c i s e 12.04 M i n e r a l R o y a l t i e s 110.88 C o p p e r E x p o r t t a x . 5 1 . 8 0 M o t o r S p i r i t t a x 1.96 M o t o r V e h i c l e l i c e n s e s 3 . 0 8 O t h e r I i c e n s e s .28. P r o f i t s o f g o v e r n m e n t e n t e r p r i s e Stamp Duty . 5 6 O t h e r 1.68 TOTAL 2 0 3 . 8 4 Mi 1.1 i o n s o f U S . $ S o u r c e : R e p u b l i c o f Zambia E c o n o m i c R e p o r t 1968 ( L u s a k a 1969) p . 93 Ta bIe 6 . 6 Revenue L o s s as p e r c e n t a g e .of t o t a l Customs Revenue and t o t a l I n d i r e c t T a x e s Revenue $ o f Custom $ o f t o t a l Revenue I n d i r e c t t a x r e v e n u e Lower e s t . 24$ 2 . 5 $ U p p e r e s t . 38$ ' 4$ 9 7 . and f o r t h i s r e a s o n d e r i v e s most o f i t s r e v e n u e i n t h e f o r m o f m i n e r a l r o y a l t i e s and c o p p e r e x p o r t t a x e s . O n l y 11$ o f a l l i n d i r e c t , t a x r e v e n u e comes from c u s t o m s d u t i e s , w h i l e o v e r 80$ i s d e r i v e d f r o m t h e two a b o v e m e n t i o n e d s o u r c e s ( t a b l e 6 . 5 shows t h e c o m p o n e n t s o f i n d i r e c t t a x r e v e n u e s f o r 1966). T a k i n g t h e l a t t e r e s t i m a t e s o f r e v e n u e l o s s i t r e p r e s e n t s o n l y 2 . 5 $ t o 4$ o f t h e t o t a l i n d i r e c t t a x r e v e n u e , a smaI I p r i c e t o pay f o r i n t e g r a t i o n . T h e r e w i l l a l s o be a n o t h e r r e v e n u e l o s s . U n d e r o u r p r o p o s e d i n t e g r a t i o n , Zambia w i l l f o r f e i t t h e r i g h t t o levy c u s t o m d u t i e s on EACM i m p o r t s . L o o k i n g a t t h e 1966 s t a t i s t i c s t h e l e v e l o f t r a d e was n o t s u f f i c i e n t t o c h a n g e t h e r e s u l t s o f t h e f i n d i n g s . F o r t h i s r e a s o n we wi I I s i m p l y c o n s i d e r t h e a b o v e m e n t i o n e d l o s s . T h i s l o s s o f r e v e n u e c a n be p r e s e n t e d as a s t r o n g a r g u m e n t f o r d e m a n d i n g (1) a s h a r e of r e g i o n a l l y b a s e d i n d u s t r y , and (2) l o a n i n g p r i v i l e g e s f r o m t h e E a s t A f r i c a n D e v e l o p m e n t Bank ( E A D B ) . In t h e p r e v i o u s c h a p t e r we d i s c u s s e d t h e n e c e s s i t y o f r e a c t i v a t i n g t h e C o u n c i l o f I n d u s t r i a l D e v e l o p m e n t , n o t o n l y f o r Z a m b i a ' s b e n e f i t b u t f o r t h e c o n t i n u e d o p e r a t i o n o f t h e EACM. C e r t a i n l y , Zambia w i l l r e c e i v e t h e s u p p o r t o f T a n z a n i a f o r i m p l e m e n t a t i o n o f s u c h a p l a n . •The EADB was e s t a b l i s h e d i n 1967 t o r e p l a c e t h e d i s t r i b u t i v e p o o l s e t up i n 1961 by t h e Raisman C o m m i s s i o n . The p u r p o s e o f t h e bank i s t o h e l p t h e ' h a v e n o t ' c o u n t r i e s o f t h e EACM, namely Uganda and T a n z a n i a . Zambia c o u l d e a s i l y s u b s c r i b e t o t h e EADB and have p r i v i I e g e d d r a w i n g r i g h t s as Uganda and T a n z a n i a . T h e e x a c t d e t a i l s a s t o t h e amount c o n t r i b u t e d and t h e p e r c e n t a g e o f w i t h - 9 8 . d r a w i n g r i g h t s would have t o be worked o u t by. t h e p a r t i c i p a t i n g " ^ " """~ c o u n t r i e s , b u t t h e EADB i s c e r t a i n l y a p o s s i b I e . t o o l t o be used t o c o m p e n s a t e Zambia f o r h e r l o s s o f r e v e n u e . A n o t h e r i m p o r t a n t c o n s i d e r a t i o n i s t h e e f f e c t i n t e g r a t i o n w i l l have on Z a m b i a n s m a l l s c a l e i n d u s t r i e s . If t h e t r a n s f e r t a x s y s t e m i s m a i n t a i n e d u n t i l i t s 1975 e x p i r y d a t e t h e n Z a m b i a n l o c a l i n d u s t r y w i l l r e c e i v e a c e r t a i n amount o f p r o t e c t i o n . B u t , more i m p o r t a n t , i s t h e f a c t t h a t most o f Z a m b i a ' s f u t u r e i n d u s t r i a l d e v e l o p m e n t w i l l be on a r e g i o n a l b a s i s . Z a m b i a , w i t h a p o p u l a t i o n o f 4 m i l l i o n o f w h i c h o n l y 9% a r e e m p l o y e d f o r money wages^, i s h a n d i c a p p e d by a v e r y s m a l l d o m e s t i c m a r k e t , and t h e r e f o r e t h e s c o p e f o r any l a r g e s c a l e ( p r o d u c t i o n ) i n d u s t r y i s v e r y s l i m . B u t now i n - d u s t r y c a n t a k e a d v a n t a g e o f . e c o n o m i c s o f s c a l e and s u p p l y a m a r k e t s e v e n t i m e s t h e s i z e o f i t s own d o m e s t i c m a r k e t . T h e r e f o r e , m o s t o f t h e f u t u r e i n d u s t r i a l d e v e l o p m e n t w i l l move i n . t h i s d i r e c t i o n . T h e r e w i l l a l s o be g r o w t h o f i n d u s t r i e s t h a t e n j o y a c e r t a i n g e o g r a p h i c a l p r o t e c t i o n . C e r t a i n l y t h e f o o d p r o c u r i n g i n d u s t r i e s and p a r t i c u l a r b u l k y c o n s u m e r g o o d s w i l l be p r o d u c e d l o c a l l y . T h u s , t h e o n l y f e a r l i e s i n t h e r e a l i z a t i o n t h a t some e x i s t i n g i n d u s t r i e s w h i c h a r e now o p e r a t i n g u n d e r t h e u m b r e l l a o f a p r o t e c t i v e t a r i f f may n o t be a b l e t o c o m p e t e w i t h EACM g o o d s a f t e r t h e s u s p e n s i o n o f t h e t r a n s f e r t a x . T h i s m i g h t be c o n s i d e r e d a s h o r t r u n c o s t b u t when we c o n s i d e r t h e l o n g r u n i n d u s t r i a l d e v e l o p m e n t o f t h e r e g i o n i t i s a b e n e f i t . From t h e EACM p o i n t of v i e w , t h e r e a r e v e r y few c o s t s i n v o l v e d . As we m e n t i o n e d e a r l i e r t h e EACM c o u n t r i e s i m p o r t v e r y l i t t l e f r o m Z a m b i a E v e n i f we were t o assume t h a t a l l t h e s e i m p o r t s were t a x e d 30% ( w h i c h i s a h i g h r a t e ) , t h e i m p o r t r e v e n u e l o s s w o u l d be l e s s t h a n ha I f - a - m i I I i o n d o l l a r s a y e a r . The g r e a t e s t c o s t t h a t t h e EACM w o u l d have t o b e a r i s 9 9 . t h e e x p e n d i t u r e s i n v o l v e d i n e x t e n d i n g t h e s e r v i c e s o f t h e EACSO t o Z a m b i a . ; The b u r d e n would be s h a r e d by Zambia s i n c e i t i s t h e r e c i p i e n t o f t h e s e s e r v i c e s . B u t t h e d i s t r i b u t i o n of c o s t s i s some- t h i n g t h a t w o u l d have t o be n e g o t i a t e d between t h e two p a r t i e s . T h i s l o g i c a l l y b r i n g s us t o o u r f i n a l p o i n t o f d i s c u s s i o n i n t h e t h e s i s . T h a t i s , "What s t e p s s h o u l d be t a k e n by Zambia t o w a r d s b e c o m i n g a member o f t h e EACM?" and f u r t h e r , "How w i l l t h e T r e a t y f o r E a s t A f r i c a n C o - o p e r a t i o n have t o be c h a n g e d t o accommodate Z a m b i a n a c c e s s i o n t o t h e common m a r k e t ? " F i r s t o f a l l , l e t us m e n t i o n c o n s t i t u t i o n a l and a d m i n i s t r a t i v e c h a n g e s . . B e s i d e s t h e s i m p l e s e m a n t i c s o f r e p l a c i n g t h e t e r m " t h r e e P a r t n e r S t a t e s " t o " f o u r P a r t n e r S t a t e s " , t h e r e a r e some b a s i c moves, t h a t must be made t o accommodate Z a m b i a n . e n t r y . The f i r s t and most o b v i o u s c h a n g e i s t h e i n c l u s i o n o f Z a m b i a n a u t h o r i t i e s on t h e a d m i n i s t r a t i v e C o u n c i l s . Z a m b i a w o u l d e l e c t an E a s t A f r i c a n m i n i s t e r and d e p u t y m i n i s t e r who would be f u l l - t i m e members o f t h e Common M a r k e t T r i b u n a l as w e l l as r e p r e s e n t a t i v e s t o t h e d i f f e r e n t a d m i n i s t r a t i v e c o m m i t t e e s . . . . The s t a n d a r d i z a t i o n o f Z a m b i a n t a r i f f r a t e s t o t h o s e o f t h e EACM c o u l d t a k e p l a c e o v e r a t r a n s i t i o n a l p e r i o d o f two o r t h r e e y e a r s . The E a s t A f r i c a n Customs and E x c i s e D e p a r t m e n t (EACED) has been t h e s i n g l e c o l l e c t o r o f i m p o r t d u t i e s and has t h e n d i s t r i b u t e d t h e f u n d s on a " c o u n t r y d e s t i n a t i o n " b a s i s . S i n c e most o f Z a m b i a n i m p o r t s come v i a T a n z a n i a (now by r o a d b u t i n f u t u r e by r a i l ) , e x t e n s i o n o f t h e f u n c t i o n s o f t h e EACED c o u l d e a s i l y be e x t e n d e d t o Z a m b i a n g o o d s w i t h o u t an g r e a t i n c r e a s e i n o p e r a t i o n a l c o s t s . T h e EACED i s an i m p o r t a n t s o u r c e o f d a t a f o r t h e a d m i n i s t r a t i o n o f t h e t r a n s f e r t a x s y s t e m , t h u s , i n o r d e r f o r Zambia t o t a k e a d v a n t a g e o f t h e t r a n s f e r t a x s y s t e m she must j o i n t h e EACED. 100. As we a r g u e d in t h e p r e v i o u s c h a p t e r , one of t h e f o r e m o s t p r e - c o n d i t i o n s o f Z a m b i a n e n t r y i n t o t h e Common M a r k e t s h o u l d i n c l u d e t h e g u a r a n t e e o f some r e g i o n a l l y b a s e d i n d u s t r y . Under t h e p r e s e n t T r e a t y s e t - u p , A r t i c l e , 2 3 , p a r a g r a p h 3 , s t a t e s : " . . . t h a t no a d d i t i o n s s h a l l be made t o t h e s c h e d u l e s o f a r t i c l e s , t h e m a n u f a c t u r e o f w h i c h is-, s u b j e c t t o i n d u s t r i a l l i c e n c i n g u n d e r t h e s a i d E a s t A f r i c a n I n d u s - t r i a l L i c e n c i n g L a w s " . T h i s s e c t i o n would have t o be amended t o accommodate Z a m b i a n demands. B e t t e r s t i l l , t h e w h o l e s e c t i o n c o u l d be r e p l a c e d by a new r e g i o n a l i n d u s t r i a I . p I a n w h i c h would be drawn up by t h e r e - a c t i v a t e d E a s t A f r i c a n I n d u s t r i a I C o u n c i I . ,, M e m b e r s h i p i n t h e E a s t A f r i c a n D e v e l o p m e n t Bank would r e q u i r e a m e n d i n g Annex 6 of t h e T r e a t y t o i n c l u d e Z a m b i a on some a g r e e d upon b a s i s . As we s a i d e a r l i e r i n t h e c h a p t e r , t h e EADB i s an i m p o r t a n t c o m p e n s a t o r y t o o l . A l s o n e g o t i a t i o n s must d e t e r m i n e t o what e x t e n t Z a m b i a w i l l p a r t i c i p a t e , i n t h e 27 s e r v i c e s o f f e r e d by t h e E a s t A f r i c a n Common S e r v i c e s O r g a n i z a t i o n . ^ (See t h e A p p e n d i x UT f o r t h e l i s t o f s e r v i c e s ) . By t a k i n g p a r t in EACSO, Z a m b i a c o u l d t a k e a d v a n t a g e o f e c o n o m i e s o f s c a l e t h a t w o u l d n o t be p o s s i b l e i f t h e s e s e r v i c e s were u n d e r t a k e n a l o n e . F i n a l l y , p a r t i c i p a t i o n i n t h e E a s t A f r i c a n C o r p o r a t i o n s g i v e s a d d e d b e n e f i t s t o Z a m b i a . The two c o r p o r a t i o n s t h a t d e a l w i t h g r o u n d and s e a t r a n s p o r t a t i o n ( i . e . E a s t A f r i c a n R a i l w a y s C o r p o r a t i o n and E a s t A f r i c a n H a r b o u r s C o r p o r a t i o n ) c o u l d be e a s i l y e x t e n d e d t o i n c l u d e Z a m b i a s i n c e Z a m b i a a l r e a d y d e p e n d s h e a v i l y upon t h e s e v e r y t r a n s p o r t f a c i l i t i e s . P a r t i c i p a t i o n i n t h e r e m a i n i n g two c o r p o r a t i o n s d e a l i n g w i t h a i r t r a v e l , p o s t and t e l e c o m m u n i c a t i o n s would be d e t e r m i n e d by j o i n t a g r e e m e n t and i m p l e m e n t e d d u r i n g t h e t r a n s i t i o n a l p e r i o d . 