Determinants of Tanzania’s agricultural export performance: the case of EU’s trade arrangements with ACP countries

The study set out to analyze the performance and determinants of Tanzania’s agricultural exports to EU for the period 1980 - 2008. Ordinary Least Square technique was adopted to regress the secondary time series data. Stata 10 was used for econometric analysis. The analysis found that the general trade performance of Tanzania is experiencing trade balance deficit with the increase in imports than exports. In those exports from Tanzania, non-traditional export is doing well than traditional exports. Traditional exports, in particular agricultural exports are not doing well due to constraints facing agricultural sector performance. The econometric results found that four out of five variables were significantly determining the performance of Tanzania’s agricultural exports to EU. The results indicated that a unit increase in GDP and inflation of Tanzania and EU facilitates trade in agricultural products which ultimately improves exports of Tanzania’s products to EU. So from the analysis it is found that determinants of Tanzania’s agricultural exports performance are GDP of EU and Tanzania, inflation rates of EU and Tanzania. An important lesson from this study is that policy makers should put in place a well-designed policy to address supply side constraints and thus enable Tanzania benefit from preferential market access given by the EU. Tanzania should therefore; target to attract export oriented foreign direct investment so as to improve the production of agricultural goods for export markets. This could to a great extent be done through a better legal system and institutional framework.