According to reports in the Tanzanian press, private sector representatives have urged the Tanzanian government to establish a 25% import duty on rice imports “to ensure that the domestic market is not saturated with ‘cheap’ commodities”. The CEO of Southern Agriculture Growth Corridor of Tanzania (SAGCOT), Geoffrey Kirenga, commented that the 2013 government decision “to waive import duty on 60,000 tonnes of imported rice was wrong and the mistake… should not be repeated”.
Mr Kirenga said that farmers not only faced lower prices for local rice, but also struggled to sell rice on regional markets in the face of competition from cheap Asian rice. He saw a dialogue with stakeholders on appropriate levels of rice tariffs and imports as necessary.
SAGCOT, in association with foreign investors involved in Kilombero Plantations Limited (KPL), supports smallholder rice production. KPL has reported major increases in Tanzanian smallholders’ yields, after which it undertakes the milling and marketing of the expanded rice production. According to the parent company of KPL, the innovations have “doubled or trebled” smallholder yields compared to “local traditional yields”.
However, the CEO of KPL, Carter Coleman, claims that his company has suffered “a whopping 4 billion shilling loss [about €1.8m] as a result of Asian rice imports”. These referred in particular to “40,000 tonnes of cheap Pakistani rice that was exempt” from the EAC common external tariff (CET), as a result of which the wholesale price fell by 54%. Mr Coleman noted that KPL “still has 1,000 tonnes of rice from the 2012 season and another 5,000 tonnes from [the 2013 harvest], which cannot be sold at a profitable price due to a saturated local market”.
The market difficulties remain, despite the Tanzanian government decision of March 2013 to halt imports “following complaints from local producers and donors”.
For rice, the EAC CET is “a compound tariff of the 75% ad valorem rate or US$ 200/tonne, whichever is higher”. However, under the Customs Union Protocol, flexibilities were envisaged which allowed national governments to “review the common external tariff structure and approve measures designed to remedy any adverse effects which any of the Partner States may experience by reason of the implementation”. This at times has resulted in Kenya applying import tariffs on rice of 35% and Tanzania and Uganda applying import tariffs of 15%. In the case of Kenya, this was linked to tariff concessions from Pakistan for Kenyan tea exports. Attempts to enforce the higher CET rate in the past led to extensive smuggling of rice into Tanzania.
According to earlier analysis from USDA, the EAC’s rice sector tariff had three main effects:
- it encouraged local production;
- it raised domestic prices; and
- it suppressed per capita rice consumption.
However, according to an FAO commodity and trade policy working paper published in 2013, there is strong stakeholder support for a tariff of around 35%, as the maintenance and development of the domestic production base are considered to justify the price increases that the tariff gives rise to.
The situation facing smallholder farmers in the Kilombero rice project highlights the need for consistency between national agricultural development initiatives and trade policy decisions. FAO has highlighted how the setting of appropriate CET rates for staple food products such as rice is a key policy issue that needs to be addressed – and it is closely related to the issue of the effective management and implementation of regionally agreed tariff policies at the national level. The limited analysis that has taken place to date suggests that an import duty of 35% would enable both efficient and average producers remain competitive, but that the benefits would be unevenly spread – for example, Tanzanian rice producers might benefit at the expense of Kenyan consumers.
The issue of an appropriate rice sector tariff is further complicated by the growing consumer demand for rice in the EAC, which is outpacing production gains. Underlying competitiveness challenges need to be addressed. This applies along the entire value chain: from better input supply, processing technologies and storage facilities to harmonised grading and quality standards, and the elimination of non-tariff and informal barriers to intra-regional trade.
Current “flexibilities” pose challenges – for example where reduced tariffs are applied in pursuit of bilateral trade interests (e.g. the Kenya–Pakistan tariff trading concessions for rice and tea respectively).
In this context, important issues related to the harmonisation of tariff protection policies with supply-side and trade facilitation measures need to be addressed. This could potentially involve the use of seasonal import quota arrangements.