101 Z a m b i a , t h e r e f o r e , f i t s q u i t e w e l l i n t o t h e E a s t A f r i c a n c o m m u n i t y . Even t h o u g h t h e T r e a t y f o r E a s t A f r i c a n C o - o p e r a t i o n was t a i l o r e d s p e c i f i c a l l y f o r t h e needs o f t h e t h r e e p a r t i c i p a t i n g members o f t h e EACM, w i t h a few m i n o r a d j u s t m e n t s Z a m b i a c o u l d r e a d i l y be i n c l u d e d . N o t o n l y w i l l t h e e n t r y o f Z a m b i a b e n e f i t t h e EACM f i n a n c i a l l y , b u t a l s o t h e c h a n g e s demanded by Z a m b i a w i l l , i m p r o v e t h e w o r k i n g s o f t h e common m a r k e t and i n c r e a s e t h e c h a n c e s o f c o n t i n u e d s u c c e s s . B e f o r e t h e c o n c l u d i n g r e m a r k s , b r i e f m e n t i o n w i l l be made t o some o f t h e o t h e r a s p e c t s of i n t e g r a t i o n t h a t r e l a t e t o t h e m a j o r i s s u e s d i s c u s s e d a b o v e . . s One i m p o r t a n t c o n s i d e r a t i o n i s t h e e f f e c t cur p r o p o s e d i n t e g - r a t i o n w i l l have on t h e b a l a n c e o f payments p o s i t i o n of t h e c o u n t r i e s c o n c e r n e d . The i m m e d i a t e e f f e c t w i l l be an i n c r e a s e i n t h e v i s i b l e , e x p o r t s t o Z a m b i a f r o m ; b o t h T a n z a n i a and K e n y a . As f a r as Zambia i s c o n c e r n e d t h e r e w i l l s i m p l y be a s h i f t i n t h e s o u r c e o f h e r v i s i b l e i m p o r t s f r o m S o u t h A f r i c a and R h o d e s i a t o t h e EACM. In- t h e l o n g r u n i t i s hoped t h a t Z a m b i a ' s v i s i b l e e x p o r t s t o t h e EACM w i l l i n c r e a s e . As t h e e n t i r e r e g i o n d e v e l o p s i t s i n d u s t r i a l b a s e , i n t e r m e d i a t e and c a p i t a l goods w i l l become an i n c r e a s i n g l y l a r g e r s h a r e o f d o m e s t i c i m p o r t s w h i l e l o c a l m a n u f a c t u r e d goods w i l l be s u b - s t i t u t e d f o r c o m m o d i t i e s p r e v i o u s l y i m p o r t e d . I n t e g r a t i o n w i l l have a p o s i t i v e e f f e c t on t h e i n f l o w o f f o r e i g n i n v e s t m e n t . As t h e m a r k e t s i z e o f t h e community i n c r e a s e s b u s i n e s s o p p o r t u n i t i e s w i l l a p p e a r t h a t were p r e v i o u s l y n o t f e a s i b l e b e c a u s e o f t h e l i m i t e d s i z e o f t h e d o m e s t i c m a r k e t . One o f t h e b e n e f i t s o f d i r e c t f o r e i g n i n v e s t m e n t i s t h e i n c r e a s e d e x p o s u r e o f l o c a l a d m i n i s t r a t i o n t o new t e c h n o l o g i c a l a d v a n c e m e n t s and e n t r e p r e n e u r i a l s k i l l s . 102. One o f t h e m a i n p r o b l e m s o f i n t e g r a t i o n f a c i n g t h e E u r o p e a n . E c o n o m i c Community has been t h e h a r m o n i z a t i o n o f a g r i c u l t u r a l p o l i c i e s o f t h e member s t a t e s . F o r t u n a t e l y t h i s has n o t been t h e c a s e f o r E a s t A f r i c a . A l l t h r e e c o u n t r i e s i n t h e EACM were a g r i c u l t u r a l e x p o r t e r s and f o l l o w a c o - o r d i n a t e d a g r i c u l t u r a l p o l i c y . L o c a l demands a r e met by l o c a l p r o d u c t i o n . S i n c e Zambia i s an e x p o r t e r o f m i n e r a l p r o d u c t s t h e r e i s no need t o w o r r y a b o u t c o m p e t i n g e x p o r t s . As we m e n t i o n e d e a r l i e r Zambia i s s t r i v i n g t o become s e l f - s u f f i c i e n t i n f o o d p r o d u c t i o n . Most o f t h e a g r i c u l t u r a l p r o d u c t s i m p o r t e d from t h e s o u t h were d u t y f r e e , i f t h e E a s t / A f r i c a n a g r i c u l t u r a l goods a r e more c o s t l y t h e n t h i s w i l l s t i m u l a t e t h e d e v e l o p m e n t o f l o c a l a g r i c u l - t u r a l p r o d u c t i o n . F a c t o r m o b i l i t y w i l l n o t g r e a t l y be a f f e c t e d by Z a m b i a n e n t r y i n t o t h e EACM. A l t h o u g h a common m a r k e t by d e f i n i t i o n assumes f r e e movement o f c a p i t a l and l a b o u r such' has n o t been t h e c a s e i n E a s t A f r i c a . A f t e r t h e A r u s h a D e c l a r a t i o n when t h e banks were n a t i o n a l i z e d i n T a n z a n i a r e s t r i c t i o n s were p l a c e d on t h e movement o f c a p i t a l . T h i s was done t o s t o p t h e f l i g h t o f c a p i t a l w h i c h was o c c u r r i n g a f t e r i n d e p - e n d e n c e . S i m i l a r l y , t h e movement o f l a b o u r has been l i m i t e d . I n t e r - t e r r i t o r i a l m i g r a t i o n has been s l i g h t . A f r i c a n w o r k e r s h a v e t r a d i t i o n - a l l y been r e l u c t a n t t o move away f r o m t h e i r t r i b a l g r o u p s . When t h e y move f r o m t h e c o u n t r y t o t h e c i t i e s t h e y u s u a l ly l i v e i n a r e a s o f t h e c i t y p o p u l a t e d by t h e i r l o c a l t r i b e s m e n . F o r t h i s r e a s o n , m o b i l i t y o f l a b o u r has been l i m i t e d . F i n a l l y , we must c o n s i d e r t h e e f f e c t o f i n t e g r a t i o n on mone- t a r y and f i s c a l p o l i c y . S i n c e 1966 a l l t h r e e members o f t h e EACM have had s e p a r a t e b a n k i n g s y s t e m s and s e p a r a t e c u r r e n c y . I t w o u l d , t h e r e f o r e , n o t be d i f f i c u l t t o i n c o r p o r a t e t h e Z a m b i a n b a n k i n g s y s t e m w i t h t h e 103. a p p r o p r i a t e mechanism b e i n g s e t up t o f a c i l i t a t e r a p i d and e f f i c i e n t — e x c h a n g e o f c u r r e n c i e s . F i s c a l p o l i c y h a r m o n i z a t i o n would have t o be worked o u t between t h e c o n t r a c t i n g p a r t i e s . : Such n e g o t i a t i o n s w o u l d e n s u r e t h a t t h e Z a m b i a n t a x s y s t e m was in l i n e w i t h t h a t o f t h e EACM. T h i s would g u a r a n t e e e q u a l t r e a t m e n t of b u s i n e s s e n t e r p r i s e s r e g a r d l e s s o f where t h e y l o c a t e d w i t h i n t h e e x t e n d e d common m a r k e t . T h i s c h a p t e r has s e r v e d t o r o u n d o u t t h e d i s c u s s i o n o f t h e t o p i c by i n d i c a t i n g some o f t h e c o s t s i n v o l v e d , r e s u l t i n g from o u r " P r o p o s e d i n t e g r a t i o n " . The c o n d i t i o n s f o r Z a m b i a n e n t r y t h a t have been s u g g e s t e d , h o p e f u l l y w i l l m i n i m i z e t h e s e e f f e c t s a n d , t h e r e f o r e , i m p r o v e t h e c h a n c e s o f s u c c e s s . H a v i n g d i s c u s s e d t h e i m p o r t a n t a s p e c t s o f t h e i s s u e we c a n now t u r n t o t h e c o n c l u d i n g r e m a r k s . • •; CONCLUDING REMARKS T h r o u g h o u t t h i s s t u d y I have t r i e d t o p r e s e n t t o t h e r e a d e r t h e i m p o r t a n t i s s u e s f a c i n g b o t h Zambia and t h e E a s t A f r i c a n ' C o m m o n M a r k e t when c o n s i d e r i n g t h e q u e s t i o n o f f u r t h e r i n t e g r a t i o n . The a n a l y t i c a l t o o l s o f f e r e d by t r a d i t i o n a l c u s t o m u n i o n t h e o r y have l i m i t e d use s i n c e t h e y have been d e v e l o p e d w i t h t h e a d v a n c e d c o u n t r i e s i n m i n d . Our i n v e s t i g a t i o n has been l i m i t e d t o e x a m i n i n g t h e i s s u e s t h a t a r e o f p a r t i c u l a r i m p o r t a n c e t o t h e c o n t r a c t i n g p a r t i e s ' . The e m p i r i c a l s t u d y has shown T a n z a n i a w i l l be t h e l a r g e s t g a i n e r w i t h an i m m e d i a t e i n c r e a s e i n h e r GDP o f between 7 . 3 $ t o 1 3 . 9 $ . A s m a l l e r i m p a c t e f f e c t i n t h e r a n g e o f 5 .1$ t o 10.8$ w i l l be e n j o y e d by K e n y a . T h i s f a c t , c o m b i n e d w i t h t h e hope o f some t y p e o f r e g i o n a l l y p l a n n e d i n d u s t r i a l d e v e l o p m e n t w i l l i n c r e a s e t h e h a r m o n y . a n d s a t i s f a c t i o n .104. w i t h i n t h e EACM. F o r t h e E a s t A f r i c a n Common M a r k e t as a w h o l e t h e r e i s hope f o r i n c r e a s e d r a t e o f e c o n o m i c g r o w t h . W i t h a l a r g e r m a r k e t , a b r o a d e r e x p o r t b a s e , and t h e l i k e l i h o o d o f i n c r e a s e d r a t e of i n - d u s t r i a l i z a t i o n t h e c h a n c e s f o r s u c h an o c c u r r e n c e a r e , g r e a t l y i m - p r o v e d . F o r Z a m b i a t h e p r o p o s i t i o n . i s e q u a l l y a t t r a c t i v e . One of t h e g r e a t e s t s t u m b l i n g b l o c k s t o Z a m b i a n e c o n o m i c d e v e l o p m e n t w i l l be o v e r c o m e . The s m a l l s i z e o f t h e d o m e s t i c m a r k e t w i l l no l o n g e r be an o b s t a c l e t o d e v e l o p m e n t . W i t h r e g i o n a l l y b a s e d i n d u s t r y , f r e e r a c c e s s t o w o r l d m a r k e t s ( E . E . C . ) and a more r a t i o n a l use o f s k i l l e d manpower . ( t h r o u g h p a r t i c i p a t i o n i n EACSO) t h e b e n e f i t s o f i n t e g r a t i o n a r e l i k e l y t o o u t w e i g h t h e p o s s i b l e loss o f c u s t o m s r e v e n u e . T h e r e f o r e , o u r s t u d y has shown t h a t b o t h t h e EACM and Z a m b i a w i l l e n j o y n e t g a i n s f r o m o u r p r o p o s e d i n t e g r a t i o n . A p r a c t i c a l a p p r o a c h has been s u g g e s t e d and t h e q u e s t i o n i s now up t o t h e p a r t i e s c o n c e r n e d . I n t e r e s t has been shown on b o t h s i d e s and i t i s a p p r o p r i a t e t o c o n c l u d e t h e s t u d y w i t h t h e words o f P r e s i d e n t K e n n e t h Kaunda e x p r e s s - i n g h i s g e n u i n e d e s i r e f o r s u c h a u n i o n , "I p l e d g e f o r m y s e l f and my G o v e r n m e n t t h a t , where a p r a c t i c a l a p p r o a c h w i l l l e a d t o f r u i t f u l c o - o p e r a t i o n , we s h a l l be t h e f i r s t t o s i e z e i t . " / 105.' FOOTNOTES INTRODUCTION 1. A d d r e s s g i v e n by H . E . D r . K e n n e t h K a u n d a , P r e s i d e n t o f t h e R e p u b l i c o f Z a m b i a , d e l i v e r e d a t t h e S u b - r e g i o n a l M e e t i n g on E c o n o m i c C o - o p e r a t i o n i n E a s t A f r i c a h e l d December 10, 1965, s p o n s o r e d by t h e E c o n o m i c C o m m i s s i o n f o r A f r i c a ( E C A ) . U . N . E / C N , 14/346. 2. E l l i o t , C . T h e Z a m b i a n Economy. E a s t A f r i c a J o u r n a l , D E c / 6 8 , p . 1 5 . CHAPTER 1 1. V i n e r , J . T h e Custom U n i o n I s s u e , New Y o r k , C a r n e g i e Endowment f o r I n t e r n a t i o n a l P e a c e , 1950. 2. Makower, H . , and M o r t o n , G . A C o n t r i b u t i o n T o w a r d s a T h e o r y o f Custom Un i o n s . E c o n o m i c J o r n a l ( E J ) , V o l . L X I I , M a r / 5 3 , p p . 3 3 - 4 9 . 3 . L i p s e y , R . G . The T h e o r y o f C u s t o m U n i o n s : T r a d e D i v e r s i o n and W e i - . f a r e . E c o n o m i c a , V o l . XXIV ( I ) , . N o . 9 3 , F e b / 5 7 . 4 . Meade, J . E . The T h e o r y o f Custom U n i o n s , N o r t h H o l l a n d P u b l i s h i n g C o . , A m s t e r d a m , 1956. < • 5 . G e h r e l s , F . Custom U n i o n s f r o m a S i n g l e C o u n t r y V i e w p o i n t , Review o f E c o n o m i c S t u d i e s , V o l . XXIV ( I ) , 1956-7. 6 . L . i p s e y , R.G.. M r . G e h r e l on Custom U n i o n s , Review o f E c o n o m i c S t u d i e s , V o l . XXIV ( 3 ) , N o . 6 5 , 1956-7, pp.21 1-214. 7. Meade, J . E . o p . c i t . . , 8 . I b i d . , p p . 107-1 15. 9 . L i p s e y , R . G . The T h e o r y o f Custom U n i o n s : A G e p n e r a l S u r v e y , E J , S e p t / 7 0 . 10. I b i d . , p p . 5 0 6 - 7 . 11. I b i d . , p . 5 0 8 . 12. O t h e r s o u r c e s o f comment on t r a d i t i o n a l c u s t o m s u n i o n t h e o r y a r e : S p r a o s , J . .The C o n d i t i o n s f o r a T r a d e C r e a t i n g Custom U n i o n . , E J , V o l . L X X I V , M a r / 6 4 , p p . 1 0 1 - 1 0 8 . . . . M i s h a n , E . J . T r a d e C r e a t i n g Customs U n i o n s - A Comment. E J , V o l . LXXV, M a r / 6 5 , p p . 2 3 8 - 4 0 . M i c h a e l y , M. On Customs U n i o n s and Gains 1 f r o m T r a d e . E J , V o l . LXXV, S e p t / 6 5 , p p . 5 7 7 - 8 3 . M a s s e l l , B . F . , and C o o p e r , C A . A New Look a t Custom U n i o n T h e o r y , E J , V o l . LXXV, D e c / 6 5 , p p . 7 4 8 , 5 8 . M i s h a n , E . J . The W e l f a r e G a i n s o f a T r a d e D i v e r t i n g Custom U n i o n R e i n t e r p r e t e d . EJ . V o l . LXXV I., S e p t / 6 6 , p p . 669-71 . 106. Kemp, M . C . The w e l f a r e g a i n s o f a t r a d e - d i v e r t i n g Custom Un i or.: Corrynen;-, EJ , V o l . L X X V M , S e p t 6 7 , p p . 6 5 2 - 3 . ' M a s s e l l , B . F . A R e p l y ; and F u r t h e r T h o u g h t s on Customs U n i o n s , E J , V o l . L X X V M I, D e c / 6 8 , p p . 9 7 9 - 8 1 . D ' A r g e , R. Note on Customs U n i o n s and D i r e c t F o r e i g n I n v e s t m e n t , E J , V o l . L X X I X , J u n e / 6 9 , p p . 3 2 4 - 3 4 . J o h n s t o n , H . G . ' T h e E c o n o m i c T h e o r y o f Custom U n i o n s ' i n Money T r a d e and E c o n o m i c G r o w t h , Unwin U n i v e r s i t y B o o k s , . A l l e n and Unwin L t d . , L o n d o n , 1964, p . 4 6 . 13. B a l a s s a , B . T r a d e C r e a t i o n and T r a d e D i v e r s i o n i n t h e E u r o p e a n Common M a r k e t . E J , V o l . L X X V M , M a r / 6 7 , p p . 1-22. B e n t i c k , B , L . E s t i m a t i n g T r a d e C r e a t i o n and. T r a d e D i v e r s i o n . E J , V o l . L X X I M , J u n e / 6 3 , p p . 2 I 9 - 2 5 . 14. L i p s e y , R . G . The t h e o r y o f Customs U n i o n s : A g e n e r a I T h e o r y , o p . c i t . p . 4 9 6 . 15. C o o p e r , C A . and M a s s e l l , B . F . T o w a r d s a G e n e r a l T h e o r y o f Customs U n i o n s f o r D e v e l o p i n g C o u n t r i e s . J P E , O c t / 6 5 . 16. I b i d . - CHAPTER 2 1. R a i s m a n , J . E a s t A f r i c a - R e p o r t o f E c o n o m i c and F i s c a l C o m m i s s i o n , J u l y / 6 0 . 2. I n t e r n a t i o n a l M o n e t a r y F u n d . S u r v e y o f A f r i c a n E c o n o m i e s . V o l . I I , W a s h i n g t o n , D . C , 1969, p . 7 5 . 3 . . I b i d . , p . 7 6 . 4 . B r o w n , A . J . C u s t o m U n i o n V e r s u s E c o n o m i c S e p a r a t i s m i n D e v e l o p i n g C o u n t r i e s , P a r t s I and 2, Y o r k s h i r e B u l l e t i n o f E c o n o m i c a n d ' / , S o c i a l R e s e a r c h , May/61 & N o v / 6 1 . . , 5 . G h a i , D . P . T e r r i t o r i a l D i s t r i b u t i o n o f B e n e f i t s and C o s t s o f t h e E a s t A f r i c a n Common M a r k e t , i n Ley and R o b s o n . 6. N e w l y n , W . T . G a i n s and l o s s e s i n t h e E a s t A f r i c a n Common M a r k e t , Y o r k s h i r e B u l l e t i n , N o v / 6 5 . 7. H a z l e w o o d , A . The E a s t A f r i c a n Common M a r k e t : I m p o r t a n c e and E f f e c t s . B u l l e t i n o f O x f o r d U n i v e r s i t y I n s t i t u t e o f E c o n o m i c s and S t a t i s t i c s , F e b / 6 6 . H a z l e w o o d , A . The S h i f t a b i l i t y o f I n d u s t r y and t h e Measurement o f G a i n s and l o s e s i n t h e E a s t A f r i c a n Common M a r k e t . Y o r k s h i r e Bui l e t i n , M a y / 6 6 . 107. CHAPTER 3 1. U . S . D e p a r t m e n t o f Commerce. F o r e i g n E c o n o m i c T r e n d s , 7ambia., A m e r i c a n E m b a s s y , L u s a k a , A p r i l / 4 / 6 9 , p . 3 . 2. B a l d w i n , R . E . E c o n o m i c D e v e l o p m e n t and E x p o r t G r o w t h , p . 1.41. 3 . Ib i d . , p . I 4 3 . 4 . I n t e r n a t i o n a l M o n e t a r y F u n d , ' S u r v e y s o f A f r i c a n E c o n o m i e s , p . 2 2 0 . 5. R e p u b l i c o f T a n z a n i a , B a c k g r o u n d t o t h e B u d g e t , p . 1 9 . 6. - I b i d . , p . 8 . 7. G u i l l e b a u d , E . W . An E c o n o m i c S u r v e y o f S i s a l I n d u s t r y o f T a n g a n v i k a . . L o n d o n , 1958, c i t e d i n R u t t e n b e r g , A g r i c u l t u r a l D e v e l o p m e n t i n T a n z a n i a , p . 1 3 . 8. O p . c i t . f t n t . 4 , V o l . 2, p . 1 4 8 . 9 . U . S . D e p a r t m e n t o f Commerce: O . B . R . B a s i c D a t a on t h e Economy o f Zambi a , D e c / 6 8 , p . 19.. 10. I b i d . , p . 7 . I I . . . In 1 9 6 7 . t h e r e were 83 e s t a b l i s h m e n t s e m p l o y i n g a p p r o x i m a t e l y 10$ o f t h e t o t a l l a b o u r i n t h e m a n u f a c t u r i n g s e c t o r w h i c h d e a l t w i t h a s s e m b l y . a n d r e p a i r o f t r a n s p o r t e q u i p m e n t , E c o n o m i c R e p o r t , 1969. 12. I K = I , 4 $ U S . E c o n o m i c R e p o r t . , I 9 6 9 , p . 1 6 0 . 13. In 1968 Z a m b i a i m p o r t e d i n m a n u f a c t u r e d g o o d s ; B e v e r a g e s & T o b a c c o 2,171 C h e m i c a l s . 2 2 , 6 4 5 M a n u f a c t u r e d goods . • 74,116 M a c h i n e s & T r a n s p o r t E q u i p m e n t 134,444 M i s c e l l a n e o u s M a n u f a c t u r e d g o o d s 2 3 , 9 5 6 T o t a l • . 2 5 7 , 3 3 1 , 0 0 0 K. I'4. U n i t e d N a t i o n s , I n d u s t r i a l D e v e l o p m e n t , . A f r i c a . N . Y . , 1966. 15. R e p u b l i c o f T a n z a n i a , News R e l e a s e , S e p t / 6 8 . 16. F o r e x a m p l e , i n 1966, t h e Zambian g o v e r n m e n t c r e a t e d an i n d e p e n d e n t Z a m b i a n r a i l r o a d . A l s o i n 1967 t h e C e n t r a l A f r i c a n A i r w a y s , w h i c h c o n s i s t e d o f A i r R h o d e s i a , A i r Malawi and Z a m b i a n A i r w a y s was d i s - s o l v e d and s e p e r a t e c o m p a n i e s were e s t a b l i s h e d . U . S . O . B . R . B a s i c d a t a on Economy o f Z a m b i a , J D e c / 6 8 , p . 1 6 . 17. R i v k i n , A. A f r i c a and E u r o p e a n Community F i n a n c e and D e v e l o p m e n t , J u n e / 6 6 , p . 1 2 6 . . 108. 18. EEC p u b l i c a t i o n , B u l l e t i n o f E u r o p e a n C o m m u n i t i e s , A u g / 6 9 , p . 2 4 , i.9. Roche r e a u , • H . S i g n i f i c a n c e o f t h e new a g r e e m e n t s tone I uded w i t h t h e AASM and t h e E a s t A f r i c a n C o m m u n i t y . B u l l e t i n o f E u r o p e a n C o m m u n i t i e s , S e p t / 0 c t / 6 9 , p . 8 . 2 0 . . B u l l e t i n o f E u r o p e a n C o m m u n i t i e s , A u g / 6 9 , p . 2 1 . 2 1 . K a u n d a , D r . K. A d d r e s s by H . E . D r . K e n n e t h K a u n d a , P r e s i d e n t o f t h e R e p u b l i c o f Z a m b i a , i n UCA R e p o r t o f t h e • S u b - r e g i o n a I M e e t i n g on E c o n o m i c E o - o p e r a t i o n in. E a s t . A f i f i c a . Annex I I I , D e c / 1 0 / 6 5 . .CHAPTER 4 1. T r e a t y f o r E a s t A f r i c a n C o - o p e r a t i o n , P r i n t e r , N a i r o b i , K e n y a , on b e h a l f o f t h e E a s t A f r i c a n ~ C o m m o n S e r v i c e O r g a n i z a t i o n , J u n e / 6 / 6 7 . 2. U n i t e d N a t i o n s , F o r e i g n T r a d e S t a t i s t i c s o f A f r i c a . S e r i e s B . , J a n ^ D e c / 1 9 6 6 , N o . . 13, E / C N . I 4 / S T A T / S e r B / 1 3 . 3 . C l a r k , P a u l G . D e v e l o p m e n t P l a n n i n g i n E a s t A f r i c a , M a k e r e r e I n s t i t u t e o f S o c i a l R e s e a r c h , K a m p a l a , 1965. 4 . G r a y , C l i v e S . D e v e l o p m e n t P l a n n i n g i n E a s t A f r i c a : A Review A r t i c l e , E a s t A f r i c a n ' E c o n o m i c R e v i e w , D e c / 6 6 , . p p . I - 1 7 . 5 . I b i d . , p . 4 . 6 . I b i d . , p . 6 . 7. C l a r k , P a u l , o p . c i t . f t . n t . 3 , p . 7 0 . • 8 . Z a m b i a n M o n t h l y D i g e s t , S e p t / 6 9 , p . 17. ' 9 . U . S . D e p a r t m e n t o f Commerce. F o r e i g n E c o n o m i c T r e n d s and T h e i r I m p l i - c a t i o n s f o r t h e U n i t e d S t a t e s , Z a m b i a , L u s a k a , p . 7 . 10. Of t h e 7 2 0 , 0 0 0 , 0 0 0 $US o f c o p p e r e x p o r t s i n 1968, 2 4 0 , 0 0 0 , 0 0 0 was e x p o r t e d t o B r i t a i n and 2 4 6 , 0 . 0 0 , 0 0 0 t o E . E . C , Z a m b i a n G o v e r n m e n t E c o n o m i c R e p o r t , 1969. 11. T h e p o p u l a t i o n o f Z a m b i a i s 4 , 0 0 0 , 0 0 0 and 75$ i s e m p l o y e d i n t h e s u b s i s t e n c e s e c t o r . CHAPTER 5 1. U s i n g t h e 1966 s t a t i s t i c s a v a i I a b I e , Kenya p r o d u c e s 60$ o f t o t a l m a n u f a c t u r e d o u t p u t e x c l u d i n g m i n i n g . 2. I . B . R . D . . The e c o n o m i c d e v e l o p m e n t o f K e n y a , p . 1 5 1 . 109. 3 . T r e a t y f o r E a s t A f r i c a n C o - o p e r a t i o n . A r t i c l e 2. I • • •• ' '•" /4. D i a m o n d , P e t e r A. E f f e c t i v e P r o t e c t i o n o f t h e E a s t A f r i c a n T r a n s f e r / T a x , p . 3 7 - 4 7 . . 5 . il b i d . , p . 4 3 . ' 6.. E a s t A f r i c a n T r e a t y f o r E c o n o m i c C o - o p e r a t i o n . 7. Raisman C o m m i s s i o n R e p o r t , p . 2 9 . 8 . A summary o f t h e Kampala Agreement has been p r i n t e d in t h e E a s t A f r i c a n J o u r n a l , A p r i l / 6 5 , and A p p e n d i x 2 g i v e s t h e d u t i e s , o f t h e p r o p o s e d C o m m i t t e e . . 9 . In 1966 i n t e r t e r r i t o r i a I t r a d e i n m a n u f a c t u r e d . g o o d s and m i n e r a l f u e l s made up 12.2% o f K e n y a ' s d o m e s t i c e x p o r t s w h i l e Uganda and T a n z a n i a ' s s h a r e s a r e 51$ and 17$ r e s p e c t i v e l y . 10. L e i b e n s t e i n , H . E c o n o m i c B a c k w a r d n e s s and E c o n o m i c G r o w t h , p . 4 0 . I t . M e t w a l l y , M.M. T h e E f f e c t s o f M a r k e t L i m i t a t i o n s on I n d u s t r i a l - . . i z a t i o n i n E g y p t , E i n - S h a m s U n i v e r s i t y , C a i r o . CHAPTER 6 1. R e p u b l i c o f Z a m b i a , E c o n o m i c r e p o r t , . 1.969, p . 6 4 . 2. U n i t e d N a t i o n s , Commodity T r a d e S t a t i s t i c s , S T / S T A T / S E R D / 5 9 - B 6 . 3 . - I n t e r n a t i o n a l Customs J o u r n a I , R e p u b l i c o f Z a m b i a , B r u s s e l s , M a r / 6 5 . 4. U . S . D e p a r t m e n t o f Commerce O v e r s e a s B u s i n e s s R e p o r t . B a s i c D a t a on t h e Economy o f Z a m b i a , D e c / 6 8 , p . 1 9 . 5 . U . N . , o p , c i t . , f t n t . 2. 6 . T r e a t y f o r E a s t A f r i c a n C o - o p e r a t i o n , Annex IX, A r t i c l e . 2 3 , p a r t A 7. F o o t n o t e No. 1 i n I n t r o d u c t i o n . APPFNDIX I I 1. R e s i d e n c e L a b o u r e r ' s O r d i n a n c e o f 1937. 2. C a r s o n , J . B . The A d m i n i s t r a t i o n o f Kenya C o l o n y and P r o t e c t o r a t e , N a i r o b i , I 9 5 I , p . 9 . 3 . E c o n o m i c and- F i n a n c e C o m m i t t e e , G o v e r n m e n t and P r o t e c t o r a t e o f K e n y a . I n t e r i m R e p o r t , I925, p . 2 - 7 , q u o t e d i n S . K . A a r o n o v i t c h , C r i s i s i n K e n y a , L o n d o n , I946, p . 9 9 . 110. 4 . F o r e s t e r , M.W. Kenya T o d a y : S o c i a l P r e r e q u i s i t e ? f o r E c o n o m i c D e v e I o p m e n t . The H a g u e , 1962, p . 7 3 . 5 . R u t h e n b e r g , H a n s . A f r i c a n A g r i c u l t u r a l P r o d u c t i o n Deve1opment P o 1 i c y . in K e n y a . 1952-1965, p . 5 . 6 . D o u g l a s , D o r o t h y W. S t r u c t u r e and A d v i c e : A C a s e o f K e n y a , A m e r i c a n J o u r n a l o f E c o n o m i c s and S o c i o l o g y , O c t / 6 5 . 7. R u t h e n b e r g , H . o p . c i t . 8. I b i d . 9 . ' R u t h e n b e r g , H . A g r i c u l t u r a l D e v e l o p m e n t i n T a n g a n y i k a , p . 1 6 . 10. N y e r e r e , J . P r i n c i p l e s o f D e v e l o p m e n t ( a p p e n d i x ) . II.. G u l l i v e r , P . H . Land S h o r t a g e , S o c i a l Change Among t h e H y a k y u s a , E a s t A f r i c a n S T u d i e s #11, E a s t A f r i c a n I n s t i t u t e o f S o c i a l S t u d i e s . 12. N y e r e r e , J . _Ujamae - The B a s i s of A f r i c a n S o c i a l i s m , r e p r i n t e d from F r e e d o m and U n i t y , L o n d o n , 1967. 13. N y e r e r e , J . 1963 M c D o u g a l l L e c t u r e t o t h e Food and A g r i c u l t u r a l • O r g a n i z a t i o n , r e p r i n t e d i n Freedom and U n i t y . 14. S a u l , J . S . . M a r k e t i n g C o - o p e r a t i v e s in D e v e l o p i n g C o u n t r i e s , T h e T a n z a n i a n C a s e . C o n f e r e n c e a t U n i v e r s i t y o f S u s s e x , March 31 t o A p r i I 3 / 6 9 . 15. I b i d . , p . 7 - 8 . 16. R e p o r t o f t h e P r e s i d e n t i a l S p e c i a l C o m m i t t e e o f E n g u i r y i n t o C o - o p e r a t i v e Movement and M a r k e t i n g B o a r d s , Dar es S a l a a m , 1966, P-9. . . . 17. It was r e p o r t e d by a s t u d e n t r e s e a r c h e r on t h e a c c u m u l a t e d h o l d i n g s o f one U n i o n P r e s i d e n t , f o r e x a m p l e , who s t a r t e d from a low income base and i n a few y e a r s had a c q u i r e d "one T o y o t a c a r , two t r a c t o r s , a house and a b a r , w i f e ' s h o u s e , one Isuzu l o r r y , c a n o e s (two) and f i s h n e t s " w i t h t h e l o w e s t e s t i m a t e d va.l ue a t 8 6 , 0 0 0 s h i l l i n g s . S a u l , J . S . O p . c i t . , p . 9 , f t n t 2 6 . 18. S a u l , J . S . Op. c i t . 10. APPENDICES A P P E N D I X 1 A The f o l l o w i n g i s a breakdown o f , t h e o f f i c e s and s e r v i c e s o f t h e E a s t A f r i c a n Common S e r v i c e s O r g a n i z a t i o n : a) T r a n s p o r t and C o m m u n i c a t i o n S e r v i c e s 1 Ra.i Iway . i n land and h a r b o u r s t o g e t h e r wi t h • a s s o c i a t e d r o a d s e r v i c e s and s h i p p i n g 2 P o r t s and- t e l e c o m m u n i c a t i o n s 3 A i r t r a n s p o r t 4 C i v i l a v i a t i o n and m e t e o r o l o g i c a l s e r v i c e s b) Revenue C o l l e c t i o n . 5 Customs and e x c i s e c o l l e c t i o n 6 Income t a x a s s e s s m e n t and c o l l e c t i o n c ) E c o n o m i c and S t a t i s t i c a l S e r v i c e s .7 D e p a r t m e n t o f E c o n o m i c c o - o p e r a t i o n and E a s t A f r i c a r e p r e s e n t a t i v e s o v e r s e a s 8 - S t a t i s t i c a l s e r v i c e s d) R e s e a r c h S e r v i c e s 9 A g r i c u l t u r a l and f i s h e r i e s r e s e a r c h s e r v i c e s 10 . M e d i c a l r e s e a r c h s e r v i c e s . 11 I n d u s t r i a l r e s e a r c h 12 R e s e a r c h by M e t e o r o l o g i c a l D e p a r t m e n t e ) O t h e r S p e c i f i c S e r v i c e s .13 E a s t A f r i c a n l i t e r a t u r e b u r e a u 14 E a s t A f r i c a n h i d e and l e a t h e r b u r e a u 15 D e s e r t l o c u s t s u r v e y 16 R o y a l E a s t A f r i c a n Navy 2 . APPENDIX IB A . J . Brown i s c o n c e r n e d w i t h t h e o p e r a t i o n o f t h e s p r e a d e f f e c t s and t h e c i r c u m s t a n c e s u n d e r w h i c h t h e y wi II a f f e c t t h e h i g h e r c o s t o f i m p o r t s f r o m members of c u s t o m u n i o n s . He u s e s K e y n e s i a n . m u I t i p I i e r a n a l y s i s and assumes t h a t t h e r e a r e u n u s e d r e s o u r c e s of a l l f a c t o r s o f p r o d u c t i o n . T h e new p r o d u c t i o n P i s s u b s t i t u t e d f o r p r e v i o u s l y consumed i m p o r t s w i t h p r i c e e q u a l t o i m p o r t p r i c e pI us c u s t o m s d u t y The model i s as f o l l o w s : A s s u m p t i o n s : two c o u n t r i e s A & 3 i n d u s t r i a l d e v e l o p m e n t t a k e s p l a c e i n A and r e s o u r c e s a r e s u p p l i e d by B P (/-•* ) t a x - f r e e v a l u e o f i m p o r t s t i s ad v a l o r e m r a t e o f c u s t o m s d u t y x i s t h e f r a c t i o n o f P consumed i n A - . ' " K " f r a c t i o n o f P consumed i n B " V , r»t m a r g i n a l p r o p e n s i t y t o i m p o r t o f A and B r e s p e c t i v e l y nu ••" f r o m f o r e i g n c o u n t r i e s m i " f r o m r e s t o f f o r e i g n t r a d e The f i r s t t e r m o f t h e n u m e r a t o r i n b o t h e q u a t i o n s (1) and (2) r e p r e s e n t s t h e s p r e a d e f f e c t . T h e s e c o n d t e r m in e q u a t i o n (2) i s t h e l o s s imposed on B f r o m p u r c h a s i n g some p a r t o f i t s i m p o r t s f r o m A a t h i g h e r t h a n w o r l d p r i c e s . The s e c o n d t e r m o f e q u a t i o n (1) i s t h e v a l u e o f t h e i n c r e a s e ji n i e x p o r t s t o B p l u s t h e v a l u e f r e e o f t a x o f t h e r e d u c t i o n i n i m p o r t s f r o m t h e r e s t o f t h e w o r l d . To g e t t h e e f f e c t , t h i s amount needs t o be d i v i d e d by t h e m u I t i p I i e r and A s s u m i n g t h a t c o u n t r y A i s K e n y a , and c o u n t r y B i s Uganda and T a n z a n i a c o m b i n e d , and e s t i m a t i n g t h e p l a u s i b l e v a r i a b l e s , Brown a p p l i e d t h i s model t o EACM. He c o n c l u d e s t h a t : " w i t h t h e s e v a l u e s t h e c o u n t r y i n w h i c h m a n u f a c t u r i n g a r i s e s t o d i s p l a c e i m p o r t s i n t o ' t h e f r e e t r a d e a r e a , e x - • p e r i e n c e s a r i s e i n income e q u a l t o t w i c e t h e new m a n u f a c - t u r i n g o u t p u t , t h e r e s t o f t h e a r e a e x p e r i e n c e s a r i s e i n income o f a b o u t a t e n t h of t h e new m a n u f a c t u r i n g o u t p u t . " T h e r e f o r e , B r o w n ' s f i n d i n g s r e i n f o r c e t h e f i n d i n g s o f t h e R a i s m a n C o m m i s s i o n o f 1961 w h i c h s t a t e d t h a t t h e s p r e a d e f f e c t s o f i n c r e a s e d p r o d u c t i o n i n Kenya would g e n e r a t e enough income i n Uganda and T a n z a n i a t o c o m p e n s a t e t h e i r l o s s o f income as a r e s u l t of b u y i n g Kenyan p r o d u c t s a t h i g h e r t h a n w o r l d p r i c e s . A b a s i c f a u l t o f B r o w n ' s model i s t h a t he f a i l s t o c o n s i d e r the' c a s e where i n d u s t r i e s w o u l d have l o c a t e d i n T a n z a n i a and Uganda i f t h e EACM d i d n o t e x i s t . He r e s t r i c t e d h i m s e l f t o t h o s e i n d u s t r i e s t h a t r e q u i r e d a c e r t a i n s i z e m a r k e t t h a t would n o t have l o c a t e d i n an i n d i v i d u a l c o u n t r y w i t h o u t t h e e x i s t e n c e o f a common m a r k e t . In t h e f o l l o w i n g y e a r t h e same p r o b l e m o f b e n e f i t s and c o s t s were e x a m i n e d b u t from a d i f f e r e n t p o i n t o f v i e w . M r . D. G h a i a t t e m p t e d t o e s t i m a t e t h e d e g r e e o f d e p e n d e n c e o f e a c h c o u n t r y on t h e common m a r k e t . He c a l c u l a t e d t h e e x p o r t s o f e a c h member c o u n t r y t o E a s t A f r i c a and d i v i d e d i t by t h e m o n e t a r y g r o s s d o m e s t i c p r o d u c t . H i s r e s u l t s showed t h a t f r o m 1946 t o 1962, Kenya had i n c r e a s e d i n t e r - t e r r i t o r i a l t r a d e from 4$ t o 10$. U g a n d a ' s t r a d e f e l l f r o m 10$ t o 7 $ , w h i l e T a n g a n y i k a m a i n t a i n e d a l e v e l o f 2$. He c o n c l u d e d . that Kenya r e l i e s m o s t , and T a n g a n y i k a l e a s t , o n t h e EACM. H i s c o n c l u s i o n was r e i n - f o r c e d by f i g u r e s f o r t h e v a l u e o f i n t e r - t e r r i t o r i a l t r a d e i n 1962: Kenya 17.32 mi I I i o n p o u n d s , Uganda 7 . 0 6 mi I Ii o n , and T a n g a n y i ka 2 . 3 9 mi I I i o n . A f u r t h e r breakdown shows t h a t 67$ o f K e n y a ' s e x p o r t s t o T a n g a n y i k a and Uganda a r e m a n u f a c t u r e d g o o d s , Uganda e x p o r t s c o t t o n , c o f f e e , c i g a r e t t e s , s u g a r , e l e c t r i c p o w e r , w h i l e T a n g a n y i k a ' s e x p o r t s c o n s i s t o f f o o d s t u f f s and raw m a t e r i a l s s u c h as f r u i t , v e g e t a b l e s , and t o b a c c o . On e x a m i n i n g t h e d e g r e e of p r o t e c t i o n e n j o y e d by e a c h p a r t n e r c o u n t r y ' s e x p o r t s , T a n z a n i a had t h e . l o w e s t p r o t e c t i o n - 46$ o f h e r e x p o r t s d u t y f r e e , w h i l e Uganda had t h e h i g h e s t d e g r e e o f p r o t e c t i o n a t 2 0 . 6 $ duty. f r e e . T h e c o s t o f t h e c u s t o m u n i o n i s t h e t a r i f f r e v e n u e f o r g o n e and a g a i n t h e g r e a t e s t c o s t i s c a r r i e d b y . T a n z a n i a . Ghai c o n - c ] u d e s : " F r o m o u r a n a l y s i s o f t h e i n t e r n a l d i s t r i b u t i o n o f o f b e n e f i t s and c o s t s o f t h e EACM i t a p p e a r s t h a t Kenya has been t h e g r e a t e s t n e t b e n e f i c i a r y , t h a t ' Uganda has on b a l a n c e g a i n e d r a t h e r t h a n , l o s t and . t h a t T a n g a n y i k a has s u f f e r e d a s u b s t a n t i a l n e t . l o s s . " T h i s r e p o r t added f u e l . t o t h e f i r e of e c o n o m i c s e p a r a t i s m , b u t was n o t l e f t unchaI Ienged f o r l o n g . M r . A . D. Haze I wood was s o o n t o d e m o n s t r a t e t h a t t h e d a t a Ghai had used was u n s a t i s f a c t o r y , and had led t o f a l s e c o n c l u s i o n s . He p o i n t e d o u t t h a t e x i s t e n c e o f an E a s t A f r i c a n m a r k e t was n o t e x c l u s i v e l y d e p e n d e n t upon t h e e x i s t e n c e o f EACM. • . Some p r o d u c t s r e q u i r e d no p r o t e c t i o n a t a l I and would be t r a d e d i n E a s t A f r i c a n m a r k e t s w i t h o u t any t a r i f f p r e f e r e n c e . T h e r e f o r e , t o what e x t e n t a r e t h e e x i s t i n g e c o n o m i c i n a d e q u a c i e s a r e s u l t o f EACM and i t s a c t i o n s ? H a z e l w o o d w i s e l y shows t h a t when c o r r e c t i o n s i n t h e ' d a t a a r e made f o r t h o s e p r o d u c t s t h a t r e q u i r e no p r o t e c t i o n , t h e r e s u l t s a r e n o t q u i t e s o p r o f o u n d . M a k i n g t h i s d i s t i n c t i o n g e t s t h e f o l l o w i n g r e s u l t s : IMPORTANCE OF COMMON MARKET - 1962 I n t e r t e r r i t o r y t r a d e as a $ o f GDP T o t a l i n t e r t e r r i t o r y e x p o r t s I n t e r t e r r i t o r i a I e x p o r t s d e p e n d e n t on p r e f e r e n c e Kenya celt Uganda 3 $ T a n z a n i a 1$ S i m i l a r l y , f o r d e g r e e o f p r o t e c t i o n : • K e n - T a n z . E f f e c t i v e 12$ .. Normal 45$ T a n z . - K e n 10$ 16$ F r o m - t h e s e f i n d i n g s i t was n o t s o o b v i o u s t h a t T a n g a n y i k a was l o s i n g from r e m a i n i n g a p a r t of t h e EACM. As m e n t i o n e d a b o v e , i t was o b v i o u s t h a t N a i r o b i , t h e c a p i t a l o f K e n y a , had become t h e i n d u s t r i a l g r o w i n g p o i n t i n an o t h e r w i s e t r a d i t i o n a l a g r i c u l t u r a l economy. The h i s t o r i c a l r e a s o n f o r t h i s phenomenon i s t h a t i t was t h e a d m i n i s t r a t i v e c e n t r e f o r t h e B r i t i s h C o l o n i a l O f f i c e and was, t h e r e f o r e , more l i k e l y t o be e x p o s e d t o t h e o u t s i d e w o r l d . The q u e s t i o n t h e n a r o s e as t o how much o f t h i s i n d u s t r i a l g r o w t h was a r e s u l t o f t h e EACM. . M r . Newlyn u n d e r t o o k an i n v e s t i g a t i o n as t o t h e s h i f t a b i l i t y o f i n d u s t r y from Kenya t o T a n g a n y i k a and Uganda i f t h e r e was no c u s t o m u n i o n . He c o m p a r e d t h e a v e r a g e v a l u e o f o u t p u t p e r p l a n t i n Kenya w i t h t h e s i z e o f e x p o r t t o t h e p a r t i c u l a r a r e a s . If t h e v a l u e o f e x p o r t s t o t h e c o u n t r y was g r e a t e r t h a n t h e a v e r a g e o u t p u t p e r p l a n t , i t meant t h a t t h e i n d u s t r y was s h i f t a b l e f r o m Kenya t o t h a t p a r t i c u l a r c o u n t r y . From h i s i n v e s t i g a t i o n he f o u n d t h a t a l a r g e amount o f K e n y a ' s p r o d u c t i o n . c o u I d be s h i f t e d t o T a n g a n y i k a o r Uganda and he c o n c l u d e d as f o l l o w s : " A c c o r d i n g t o t h e 1961 d a t a - a l a r g e amount o f K e n y a ' s p r o d u c t i o n was s h i f t a b l e t o Uganda and T a n g a n y i k a and t h e r e would be a c l e a r g a i n f o r T a n g a n y i k a and i n s i g - n i f i c a n t l o s s t o Uganda from h a v i n g t h e E A C M . " W i t h i n m o n t h s , Haze I wood was q u i c k t o show t h a t N e w l y n ' s c o n - c l u s i o n s were i n v a l i d , b e c a u s e o f h i s m e t h o d o l o g y and t h e d a t a he u s e d . N e w l y n ' s method o f c a l c u l a t i n g a v e r a g e o u t p u t d i d n o t t a k e i n t o c o n s i d e r - a t i o n t h a t i n many i n d u s t r i e s , a l a r g e p e r c e n t a g e o f o u t p u t was s u p p l i e d by 1 o r 2 f i r m s and t h e r e m a i n i n g 10-15 p l a n t s were s i m p l y l o c a l p r o d u c e r s , s u p p l y i n g a m u n i c i p a l m a r k e t . A l s o t h e r e was an a s s u m p t i o n o f h o m o g e n e i t y o f i n d u s t r y w h i c h l e d t o f u r t h e r m i s i n t e r p r e t a t i o n . F o r e x a m p l e , t h e b a k i n g i n d u s t r y was c o n s i d e r e d t o be s h i f t a b l e when, i n f a c t , i t was b i s - c u i t p r o d u c t s t h a t were b e i n g e x p o r t e d w h i c h r e q u i r e s a l a r g e r . s c a l e o f p l a n t t h a n t h e a v e r a g e o u t p u t f i g u r e s u g g e s t e d . T h e r e i s s u c h v a r i a t i o n w i t h i n each i n d u s t r y t h a t t h e w h o l e i n d u s t r y c a n n o t be e a s i l y c l a s s i f i e d as s h i f t a b l e o r n o t . • A f t e r r e - e x a m i n a t i o n o f t h e d a t a , o u t o f t h e 15 i n d u s t r i e s w h i c h Newlyn c l a s s i f i e d as s h i f t a b l e , o n l y 4 p a s s e d t h e t e s t . Newlyn was t h e f i r s t t o a d m i t t h a t h i s c a l c u l a t i o n s w e r e - i n c o r r e c t . B u t t h e damage had a l r e a d y been d o n e . T o o o f t e n , a n a l y s i s o f t h i s k i n d i s s i e z e d upon and used t o f u r t h e r p o l i t i c a l a i m s o f c e r t a i n p r e s s u r e g r o u p s . 7. APPENDIX I C / . ' ' . . • In t h e A g r e e m e n t f i v e a p p r o a c h e s t o t h e r e c t i f i c a t i o n o f i m b a - l a n c e s were l i s t e d i n t h e o r d e r i n w h i c h i t ' was t h o u g h t t h e y c o u l d be a p p l i e d . 1. In c e r t a i n e x i s t i n g i n d u s t r i e s i n w h i c h t h e f i r m s o p e r a t e p l a n t s i n more t h a n one c o u n t r y , t h e f i r m s were t o be r e q u e s t e d t o i n c r e a s e t h e r e l a t i v e s h a r e o f o u t p u t in T a n z a n i a . 2. S e v e r a l new i n d u s t r i e s a b o u t t o be e s t a b l i s h e d , o f s u c h a n a t u r e t h a t t h e r e c o u l d , i n i t i a l l y , be o n l y one p l a n t in E a s t A f r i c a , , were t o be a l l o c a t e d by a g r e e m e n t a m o n g • t h e t h r e e t e r r i t o r i e s . Most were a s s i - gned t o T a n z a n i a w h i c h was t o r e c e i v e r a d i o a s s e m b l y and m a n u f a c t u r e , t h e m a n u f a c t u r e o f m o t o r v e h i c l e s , t y r e s and t u b e s , and t h e m a n u f a c t u r e a l a l u m i n u m f o i l , c i r c l e s and p l a i n s h e e t s . Uganda was t o r e c e i v e a b i c y c l e a s s e m b l y p l a n t and a f e r t i l i z e r p l a n t , and Kenya a l i g h t - b u l b f a c t o r y . T h e a l l o c a t i o n was t o be made e f f e c t i v e by e a c h g o v e r n m e n t a g r e e i n g t o s c h e d u l e t h e s e i n d u s t r i e s u n d e r t h e I n d u s t r i a l L i c e n s i n g A c t s and t h e n a r r a n g i n g t h a t l i c e n c e s i s s u e d by t h e E a s t A f r i c a n I n d u s - t r i a l C o u n c i l ( o v e r w h i c h t h e t h r e e G o v e r n m e n t s have u l t i m a t e c o n t r o l ) w o u l d be i s s u e d i n a c c o r d a n c e w i t h t h e d e c i s i o n s r e a c h e d u n d e r t h e Kampala A g r e e m e n t . 3. A s y s t e m o f q u o t a s was t o be i n t r o d u c e d on e x p o r t s f r o m t h e s u r p l u s c o u n t r i e s to. f a c i I i t a t e - t h e . b u i I d i n g up o f p r o d u c t i v e c a p a c i t y i n t h e d e f i c i t c o u n t r i e s . 4. T h e ' s u r p l u s ' c o u n t r i e s a g r e e d t o a t t e m p t t o i n c r e a s e t h e i r p u r c h a s e s from ' d e f i c i t ' c o u n t r i e s . 5. A c o m m i t t e e o f i n d u s t r i a l e x p e r t s was t o be a p p o i n t e d t o s u r v e y t h e l o n g - r a n g e p r o b l e m o f a l l o c a t i o n o f i n d u s t r y among t h e t h r e e c o u n t r i e s 8. and t h e p r o v i s i o n o f a s y s t e m o f d i f f e r e n t i a l i n c e n t i v e s t o a t t r a c t / / . / m a n u f a c t u r i n g i n d u s t r y t o t h e l e s s d e v e l o p e d c o u n t r i e s . S o u r c e : E c o n o m i c I n t e g r a t i o n i n A f r i c a , P. R o b s o n , P . 1 4 9 . APPENDIX I I In E a s t A f r i c a , as i n o t h e r p a r t s o f t h e d e v e l o p i n g w o r l d , a g r i - c u l t u r e has been t h e m a j o r e c o n o m i c a c t i v i t y w i t h i n e a c h c o u n t r y . From t a b l e 2A1 we s e e t h a t Uganda r e l i e s most h e a v i l y on t h i s s e c t o r , w i t h 90$ of. i t s p o p u l a t i o n i n v o l v e d i n t h e a g r a r i a n economy, 60$ o f G . D . P . and 80$ o f i t s ' e x p o r t e a r n i n g s b e i n g d e r i v e d f r o m a g r i c u l t u r a l p r o d u c t i o n . In T a n z a n i a a g r i c u l t u r e a c c o u n t s f o r 80$ o f p o p u l a t i o n , 50$ o f G . D . P . and 80$. o f e x p o r t e a r n i n g s , w h i l s t i n K e n y a , w h i c h i s l e a s t d e p e n d e n t on a g r i c u l t u r e , 75$ o f p o p u l a t i o n , 35$ o f G . D . P . and 50$ o f f o r e i g n e a r n i n g s a r e s u p p o r t e d by a g r i c u l t u r a l a c t i v i t y . T h i s t y p e o f d e v e l o p m e n t has i t s r o o t s i n t h e p a s t . B e f o r e t h e c o l o n i a l e r a , E a s t A f r i c a was p o p u l a t e d by n o m a d i c t r i b e s whose m a i n o c c u p a t i o n w a s . s u b s i s t e n c e a g r i c u l t u r e . N o t u n t i l t h e l a t e n i n e t e e n t h c e n t u r y d i d E a s t A f r i c a become s u b j e c t t o B r i t i s h C o l o n i a l i n f l u e n c e s . Uganda was t h e f i r s t o f t h e t h r e e t e r r i t o r i e s t o be e x p o s e d t o t h e o u t s i d e w o r l d . In 1875, t h e f i r s t c o n t a c t had been made" b y . m i s s i o n a r i e s , t h o u g h i t w a s n ' t u n t i I 1900 w i t h t h e s i g n i n g o f t h e Uganda A g r e e m e n t . t h a t a B r i t i s h a d m i n i s t r a t i o n was e s t a b l i s h e d . I t was o n l y w i t h t h e c o m p l e t i o n i n 1901 o f a r a i l w a y t o t h e c o a s t t h a t Uganda became an e x p o r t e r o f c a s h c r o p s . C o t t o n was grown by p e a s a n t f a r m e r s i n a d d i t i o n t o t h e s u b s i s t e n c e a c t i v i t i e s . C o t t o n e x p o r t s d o m i n a t e d t h e economy, a n d e v e n a s l a t e as 1938, 80$ o f e x p o r t e a r n i n g s came f r o m t h i s s o u r c e . W i t h i n c r e a s e d w o r l d demand f o r c o f f e e , t h e f a r m e r s s w i t c h e d p r o d u c t i o n and i n c r e a s e d e x p o r t s o f t h i s c r o p from 13,000 t o n s i n 1945 t o 150,000 t o n s i n 1 9 6 2 - 3 . The i m p o r t a n t t h i n g t o n o t e i s t h a t o v e r 90$ o f t h e s e e x p o r t s were p r o d u c e d by p e a s a n t A f r i c a n f a r m e r s and t h a t l i t t l e c a p i t a l i n v e s t m e n t was r e q u i r e d t o 10. i n c r e a s e o u t p u t . T h i s i s i n c o n t r a s t t o Kenya where 80$ o f a g r i c u l t u r a l e x p o r t s a r e p r o d u c e d by s e t t l e r f a r m e r s . B u t t h e p r o b l e m i n Uganda now e x i s t s t h a t any f u r t h e r i n c r e a s e i n o u t p u t w o u l d r e q u i r e f u n d a m e n t a l c h a n g e s i n t r a d i t i o n a l methods o f l a n d t e n u r e and a t t i t u d e s t o w a r d s s u b - s i s t e n c e f a r m i n g . I n t r o d u c t i o n o f new methods o f f a r m i n g and r e o r g a n i z - a t i o n o f l a n d t e n u r e would be a p r e c o n d i t i o n t o any s u b s t a n t i a l i n c r e a s e i n a g r i c u l t u r a l o u t p u t . The c o l o n i a l a d m i n i s t r a t i o n i n Kenya was e s t a b l i s h e d by t h e B r i t i s h i n 1895 and an a c t i v e p o l i c y o f e n c o u r a g i n g i m m i g r a t i o n was f o l l o w e d . T h e hope f o r Kenya was f o r a p a t h o f e c o n o m i c d e v e l o p m e n t s i m i l a r t o t h a t o f Canada o r A u s t r a l i a . T h u s , i n t h e e a r l y 1 9 0 0 ' s i t was B r i t i s h p o l i c y t o d e v e l o p an e x p o r t economy o p e r a t e d by E u r o p e a n f a r m e r s and worked by n a t i v e l a b o u r . In o r d e r t o a t t r a c t E u r o p e a n s e t t l e r s , t h e m o s t f e r t i l e a r e a o f Kenya was d e c l a r e d t h e " W h i t e H i g h l a n d s " . T h i s w e l l - w a t e r e d u p l a n d was s u r r o u n d e d by l o w - l y i n g A f r i c a n , n o n - s c h e d u l e d l a n d s . Some o f t h i s l a n d was f e r t i l e b u t most a r e a s were good o n l y f o r g r a z i n g and a l a r g e a r e a l a y i d l e b e c a u s e i t was i n f e s t e d by t s e t s e f l i e s . W i t h i n t h e W h i t e H i g h l a n d s o r S c h e d u l e d A r e a s lay some o f t h e most f e r t i l e f a r m l a n d s in A f r i c a . H o l d i n g s i n t h e s e a r e a s were r e s t r i c t e d t o w h i t e s o n l y and were a c q u i r e d on a 99 o r 999 y e a r l e a s e b a s i s , f o r a n o m i n a l r e n t a l f e e p a i d t o t h e C r o w n . A f r i c a n s were f o r b i d d e n t o own land a l t h o u g h a f t e r a t i m e ' s q u a t t e r s a r r a n g e m e n t s were made f o r A f r i c a n s t o own s m a l l p a t c h e s o f t h e e s t a t e on t h e c o n d i t i o n t h a t t h e s q u a t t e r and h i s fami ly worked a s c o n t r a c t e d j l a b o u r f o r t h e w h i t e e s t a t e o w n e r . E a r l y c o l o n i a l p o i i c y c a n e a s i l y be summed up by t h e words o f S i r C h a r l e s E l i o t , f i r s t B r i t i s h C o m m i s s i o n e r o f B r i t i s h E a s t A f r i c a . E l i o t w r o t e i n 1903, " t h e i n t e r i o r o f t h e p r o t e c t o r a t e i s a W h i t e M a n ' s c o u n t r y . T h i s b e i n g s o , i t i s mere h y p o c r i s y n o t t o a d m i t t h a t w h i t e 11, i n t e r e s t s must be p a r a m o u n t . " T h e g r e a t mass o f t h e A f r i c a n s l i v e d in t h e R e s e r v e s on t h e N o n - s c h e d u l e d l a n d . T h e s e r e s e r v e s were used a s l a b o u r p o o l s t o s u p p l y t h e l a r g e E u r o p e a n f a r m s w i t h cheap l a b o u r . A f r i c a n l a b o u r was drawn f r o m t h e r e s e r v e s f o r two r e a s o n s . , F i r s t , b e c a u s e o f t h e p o o r ' c o n - d i t i o n s o f t h e r e s e r v e s a n d more i m p o r t a n t , b e c a u s e o f t h e " h u t t a x " t h a t was l e v i e d upon e v e r y A f r i c a n m a l e . S i n c e t h e . A f r i c a n s had no c a s h t h e y were f o r c e d t o work f o r a c e r t a i n p e r i o d o f t i m e i n o r d e r t o meet t h i s o b l i g a t i o n . The amount o f t a x v a r i e d d e p e n d i n g on t h e p a r t y i n power i n B r i t a i n a t t h e t i m e . D i s c u s s i o n c e n t r e d a r o u n d w h e t h e r t h e t a x s h o u l d be p a i d o f f by two o r s i x months e a r n i n g s b u t t h e r e was no q u e s t i o n as t o t h e p u r p o s e o f t h e t a x . "We c o n s i d e r t h a t t a x a t i o n i s t h e o n l y p o s s i b l e method o f c o m p e l l i n g t h e n a t i v e t o l e a v e h i s r e s e r v e f o r t h e p u r p o s e o f s e e k i n g w o r k . O n l y • i n t h i s way c a n t h e c o s t o f l i v i n g be i n c r e a s e d f o r t h e n a t i v e and' a s ' w e have p r e v i o u s l y p o i n t e d o u t , i t i s on t h i s t h a t t h e s u p p l y o f l a b o u r and t h e p r i c e of l a b o u r d e p e n d s . " ^ The a v e r a g e s i z e A f r i c a n f a r m o f 2 3 . 6 a c r e s (as c o n t r a s t e d w i t h t h e w h i t e f a r m h o l d i n g s o f 3 , 4 0 0 a c r e s ) was u s e d p r i m a r i l y f o r s u b s i s t e n c e a g r i c u l t u r e . W h i l e t h e male members were o f f w o r k i n g , t h e w i f e and c h i l - . d r e n c u l t i v a t e d t h e home p l o t . t h e r e were few e x t e r n a l i t i e s o f t h i s d u a l s y s t e m t h a t c o u l d b e n e f i t t h e l o c a l i n h a b i t a n t s . T h e r e was a c e r t a i n s p i l l - o v e r o f t e c h n o l o g i c a l i n n o v a t i o n t h a t c o u l d be a p p l i e d t o A f r i c a n l a n d s . B u t t h e r e seems t o be v e r y l i t t l e e v i d e n c e o f i n c r e a s e d p r o d u c - t i v i t y . The t e c h n o l o g y o f t h e l a r g e E u r o p e a n f a r m s was h i g h l y m e c h a n i z e d a n d d i d n o t lend i t s e l f t o s m a l l a c r e a g e . In many c a s e s t h e work done by A f r i c a n l a b o u r was s i m p l e , t e d i o u s o p e r a t i o n , f r o m w h i c h no k n o w l e d g e c o u l d be g a i n e d . In a d d i t i o n , b e c a u s e o f t h e c r o w d e d c o n d i t i o n s w i t h i n t h e 12. t h e r e s e r v e s , and l a c k o f c a p i t a l , l i t t l e improvement was n o t i c e d . T h e r e were c e r t a i n l y s o c i a l s e r v i c e s w h i c h became a v a i l a b l e t o l o c a l i n h a b i t a n t s , s i n c e t h e f o r e i g n e n c l a v e d e v e l o p e d h o s p i t a l s , s c h o o l s and. o t h e r a m e n i t i e s t o w h i c h t h e n a t i v e s a l s o had. l i m i t e d a c c e s s . T h e d u a l economy was a s u c c e s s on p u r e l y e c o n o m i c c r i t e r i a . The l a r g e f a r m s became t h e e c o n o m i c b a c k b o n e o f t h e c o u n t r y and between 1954-1963 p r o v i d e d o n e - t h i r d o f t h e t o t a l a g r i c u l t u r a l p r o d u c t i o n and 5 f o u r - f i f t h s o f t h e a g r i c u l t u r a l p r o d u c t s b r o u g h t t o m a r k e t . T h e s e l a r g e f a r m s p r o d u c e d f o r t h e w o r l d m a r k e t a n d p r o v i d e d g o v e r n m e n t and f a r m e r w i t h f o r e i g n e x c h a n g e . As m e n t i o n e d a b o v e , e i g h t y ' p e r c e n t o f d o m e s t i c e x p o r t s came f r o m t h e s e t t l e r f a r m e r s e c t o r . A l t h o u g h t h e e c o n o m i c b e n e f i t s were h i g h f r o m s u c h a s y s t e m , t h e s o c i a l c o s t s were a l s o h i g h . T h e g r o w i n g i r k s o m e n e s s o f t h e . i n c o m e d i s p a r i t y between A f r i c a n and N o n - A f r i c a n , t h e breakdown o f t r a d i t i o n a I n a t i v e c u s t o m s , t h e o v e r c r o w d i n g o f r e s e r v e a r e a s r e s u l t i n g i n i n c r e a s e d e r o s i o n , and t h e d i s c r i m i n a t i o n o f M a r k e t i n g B o a r d a g e n t s a g a i n s t t h e A f r i c a n f a r m e r s b r o u g h t t h e c r i s i s t o a b o i l i n g p o i n t i n t h e e a r l y f i f t i e s . The y e a r 1952 marked t h e o u t b r e a k o f v i o l e n c e . The MauMau had s o u g h t t o d r i v e o u t t h e s e t t l e r f a r m e r s by w i t h - h o l d i n g l a b o u r , and any n a t i v e s who went t o work f o r t h e w h i t e men were k i l l e d . T h i s c r i s i s s i t u a t i o n b r o u g h t a m a s s i v e i n f l o w o f B r i t i s h a i d t o b o l s t e r t h e m i l i t a r y and p o l i c e f o r c e . S u p p r e s s i o n of t h e r e b e l l i o n c o s t w e l l o v e r 13,000 l i v e s i n c l u d i n g 96 E u r o p e a n s , among them 32 c i v i l i a n s . ^ W i t h t h e u p r i s i n g came t h e a w a r e n e s s o f t h e p l i g h t o f t h e A f r i c a n f a r m e r and a s w i t c h i n p o l i c y was made. F u r t h e r e c o n o m i c d e v e l o p m e n t 13. w o u l d be aimed a t t h e A f r i c a n s e c t o r o f . d e v e I o p m e n t . i ' T h e S w y n n e r t o n P l a n , b a c k e d by 5 m i l l i o n p o u n d s , was i m p l e m e n t e d t o b r i n g a b o u t b a s i c c h a n g e s w i t h i n t h e s t r u c t u r e of t h e economy. T h e new a p p r o a c h was c h a r a c t e r i z e d b y : (1) a l a n d r e f o r m b r i n g i n g land c o n s o l i d a t i o n and t h e i s s u i n g of t i t l e d e e d s . • i . (2) c h a n g i n g t h e e m p h a s i s from t h e d e v e l o p m e n t o f s u b s i s t e n c e c r o p s t o t h e i n t r o d u c t i o n o f new c a s h y i e l d i n g c r o p s ; (3) e f f o r t s t o r e o r g a n i z e p a s t o r a l a r e a s , by e s t a b l i s h i n g g r a z i ng a r e a s . (4) s e t t l e m e n t of r a i n - f e d l a n d and some i n v e s t m e n t i n i r r i g - ' • a t i o n f a r m i n g . (5) p r o v i s i o n o f more f i n a n c e s and p e r s o n n e l f o r a u x i l i a r y s e r - v i c e s and t e c h n i c a l a s s i s t a n c e . ^ T h e r e was a g r e a t r e s p o n s e f r o m t h e s m a l l - f a r m s e c t o r . L a r g e p e r c e n - t a g e i n c r e a s e s were made i n a l l . a r e a s o f p y r e t h r u m , t e a , s i s a l , r i c e , b u t t h e m o s t s p e c t a c u l a r was t h a t o f c o f f e e r e v e n u e s w h i c h grew from 170,000. i n 1954 t o 5 , 0 0 0 , 0 0 0 i n 1964. * T h u s , i n t h e d e c a d e p r e c e d i n g i n d e p e n d e n c e , p o s i t i v e s t e p s had been t a k e n t o i m p r o v e t h e l o t o f t h e A f r i c a n , b u t t h e r e was s t i l l a long way t o g o , . In 1960 A f r i c a n i z a t i o n o f t h e W h i t e H i g h l a n d s was i m p l e m e n t e d i n t h e "One m i l l i o n a c r e s e t t l e m e n t s c h e m e " . U n d e r t h i s p r o g r a m 1.2 m i l l i o n a c r e s were t o be p u r c h a s e d f r o m v o l u n t a r y s e l l e r s i n t h e s c h e d u l e d a r e a s and r e - d i s t r i b u t e d t o A f r i c a n s . R e d i s t r i b u t i o n was d i v i d e d i n t o h i g h and low d e n s i t y a r e a s , t h e f o r m e r c o v e r i n g one m i l l i o n a c r e s and p l o t s o f 28 a c r e s i z e were a l l o c a t e d w i t h e s t i m a t e d e a r n i n g power o f K . S h . 5 0 0 . T h e low- d e n s i t y p r o g r a m was t o accommodate b e t t e r q u a l i f i e d A f r i c a n s who owned some c a p i t a l o f t h e i r own and d e m o n s t r a t e d some a g r i c u l t u r a l a b i l i t y . T h e a v e r a g e 14. s i z e o f p l o t was 35 a c r e s w i t h a minimum n e t c a s h income o f K . S h . 2 0 0 0 . C o m p l e t i o n o f p l a n was a n t i c i p a t e d f o r 1968 b u t was e x t e n d e d t o 1972. The m a i n r e a s o n f o r s l o w p r o g r e s s was l a c k o f t r a i n e d manpower and s m a l l f i e l d s t a f f . It seems o b v i o u s t h a t t h e p u r p o s e o f t h i s p l a n was p o l i t i c a l i n n a t u r e . As A f r i c a n i z a t i o n c o n t i n u e d t h e E u r o p e a n f a r m e r s c o u l d demand a good p r i c e f o r t h e i r l a n d , one much h i g h e r t h a n i f t h e r e had been no g o v e r n m e n t b a c k i n g . B u t w h a t e v e r t h e m o t i v a t i o n , i t has been a p o s i t i v e s t e p i n t h e r a i s i n g o f A f r i c a n s t a n d a r d s . In T a n z a n i a ( p r e v i o u s l y T a n g a n y i k a - ) t h e r e has a l s o e x i s t e d f o r e i g n - owned and o p e r a t e d e s t a t e s . B u t u n l i k e K e n y a , t h e s e f a r m e r s d i d n o t f o r m t h e o n l y s u p p l y o f a g r i c u l t u r a l e x p o r t s . The e s t a t e 5 c o v e r e d o n l y 1.1$ o f t o t a l l a n d o r 10$ of t h e a r a b l e l a n d . In 1954 t h e e s t a t e s a c c o u n t e d f o r 25$ o f a g r i c u l t u r a l p r o d u c t . The W o r l d Bank r e p o r t s t h a t 35$ o f m a r k e t s u p p l y and 45$ o f t h e a g r i c u l t u r a l e x p o r t were p r o v i d e d by t h e e s t a t e s . M o s t r e c e n t f i g u r e s show t h e e s t a t e s ' s h a r e d r o p p i n g t o 12$ o f t o t a l a g r i - c u l t u r a l o u t p u t . The m a i n e s t a t e c r o p s a r e s i s a l , c o f f e e and t e a . C o m m e r c i a l g r o w i n g o f c o t t o n and c o f f e e was i n t r o d u c e d t o t h e p e a s a n t f a r m e r s by t h e e a r l y C a t h o l i c m i s s i o n a r i e s and have become t h e main e x p o r t o f T a n z a n i a t o d a y . C o t t o n , m i l l e t , s o r g h u m , r o o t c r o p s , b a n a n a s , l e g u m i n o u s c r o p s , r i c e , e t c . a r e p r o d u c e d a l m o s t e n t i r e l y on A f r i c a n f a r m s as w e l l as h a l f o f t h e c o u n t r y ' s c o f f e e and t o b a c c o . . . S h i f t i n g a g r i c u l t u r e t h a t was t r a d i t i o n a l l y p r a c t i c e d by l o c a l f a r m e r s i s b e i n g t r a n s f o r m e d t o s e m i - p e r m a n e n t and p e r m a n e n t f a r m i n g methods as a r e s u l t o f i n c r e a s i n g p o p u l a t i o n p r e s s u r e s and demand f o r c a s h e x p o r t s . Work i s a l s o b e i n g done by e x t e n s i o n w o r k e r s t o i n c r e a s e t h e p r o d u c t i v i t y o f t h e land t h r o u g h f e r t i l i z a t i o n , and i m p r o v e d f a r m management. 15 What i s more i n t e r e s t i n g a b o u t t h e T a n z a n i a n a g r i c u l t u r a l d e v e l o p - ' ment i s t h e s t r u c t u r a l c h a n g e s c a l l e d f o r i n t h e p u r s u i t o f " A f r i c a n S o c i a l i s m . " T a n z a n i a ' s P r e s i d e n t , J u l i u s N y e r e r e , h a s based h i s hope f o r A f r i c a n S o c i a l i s m i n r u r a l r e d e v e l o p m e n t . In a p a p e r e n t i t l e d " S o c i a l i s m and R u r a l D e v e l o p m e n t " , N y e r e r e e x p l a i n s t h e b a s i c s o c i a l u n i t o f t r a d i t i o n a l T a n z a n i a n s o c i e t y t o be "Ujamae" o r t h e e x t e n d e d k i n s h i p g r o u p . F o r t h i s r e a s o n he f e e l s t h a t T a n z a n i a has t h e b e s t p o s s i b l e f o u n d a t i o n f o r a t r u l y s o c i a l i s t s t a t e . The Ujamae s y s t e m i s b a s e d on (1) mutual r e s p e c t o f t h e k i n s h i p g r o u p s , (2) common h o l d i n g o f m a t e r i a l g o o d s , a n d , (3) an o b l i g a t i o n t o work and c o n t r i b u t e t o t h e c o l l e c t i v e w e l f a r e o f t h e g r o u p . ' Even t h o u g h t h e g o v e r n m e n t t r u l y b e l i e v e s in t h e i d e o l o g i e s f o r w h i c h A f r i c a n s o c i a l i s m s t a n d s and seems w i l l i n g t o make s a c r i f i c e s t o u p h o l d t h e m , p r o b l e m s have a r i s e n i n t h e a c t u a l i m p l e m e n t a t i o n o f t h e p r o g r a m . T h e r e a r i s e s t h e c o n f l i c t between e c o n o m i c p r o g r e s s and i d e o - l o g i c a l g o a l s . M a t e r i a l p r o g r e s s i n v o l v e d t h e f r a g m e n t a t i o n o f T a n z a n i a n r u r a l s o c i e t y i n t o i n d i v i d u a l i s t i c e c o n o m i c u n i t s . The few a t t e m p t s t h a t were made a t c o - o p e r a t i v e f a r m i n g / w e r e g e n e r a l l y u n s u c c e s s f u l and a w a s t e o f g o v e r n m e n t r e s o u r c e s . The c o - o p e r a t i v e n a t u r e o f t h e e x t e n d e d k i n s h i p g r o u p was b a s e d on t h e s o c i a l s t r u c t u r e o f t h e f a m i l y g r o u p a n d was a m a t t e r o f e c o n o m i c n e c e s s i t y . Once c a s h c r o p s were i n t r o d u c e d and t h e g e n e r a l c h a n g i n g o f t h e c o n d i t i o n s t h r o u g h i n c r e a s e d p o p u l a t i o n p r e s s u r e s t h e t r a d - i t i o n a l s o c i a I . s t r u c t u r e of t h e e x t e n d e d f a m i l y began t o d e t e r i o r a t e . P . G . G u l l i v e r s t u d i e d t h e N y a k u s a t r i b e and f o u n d o v e r w h e l m i n g e v i d e n c e o f t h e e x i s t e n c e o f t h e s e t y p e s o f c o n f l i c t s and a d j u s t m e n t s w i t h i n t r i b a l s o c i e t y when f a c e d w i t h new o p p o r t u n i t i e s o f e c o n o m i c d e v e l o p m e n t . . P r e s i d e n t N y e r e r e h i m s e l f has been aware o f t h i s p r o b l e m and v o i c e d h i s c o n c e r n . He r e a l i z e d t h a t t h e i n t r o d u c t i o n o f c a s h c r o p s t e n d e d t o 16.. ' • . e n c o u r a g e i n d i v i d u a l i s t i c and a c q u i s i t i v e a t t i t u d e s and t h e i n c r e a s i n g d e p e n d e n c e on wage l a b o u r r a t h e r t h a n c o - o p e r a t i v e o r communal work. T h e r e f o r e , he w r o t e i n 1962, " A c q u i s i t i v e n e s s f o r t h e p u r p o s e o f g a i n i n g power and p r e s t i g e i s u n s o c i a I i s t i c . In an a c q u i s i t i v e s o c i e t y w e a l t h /I t e n d s t o c o r r u p t t h o s e who p o s s e s s i t . " He r e j e c t s c a p i t a l i s m as a f o r m o f d e v e l o p m e n t . " T a n g a n y i k a wou1d r e j e c t t h e c r e a t i o n o f a r u r a l c l a s s s y s t e m e v e n i f i t would be p r o v e n t h a t i t would g i v e t h e l a r g e s t o v e r a l l p r o d u c t i o n i n c r e a s e . " A f t e r an u n s u c c e s s f u l a t t e m p t a t o p e r a t i n g s t a t e c o - o p e r a t i v e s , h o w e v e r , a more t e m p e r e d a p p r o a c h was t a k e n . R a t h e r t h a n d e v e l o p c o - o p e r a t i v e f a r m s , t h e e m p h a s i s s h i f t e d t o m a r k e t i n g c o - o p e r a t i v e s . T h u s t h e number o f c o - o p e r a t i v e s o c i e t i e s i n c r e a s e d f r o m 857 i n 1961 t o 1,533 i n A p r i l 1966, and t h e v o l u m e o f p r o d u c e h a n d l e d f r o m 145,000 t o n s i n 1960 t o 4 9 5 , 0 0 0 t o n s i n 1965. The r o l e of t h o s e i n s t i t u t i o n s was n o t t o be l i m i t e d t o m a r k e t i n g a l o n e . W i t h t h e p o s t - i n d e p e n d e n t g o v e r n m e n t , g r e a t hope was p l a c e d on t h e s e b o a r d s as t o o l s f o r f u t u r e e c o n o m i c d e v e l o p m e n t . N o t o n l y d i d many o f t h e s e c o - o p s have l a r g e s u r p l u s e s t h a t c o u l d be used f o r c r e d i t e x t e n s i o n b u t a l s o t h e c o - o p e r a t i v e movement r e p r e s e n t e d an e f f e c t i v e p o l i c y t o o l t h a t a f f e c t e d r u r a l d e v e l o p m e n t most d i r e c t l y . The d e v e l o p m e n t o f t h e c o - o p e r a t i v e movement and m a r k e t i n g b o a r d s was i n t h e P r e s i d e n t ' s own w o r d s , " . . . f r o m t h e s o c i a l i s t p r i n c i p l e o f fS a v o i d i n g t h e e x p l o i t a t i o n o f man by m a n . " 1 7 . T a b l e 2A 2 1 T a n z a n i a n A g r i c u l t u r a l P r o d u c t i o n V a 1 u e : m i 1 1 i o n s o f T . S h i 11 i n g s 1961 1 9 6 2 1 9 6 3 1964. 1 9 6 5 1 9 6 6 C o f f e e 104 102 134 172 2 0 5 3 0 5 S i s a 1 2 6 4 2 9 4 4 4 0 4 6 8 2 8 0 2 5 4 L i n t C o t t o n 100 120 148 172 2 1 2 2 5 3 C a s h e w n u t s 14 2 6 2 8 4 0 6 3 8 0 O i l , s e e d s a n d n u t s 2 8 2 6 3 6 3 8 2 8 2 7 G r o u n d n u t s 14 2 4 2 6 2 2 10 8 S u g a r 2 8 3 6 4 8 5 8 61 6 4 T e a 3 4 3 2 3 6 . 3 0 37 4 4 O t h e r c a s h c r o p s 4 0 4 6 7 0 7 8 5 4 54 S t a p l e f o o d c r o p s 1 , 2 7 0 1 , 4 1 0 1 , 3 9 4 1 , 3 0 2 1 , 2 6 0 1 , 8 9 6 2 , 1 1 6 2 , 3 6 0 2 , 3 8 0 2 , 2 1 0 1 S o u r c e : S u r v e y s o f A f r i c a n E c o n o m i c s P . 2 1 9 T a b l e 2A 3 2 K e n y a n A g r i c u l t u r a l P r o d u c t i o n Valuermi 11 ions of K . S h i 11 i ngs 1961 1 9 6 2 1 9 6 3 1 9 6 4 1 9 6 5 1 9 6 6 Cof fee 2 0 8 190 2 2 0 2 7 9 _ 2 5 9 3 4 6 Tea 9 6 134 137 147 198 S i s a l 9 0 9 0 1 5 9 135 7 8 6 0 Wheat 5 4 4 2 61 7 3 8 8 7 7 Ma i ze 5 8 6 6 7 9 3 2 3 8 5 4 Other c e r e a l s 16 12 19 16 17 16 Pyrethrum 5 0 4 0 2 2 18 2 9 4 3 Watt le 10 14 13 13 11 15 Sugar 2 0 2 4 2 7 31 3 2 2 0 Cot ton 10 6 9 11 . 13 13 Other cash crops 7 6 6 2 4 4 4 4 4 8 6 2 Tota l c rops L i v e s to ck p rod . 6 8 8 2 3 4 6 8 0 2 6 8 7 9 0 197 8 0 8 190 7 6 0 196 9 0 4 2 7 3 Tota1 Revenue 9 2 2 9 4 8 9 8 7 9 9 8 9 5 6 1 , 1 2 7 i c^iir - ^ Q . Q u r v / o v Q o f A f r i c a n E c o n o m i c s . D . 1 4 9 18. T a b l e 2A 4 3 ' Ugandan A g r i c u l t u r a l P r o d u c t i o n Va1ue: mi 11 i o ns o f U. Shi 11i ngs 1961 1962 ' 1963 1964 1965 1966 C 3 f f e e beans 276 306 430 302 200." 252 Seed c o t t o n 122 248 235 302 309 1 9 3 • S u g a r 92 1 10 104 96 ••96 T e a 48 -.46 56 50 . 54 T o b a c c o 6 6 12 12 14 3 S o u r c e : ' S u r v e y o f A f r i c a n E c o n o m i c s P. 300 1 9 , A l t h o u g h t h e m i d d l e man has been e l i m i n a t e d i n t h e a g r i c u l t u r a l s e c t o r , t h i s does n o t mean t h e d i s a p p e a r a n c e o f e x p l o i t a t i o n . J . S . S a u l a b l y p o i n t s o u t t h a t w i t h i n T a n z a n i a n s o c i e t y t h e r e has d e v e l o p e d a u n i q u e s o c i a l s t r u c t u r e . W i t h i n r u r a l s o c i e t y has d e v e l o p e d a new s o r t o f e l i t i s m b a s e d on m e m b e r s h i p i n t h e c o - o p e r a t i v e s . T h e e x e c u t i v e s o f t h e i n d i v i d u a l c o - o p e r a t i v e s have used t h e i r i n f I u e n c e and p o s i t i o n . t o a c c u m u l a t e p e r s o n a l f o r t u n e s . In 1965 a S p e c i a l C o m m i t t e e r e p o r t e d " W i t h r e g r e t we must r e p o r t t h a t i n a g r e a t many c a s e s , s o c i e t y s e c r e t a r i e s e n g a g e i n . p e t t y t h i e v e r y , o f t e n i n c o l l a b o r a t i o n w i t h a c o r r u p t c o m m i t t e e man and s o m e t i m e s , n o t s o p e t t y . " ^ S t o r i e s o f s u c h i Ik were commonly h e a r d i n t h e a g r i c u l t u r a l s e c t o r . ^ As w e l l , some c o - o p e r a t i v e s o f f e r e d p l o u g h i n g s e r v i c e s t o t h e i r members b u t t h e r e was an i n e q u i t a b l e d i v i s i o n o f p l o u g h i n g t i m e t h a t f a v o u r e d t h e c o m m i t t e e men and i n some c a s e s t h e s e men d i d n o t pay t h e , . 18 h i r e c h a r g e s . . . The r e s u l t o f t h e s e i n v e s t i g a t i o n s has been i n c r e a s e d g o v e r n m e n t p a r t i c i p a t i o n and c o n t r o l . Even t h o u g h t h e r e was e v i d e n c e o f g r a s s - r o o t s d i s c o n t e n t w i t h i n c o - o p e r a t i v e movements o n c e t h e i n e q u i t a b l e d i s t r i b u t i o n o f b e n e f i t s t h e " a c t i v i s t s " r e s o r t e d t o p a r o c h i a l i s m and t r i b a l i s m t o s t i r t h e p e a s a n t r y a g a i n s t i n c r e a s e d g o v e r n m e n t c o n t r o l . T h e s u c c e s s o f t h i s r e - o r g a n i z a t i o n o f t h e c o - o p e r a t i v e movement w i l l come w i t h t h e i n c r e a s i n g a w a r e n e s s and e d u c a t i o n o f t h e p e a s a n t f a r m e r s . N y e r e r e has c a l l e d f o r l o c a l f a r m e r s t o be s u s p i c i o u s o f t h e i r l e a d e r s and n o t t o f e a r c r i t i c i s m . Though i n c r e a s e d g o v e r n m e n t c o n t r o l may have s h o r t t e r m c o s t s , , as s o c i a l a w a r e n e s s a n d , more i m p o r t a n t , t h e e d u c a t i o n a l s t a n d a r d r i s e s , i n t h e l o n g r u n a l l o f T a n z a n i a n s o c i e t y w i l l b e n e f i t . 2 0 . Make up o f A g r i c u l t u r a l P r o d u c t i o n — j H a v i n g b r i e f l y s u m m a r i z e d t h e h i s t o r i c a l d e v e l o p m e n t o f e a c h c o u n t r y ' s •' a g r i c u l t u r a l s e c t o r we c a n now t u r n t o a more d e t a i l e d a n a l y s i s o f t h e a c t u a l p r o d u c t s o f t h i s s e c t o r . L e t us l o o k a t a c o u n t r y by c o u n t r y breakdown o f a g r i c u I t u r a I - p r o d u c t i o n . As was. i n d i c a t e d e a r l i e r a l l t h r e e c o u n t r i e s depend h e a v i l y on t h e a g r i c u l t u r a l s e c t o r . From t a b l e s 2A 2, 2A 3 , and 2 A 4 , . i t i s o b v i o u s t h a t t h e g r e a t e s t r e v e n u e e a r n e r s i n a l l t h r e e c a s e s a r e c o f f e e , s i s a l , c o t t o n a n d t e a . C o f f e e has become t h e main a g r i c u l t u r a l e x p o r t f o r a l l t h r e e c o u n t r i e s . A l l a r e members of t h e I n t e r n a t i o n a l C o f f e e A g r e e m e n t ( I C A ) , and t h e r e f o r e t h e "bulk o f t h e i r c o f f e e goes t o t h e q u o t a m a r k e t . Any amount above t h i s q u o t a must be s o l d o u t s i d e t h e q u o t a m a r k e t a t lower p r i c e s . Uganda i s t h e l a r g e s t p r o d u c e r w i t h 160,000 t o n s in 1967, o f w h i c h 94$ was r o b u s t a t y p e c o f f e e . Kenya t h e n f o l l o w s w i t h a 1966 p r o d u c t i o n o f 5 1 , 3 0 0 t o n s , m o s t of w h i c h i s h i g h q u a l i t y a r a b i c c o f f e e . . A n i n t e r e s t i n g o b s e r v a t i o n i s t o n o t e how t h e s m a l l f a r m e r s h a r e o f p r o d u c t i o n has i n c r e a s e d f r o m 20$ i n 1960 t o a b o u t 50$ i n 1966. Th i s i s a d i r e c t r e s u 1 1 o f t h e one mi I I i o n a c r e s e t t l e m e n t p r o g r a m d i s c u s s e d e a r l i e r . As t h e s e s m a l l f a r m p l a n t a t i o n s r e a c h m a t u r i t y i t i s p r e d i c t e d t h a t t h e 1970 c r o p w i l l r e a c h 7 0 , 0 0 0 t o n s . T a n z a n i a i s n e x t w i t h a 1967 p r o d u c t i o n o f 4 7 , 0 0 0 t o n s o f w h i c h 3/4 was a r a b i c and one f o u r t h r o b u s t a . In a l l t h r e e c o u n t r i e s p r o d u c t i o n has been g r e a t e r t h a n ICA q u o t a s o t h a t t h e r e s p e c t i v e g o v e r n m e n t s have been e n c o u r a g i n g i m - p r o v e m e n t i n q u a l i t y r a t h e r t h a n i n c r e a s e d p r o d u c t i o n . S i s a l was t h e main e x p o r t e a r n e r o f T a n z a n i a up u n t i l 1966 (£ o f t o t a l e a r n i n g s ) . T a n z a n i a h o l d s 2/5 o f t h e t o t a l w o r l d m a r k e t b u t t h e p r i c e o f s i s a l has f a l l e n b e c a u s e o f i n c r e a s e d c o m p e t i t i o n from B r a z i l . a n d t h e i n t r o - 21... d u c t i o n o f s u b s t i t u t e s y n t h e t i c f i b r e . In 1967, 2 1 7 , 0 0 0 t o n s o f s i s a l were e x p o r t e d b u t b e c a u s e of t h e h i g h e r l a b o u r c o s t s and low i n t e r n a t i o n a l p r i c e s , b o t h c o f f e e and c o t t o n were g r e a t e r e x p o r t e a r n e r s , d r o p p i n g s i s a l ' s s h a r e o f e x p o r t r e v e n u e t o 15$ i n 1967. . Kenya i s t h e o n l y o t h e r E a s t A f r i c a n c o u n t r y t h a t i s p r o d u c i n g s i s a l . P r o d u c t i o n - r e a c h e d a peak i n 1963 o f 7 0 , 2 0 0 t o n s b e c a u s e of good p r i c e s , b u t d r o p p e d t o 5 7 , 0 0 0 t o n s i n t h e n e x t 3 y e a r s f o l l o w i n g a d r o p i n p r i c e . E x p o r t e a r n i ngs f e i I f r o m K . S h . 150 mi I I i o n i n 1963 t o 66 mi I.I i on in 1966. M o s t o f t h e c r o p i s from l a r g e e s t a t e s and t h e g o v e r n m e n t i s d i s c o u r a g i n g smaI I f a r m p r o d u c t i o n o f s i s a l b e c a u s e o f t h e d i m p r o s p e c t s f o r t h e i n d u s t r y . C o t t o n was o n c e U g a n d a ' s m a i n e x p o r t and was t h e e n g i n e o f h e r e a r l y e c o n o m i c d e v e l o p m e n t b u t now i t r a n k s s e c o n d t o c o f f e e a c c o u n t i n g now f o r a b o u t 1/3 o f t o t a l e x p o r t e a r n i n g s . The l a r g e s t p r o d u c e r s , o f c o t t o n , Uganda s e t a r e c o r d c r o p o f 2 8 5 , 0 0 0 t o n s i n 1965-66. The g o v e r n m e n t i s a c t i v e l y e n c o u r a g i n g t h e p r o d u c t i o n o f c o t t o n t h r o u g h t h e i n t r o d u c t i o n o f p e s t i c i d e s and i m p r o v e d c u l t i v a t i o n p r a c t i c e s . O u t p u t i s e x p e c t e d t o e x c e e d 3 6 8 , 0 0 0 t o n s by 1971 w h i c h i s t h e end o f t h e s e c o n d f i v e - y e a r d e v e I o p m e n t p l a n . T a n z a n i a has e n j o y e d i n c r e a s e d o u t p u t e a r n i n g s t h a t has more t h a n d o u b l e d between 1961 and 1966 ( s e e t a b l e 2A 2 ) . The 1966 p r o d u c t i o n o f 7 7 , 6 0 0 t o n s has p l a c e d c o t t o n a s t h e s e c o n d l a r g e s t s o u r c e o f e x p o r t r e v e n u e b r i n g i n g i n 22$ of t o t a l e a r n i n g s . '. P r o d u c t i o n o f t e a h o l d s a l e s s e r p o s i t i o n i n t h e h i e r a r c h y o f f o r e i g n e x c h a n g e e a r n i n g c r o p s . In U g a n d a , i t i s t h e t h i r d most i m p o r t a n t c r o p and f o u r t h l a r g e s t e x p o r t . T e a p r o d u c t i o n has t r a d i t i o n a l l y come f r o m l a r g e e s t a t e s b u t t h e g o v e r n m e n t has i n t r o d u c e d a p r o g r a m t o e x t e n d t e a p r o d u c t i o n t o A f r i c a n s m a l l f a r m h o l d e r s who would s e l l t h e i r o u t p u t t o t h e e s t a t e s . By 1970, t h e t o t a l a r e a u n d e r c u l t i v a t i o n i s e x p e c t e d t o be 3 3 , 0 0 0 a c r e s o f w h i c h 2 2 . 14,000 wi I I be grown by A f r i c a n " o u t g r o w e r s " . Tea p r o d u c t i o n i n T a n z a n i a has been m i n o r i n c o m p a r i s o n t o o t h e r c r o p s . A l t h o u g h p r e v i o u s l y d o m i n a t e d by e s t a t e f a r m i n g , t e a p r o d u c - t i o n has been i n t r o d u c e d t o t h e A f r i c a n S e c t o r . From t h e r e s p e c t i v e t a b l e s we c a n s e e t h e o t h e r a g r i c u l t u r a l p r o d u c t s s u c h as g r o u n d n u t s , s u g a r , wheat and m a i z e t o g e t h e r make up a s u b s t a n t i a l p a r t o f t h e a g r i c u l t u r a l s e c t o r b u t a r e n o t o f any i m p o r t a n c e i n d i v i d u a I l y . 2 3 . APPENDIX I I I •SERVICES TO BE ADMINISTERED BY THE COMMUNITY The s e c r e t a r i a t o f t h e C o m m u n i t y , i n c l u d i n g s e r v i c e s r e l a t i n g t o t h e Common M a r k e t and t h e Chambers o f t h e C o u n s e l t o t h e C o m m u n i t y . 2. . . The E a s t A f r i c a n D i r e c t o r a t e o f C i v i l A v i a t i o n 3 . The E a s t A f r i c a n M e t e o r o l o g i c a l D e p a r t m e n t 4. The E a s t A f r i can Customs and E x c i s e D e p a r t m e n t 5. The E a s t Af r i c a n Income T a x D e p a r t m e n t . 6 . ' The E a s t A f r i c a n 1 n d u s t r i a 1 Counc i 1. 7. The E a s t A f r i c a n L i t e r a t u r e B u r e a u . 8. The A u d i t o r - G e n e r a l ' s D e p a r t m e n t . 9 . The E a s t A f r i c a n Community S e r v i c e C o m m i s s i o n . 10. The E a s t A f r i c a n L e g i s l a t i v e A s s e m b l y . 11. The E a s t A f r i c a n A g r i c u l t u r e and F o r e s t r y R e s e a r c h O r g a n i z a t i o n . 12. . The E a s t A f r i c a n F r e s h w a t e r F i s h e r i e s R e s e a r c h O r g a n i z a t i o n . 13. The E a s t A f r i c a n M a r i n e F i s h e r i e s R e s e a r c h O r g a n i z a t i o n . . ' - 14. The E a s t - A f r i c a n T r y p a n o s o m i a s i s R e s e a r c h O r g a n i z a t i o n . 15. The E a s t A f r i c a n V e t e r i n a r y R e s e a r c h O r g a n i z a t i o n . 16. ' The E a s t A f r i c a n L e p r o s y R e s e a r c h C e n t r e . 17. The E a s t A f r i c a n I n s t i t u t e o f M a l a r i a and V e c t o r - B o r n e D i s e a s e s . 18. The E a s t A f r i c a n I n s t i t u t e f o r M e d i c a l R e s e a r c h . 19. The E a s t A f r i c a n V i r u s R e s e a r c h O r g a n i z a t i o n . 2 0 . The E a s t A f r i c a n I n d u s t r i a l R e s e a r c h O r g a n i z a t i o n . 2 1 . The E a s t A f r i c a n T r o p i c a l P e s t i c i d e s R e s e a r c h I n s t i t u t e . 2 2 . The E a s t A f r i c a n T u b e r c u l o s i s I n v e s t i g a t i o n C e n t r e . 2 3 . S e r v i c e s a r i s i n g f r o m t h e o p e r a t i o n s o f t h e E a s t A f r i c a n C u r r e n c y B o a r d . 2 4 . S e r v i c e s f o r t h e a d m i n i s t r a t i o n o f g r a n t s o r l o a n s made by t h e g o v e r n - ment o f any c o u n t r y , any o r g a n i z a t i o n o r any a u t h o r i t y , f o r t h e p u r p o s e s o f p r o j e c t s o r s e r v i c e s a g r e e d between t h e A u t h o r i t y and t h e P a r t n e r S t a t e s . 2 5 . S e r v i c e s , i n c l u d i n g s t a t i s t i c a l s e r v i c e s , f o r t h e p u r p o s e s o f c o - o r d i n a t i n g t h e e c o n o m i c a c t i v i t i e s o f t h e P a r t n e r S t a t e s . 2 6 . S e r v i c e s f o r t h e p u r p o s e s o f any body o r a u t h o r i t y e s t a b l i s h e d i n p u r - s u a n c e o f p a r a g r a p h 4 o f A r t i c l e 43 o f t h i s T r e a t y . 2 7 . - S e r v i c e s f o r t h e p u r p o s e s o f t h e E a s t A f r i c a n I n d u s t r i a l C o u r t e s t a b l i s h e d by A r t i c l e 85 o f t h i s T r e a t y . B I B L I O G R A P H Y BOOKS B a i n , J.S. Ba l d w i n , Robert E. Brady, 'CT. Burke, F.G. C l a r k , P a u l G. C l a y t o n , E.S. D e l l , S.S. Ewing, A.F. F o r r e s t e r , M.W.- Harmsworth, J . I.B.R.D. I . B . E . D . I.B.R.D. I n t e r n a t i o n a l Monetary Fund Johnson, H a r r y J . Leys, C. & Robson, P. B a r r i e r s t o New C o m p e t i t i o n : t h e i r c h a r a c t e r and_ ..consequences i n ma n u f a c t u r i n g i n d u s t r y . H arvard U n i v e r s i t y P r e s s , Cambridge. 1956. Economic Development and Export Growth, U. of C a l i f o r n i a P r e s s , B e r k e l e y and Los A n g e l e s . 1966. Commerce and Conquest i n Ea s t A f r i c a , The Essex I n s t i t u t e . 1950. R i v e r s i d e P r e s s . Cambridge, Mass. Tanganyika P r e p l a n n i n g , Syracuse U. P r e s s . 1965. . Syracuse, N . Y o Development P l a n n i n g i n Ea s t A f r i c a , East A f r i c a n P u b l i s h i n g House, N a i r o b i . 1968. A g r a r i a n Development i n Peasant Economies; Some Lessons from Kenya, Oxford Pergamon P r e s s , N . Y . , "1964. ' . Trade B l o c s and Common Markets, C o n s t a b l e , London, 1965. I n d u s t r y i n A f r i c a , Oxford U. P r e s s . London. 1968. Kenya Today: S o c i a l P r e r e q u i s i t e s f o r Economic Development, 1s-Gavenhague, Mouton. 1962. Peasant A g r i c u l t u r a l Labour O r g a n i z a t i o n i n Four S e l e c t e d Areas o f E. Uganda, I n t e r - A f r i c a Labour I n s t i t u t e B u l l e t i n , Nov/63. .Economic Development of Kenya, Johns Hopkins Press.' ~1963 v Economic Development of TanganyikaJohns Hopkins P r e s s , 1963. Economic Development of Uganda, Johns Hopkins P r e s s , 1963o Surveys o f A f r i c a n Economies, V o l . I & I I , Washington, D.C. I969T ~ Money Trade and Economic Growth, George A l l e n & - Unwin, L t d . , London. 1964. F e d e r a t i o n i n Ea s t A f r i c a , Oxford U n i v e r s i t y P r e s s . London. 1 9 6 5 . 2. MacDonald, A. /Massell, B.F. & Cooper, CA. Meade, J.E. Nedegawa, P. Nyerere, J . Robson, Peter Ruthenberg, H„ l • Ruthenberg, H„ • Viner, J . Walker, D„ Wionczek, M.S. Government Documents Republic of Kenya The United Republic of Tanzania Republic of Uganda Republic of Zambia Tanzania: Young Nation i n a Hurry, Hawthorn Books Inc., N.Y. 196C Economic Union i n East A f r i c a : an evaluation of gains, Rand Corp., Santa Monica, Calif".' .1954. The Theory of Custom Unions, North Holland Pub l i - shing House, Amsterdam. 1 9 5 5 . The Common Market and Development i n East A f r i c a , East African Publishing House, Nairobi,, 1 9 6 5 » Freedon & Unity, a selection from writing and speeches 1 9 5 2 - 1 9 6 5 , Oxford U„ Press. London. Nairobi. 1 9 6 7 . Economic Integration i n A f r i c a , George Allen & Unwin Ltd., London" 1968. African A g r i c u l t u r al Production Development Policy i n Kenya, 1 9 5 2 - 1 9 6 5 , Springer-Verleg. B e r l i n - New York^ 1 9 6 6 7 Agricultural Development i n Tanganyika, Springer, Berlin-NTY. I960. The Customs Union Issue, Carnegie Endowment for International Peace, 1 9 5 0 . Economic Growth i n East A f r i c a , U. of Exeter. Oct/63. ~ ' . Economic Development i n Latin America, A f r i c a and Asia, A Handbook of Document s i M.I.T!. Press. ' 1 9 6 9 . S t a t i s t i c a l Abstract 1965» Stat. Division, Ministry of Planning and Development. 1965. Economic Report. 1969. Background to the Budget-An Economic Survey, 1968— 1969. Dar es Salaam. I96C News Releases: Department of Information, Dar es Salaam. Economic Abstract 1967. Kampala. 1968. Economic Report 1968, presented (to the National Assembly 1969. Lusaka. Republic of Zambia Economic Report 1969, presented to the National Assembly 1970. Lusaka. 1970. Zambian Monthly Digest. Lusaka. Sept/69. United States Department of Commerce Overseas Business Reports United Nations Basic Data on the Economy of Zambia Dec/68. OBR 65-57."" Basic Data on the Economy of Tanzania. Feb/66. OBR 66-4. Basic Data on the Economy of Uganda. Apr/66„ ~GBJTBb-19. Establishing a Business i n Zambia. Dec/67. OBR 67-99". ' ~ Establishing a Business i n East Africa. Dec/66. OBR 66-93. .Foreign Trade Regulations of East Africa. June/66.. 'OBR oG^AO. Foreign Trade Regulations of the Republic of Zambia. Eay/IT. 0BR~6&^6T; Market Factors i n East Africa. July/68. OBR 68-61. Selling i n -East Africa. Hay/69. OBR 69-19. Foreign Economic Trends, Zambia. A p r i l 30/69. ET 69-57.. Foreign Economic Trends, Uganda. Sept.10/69.' ET 69-105. ~ Commodity Trade S t a t i s t i c s 1966. S t a t i s t i c a l Papers Service D., Vol. XVI, No. 1-36. Foreign Trade S t a t i s t i c s of Africa, Series B. Trade by Commodity, Jan-Dec 1966, No. 13. E/CN 14/STAT/SER Trade Expansion and Economic Integration Among Developing Countries! TT̂B7cT57Rev"T; N.i. 1967. Trade Prospects and Capital Needs of Developing Countries; study prepared by the UNC'i'AD secretariat. TD/34/Rev. 1. N.Y. 1968. United Nations: Economic . ' Commission for A f r i c a _ J^J-M£a£g5j^!SP sE 0^i. j f r p j j - e m s i n Relation to the Promotion of Ecomonic DeveiopmentT ~ E/CN 14/14&U Jan/62. ._Egor^ic_ B u l l e t i n for A f r i c a , Vol. VII, No. 1&2, E/CN 14/"406. : i g ^ u g t r i a l Development: A f r i c a , Report of Sympo- sium, E/CN 1 4 / 3 4 7 . " N.Y. .966c • Report of the Sub-regional Meeting on Economic C^olpelittion i n "East A f r i c a . E / C N 14/L?/ECC?712. Dec/ST." " " " Treaty f or East African Co-operation. Kampala. June/67. ARTICLES Allen, R.L. Balassa, B. Bentick, B.L. Breton, A. Brown, A.J. Integration i n Less Developed Areas 9 Kyklos. 1961. p 0 315-336": : : ~ Trade Creation and Trade Diversion i n the European "Common Market. E T C Vol LXAVlI, Mar/67, p. 1-22. Estimating Trade Creation and Trade Diversion, E.J. Vol. LXXIII, June/63, pp.219y225. " . $The Economics of Nationalism, J.P.E., Aug/64. Custom Union Versus Economic Seperation i n Develo- ping Countries, Parts 1 & 2, Yorkshire B u l l e t i n of Economic and Social Research, May/61 and Nov/61. Clark, P.G. The Rationale and Uses of a Projection Madel for • East African Economies, E.A.E.R., June/65. Cooper, CA. & Massell, B.F. Development Planning i n East A f r i c a : a Rejoinder, 7̂ATETTn~., June/677 - Towards a General Theory of Customs Unions for Developing Countries, Journal of P o l i t i c a l Ecqn- omics, Oct/65, p.461-476. D'Arge, R. Note on Custom Unions and Direst Foreign Investment, ̂ EJ" Vol. LXXJJC, June/69, pp324-34 Diamond, P.A. Effective Protection of East African Transfer Taxes, East African Economic Review, Dec/680 5o Douglas, D.YJ. Edwards, E.O.- E l l i o t Feldraan, D. Gehrels, F, Ghai, Dharam Gray, Clive f>. Gray, Clive S 0 Hazlewood, A„ Helleiner, G.K. Howe, C . W . & Karami, H. Johnson, 'Harry G. Karani, H. Structure and Advice: The Case of Kenya, American Journal of Economics and Sociology, Oct/65, pp.397-411. . Development Planning In Kenya Since Independence, "E.A.E.R.,~Dec768o The Zambian Economy, East African Journal, Dec/68, pp~oll-19. • Problems i n Achieving Rural Socialism i n Tan- zania, Inst, of Development Studies, U. of Sussex, • Juiy7'68. Customs Unions from a Single Country Viewpoint, Review of Economic Studies, Vol. XXIV (T), 1956- 1957. Machinery of Planning i n Kenya, Inst, of Bvelop- ment Studies, U. of Sussex, June 29-July 10/69. Development Planning i n East Africa: A Reply, 'E.A.E.E., June/67. ~' Development Planning i n East Africa; A Review^. A r t i c l e , EpArE,R,, Dec/66. The EACM: Importance and Effects. BulTffitin of "Oxford University Institute of EconomicS nd S t a t i s t i c s Feb/66 The s h i f t a b i l i t y of industry and the measurement of gains and losses i n the EACIjl, Yorkshire Bu l l e t i n May/66 The Kampala Treaty and the Accession,., of New Members to the East African Community, E.A.E.R., Dec/68. Transfer Taxes, Tar i f f s and the East African Common Market, E.A.E.R., Dec/67, : ~~ ~ The Measurement of Aggregative Economic Performance • i n East Africa, E.A.E.R., June/65. A Projection Model for the Kenya Economy: A Study i n Development Planning and Comparative Economic "Structures, EyAffE,R,, June/65. An Economic Theory of Protectionism,Tariff, Bargaining and Formation of Customs Unions, J.P.E., 1965. A Projection Model for the Kenya Economy: Implications of Kenya Development Pl an, 1966-1970, E.A.E.R., ~ June/67. 6. Kemp, M.C / / •• . Kessel, Dc Lipsey, R.G. Makower, H. & Morton, G„ Massell, B.F. & Cooper, CA. r ' :. Massell, B.F. . Metwally, M.M. Michaely, M. Mikesell Mishan, E.J. Mishan, E.J. Newlyn, V/.T. Nowlan, D.M. . Raisman, J 0 Rivkin, A. The welfare gains of a trade diverting Custom-^ ~ Union: Comments, .E.J. Vol. LXXVII, Sept/67, pp, 652-3. Effective Protection of Industry i n Tanzania, ' ETATE.R. , June/68.. Mr» Gehrels on Custom Unions, Review of Economic 'Studies, Vol. XXIV(3), 1956-7. pp» 211-214. The Theory of Custom Unions: Trade Diversion and "Welfare, Economica, Vol. XXIV [1), No. 93, Feb/57. The Theory of Custom Unions: A general Survey, E.J., Sep't/60o A Contribution towards a Theory of Custom Unions, E.J., Vol. LXII, Mar/53, pp.33-49. " A New Look at Custom Union Theory, E.J., Vol. LXXV, Dec/65, ppo748-58„ ~ . A Reply and Further Thoughts on Customs Unions, E.J., Vol. LXXVIII, Dec/68, pp.979-81. _ ~ The Effects of Market Limitations on Industruali- zation i n Egypt, Ein-shams University, Cairo. Qn Customs Unions and Gains from Trade, E.J., Sept/65, pp.577-83. 7~ ~ ~ The Theory of Common Markets as applied to regional arrangements among developing countries, i n International Trade Theory i n developing World, R. Harrod. , Trade Creating Custom Unions - a Comment, E.J. Mar'','65, pp.23'S=--40• The Welfare Gains from a Trade Creating Custom Union Reiterated, E.J. Vol. LXXVI,.Sept/66, pp. 669-71 o •• C Gains and Losses i n the EACM, Yorkshire B u l l , of Econ. and Soc. Research, Nov/65. Tanzanian Socialism, Canadian Forum, June/67. East Africa Report of Economic and Fis c a l Commission, Feb/61. Africa and EEC, Finance & Development, Vol. I l l , No. 2,~E9fr6-;—^ . . R o u c h e r e a u , H . S a u l , J o h n 3 . S p r a o s , J . V a n A r k a d i e , B . W i o n c z e k , M«S„ S i g n i f i c a n c e o f t h e New A g r e e m e n t s C o n c l u d e d w i t h t h e AASM a n d t h e E a s t A f r i c a n C o m m u n i t y , B u l l , o f E u r o p e a n C o m m u n i t i e s , S e p t / O c t / 6 9 > p p . 5 - 8 . M a r k e t i n g C o - o p e r a t i v e s i n a D e v e l o p i n g C o u n t r y ; ; T h e T a n z a n i a n C a s e y Coni'erence>JJ-o--of*"T3ussex, MarTl-Apr 1/691 ' T h e C o n d i t i o n s f o r a T r a d e C r e a t i n g C u s t o m IjnjLoa., E . J . , V o l . L X X I V , M a r/64, pp.101-108. P l a n n i n g i n T a n z a n i a , I n s t i t u t e o f D e v e l o p m e n t S t u d i e s , U . o f S u s s e s , J u n e 2 9 - J u l y 10/69. E x p e r i e n c e s o f C e n t r a l A m e r i c a n E c o n o m i c I n t e g r a - t i o n P r o g r a m m e a s a p p l i e d t o E a s t A f r i c a , I n d u s t r y & P r o d u c t i v i t y B u l l o #11, N.Y., 1968, p p . 1 4 - 2 9 .

Cite

Citation Scheme:

    

Usage Statistics

Country Views Downloads
Japan 2 0
China 2 0
United States 1 2
City Views Downloads
Tokyo 2 0
Beijing 2 0
Ashburn 1 0

{[{ mDataHeader[type] }]} {[{ month[type] }]} {[{ tData[type] }]}

Share

Share to:

Comment

Related Items