To evaluate effects of free trade on the development of local industries in Zambia

 Corresponding author: MICHELO ZILOMBO. Copyright © 2025 Author(s) retain the copyright of this article. This article is published under the terms of the Creative Commons Attribution License 4.0. To evaluate effects of free trade on the development of local industries in Zambia MICHELO ZILOMBO * School of Social sciences, Department of Economics, Mulungushi University, Kabwe, Zambia. World Journal of Advanced Research and Reviews, 2025, 27(01), 2407-2420 Publication history: Received on 17 June 2025; revised on 26 July 2025; accepted on 28 July 2025 Article DOI: https://doi.org/10.30574/wjarr.2025.27.1.2801 Abstract The study investigated the effects of free trade protocols on the development of local industries in Zambia focusing on the three categories of manufacturing industry namely: fabric and garment products (Tailoring), wood products (Carpentry) Iron and Steel products (Metal and Fabrication) in Lusaka district of Zambia. The study was conducted by the following specific objectives; to evaluate the effect of free trade on the competitiveness, sustainability and development of local industries in Zambia. And also to investigate the role of government on enhancing the competitiveness, sustainability and development of local industries. This study was guided by trade protectionism, liberalism and dependency theoretical perspectives. In this study qualitative and quantitative method using descriptive research design were used to collect data from sampled respondents. The targeted population were urban manufacturing companies in Lusaka District. A sample of 50 respondents was used which consisted of (5) participants from (10) local manufacturing companies. A sample of 50 was arrived at by using stratification and purposive sampling. Data was collected using self-administered questionnaires. The study findings established that, there was a negative effect of free trade protocols on the development of local firms in Zambia. Further, the respondents indicated that the government had a role of providing better laws and regulation to enhance competitiveness, sustainability and development of local industries. The study recommended that, there is need for political will on the part of government to assist the manufacturing industry to enjoy lower production costs, economies of scale and greater capacity utilization through the provision of subsidy or direct cash incentive payments for exporters to boost the industry and make them competitive at both local and international level. In addition, government should be involved in all trade protocols on behalf of the country to put in place some safeguarding measures to compensate for unfair trade practices and make agreements in the best interest of the local manufacturing industries. Keywords: Trade; Competitiveness; Sustainability; Protectionism; Liberalization 1. Introduction Regional integration initiatives in Africa have a long history, dating back to the establishment of the South African Customs Union (SACU) in 1910 and the East African Community (EAC) in 1919. Since then a number of regional economic communities have been formed across the continent, particularly since the 1970s. Currently there are about 10 or so regional economic groupings in Africa. Today there is no country in Africa that isn’t a member of at least one regional economic group. As reflected in the number of regional agreements both in the continent and worldwide, therefore, the issue continues to occupy a centre-stage in the economic agenda of countries. Regional integration in SubSaharan Africa is not a recent phenomenon. At least two unions, the Southern African Custom Union and the East African Community have existed since 1910 and 1919 respectively. Regional integration arrangements initially became fashionable in the 1960s, following the formation of the European Economic Community in 1957 and the European Free Trade Area in 1960. These were pursued by a large number of regional integration agreements in the developing world World Journal of Advanced Research and Reviews, 2025, 27(01), 2407-2420 2408 as well in an effort to promote region trade and economic growth. The African groupings were created to achieve an “open regionalism,” with minor external tariffs than the earlier efforts on regional trade agreements of 1960s (Brewste et al, 2002). The main motivation of the enactment of free trade area protocols were identified from the Protocol on Trade of 1997 that integrated regional market opened up for a new vibrant business sector. The Protocol on Trade in the Sub-Sahara countries also takes into account the Uruguay Round of Multilateral Trade Negotiations on worldwide trade liberalization. The Protocol is the manifestation of the needs expressed in the Treaty on the establishment of an African Economic Community (the Abuja Treaty) to put a sub-regional grouping as building blocks for the creation of an African Economic Community. This provided an outline of trade cooperation attached to equity, fair competition and mutual benefit that SADC believes will contribute to the emergence of a workable development community in Sub-Saharan Countries. The main agenda of the Trade Protocol was to liberalize intra-regional trade in commodities and services on the basis of fairness, equity and beneficial trade arrangements and also to ensure efficiency production among SADC members which act as leverage to give a comparative advantage. In additional, SADC had also planned to improve capital investment climate; economic development; diversification; industrialization and form a free trade area within the region. Before the free trade protocols and liberalisation, Zambia had a well-established manufacturing sector. But the sector which boasted of having over 140 companies in the 1980s and empowering over 25,000 Zambians through provision of jobs saw mass closures of firms in the industry scaling down operations especially the manufacturing sub-sector such as clothing, metal fabrication and carpentry with the resultant employment levels dropping to below 2,500 (Chikoti et al, 2002). Zambia previously had a very good market for all the products that the country produced. The negative of effects of free trade protocols and trade liberalization have been highlighted by various authors. For example, Shaffaedin (2011a) have shown that developing countries can produce and export high value-added products but that they are constrained by unfair competitive pressure from imports as well as hampered by tariffs and arbitrary anti-dumping policies. Regarding the local industry development, one of the main arguments against trade liberalization is that it particularly helps those countries where industries are near the stage of maturity (Shafaeddin 2011b). As at now, the numbers of industry in Zambia are met with serious challenges, which brought a decline in productivity, a situation which has forced a number of industries to close down. This depressing state of affairs has mainly been due to trade liberalization that removed restrictions both internally and externally resulting in competition, which many local industries were not ready for due to the inefficient manner in which they were run as they enjoyed preferential policies from government. From the very genesis of SADDC, later SADC, the idea was to integrate African regional economies through, among other things, trade liberalisation. According to Kaphuka (2015), intra-regional trade in the Sub-Saharan has been faced by many challenges which have lowered economic growth within the region. The integration of the economies at the regional level appeared to be the best tactic to overcome trans-boundary challenges the founding member states that had faced then and to increase the level of intra-regional trade among member states. The member states also had an understanding of the fact that, trade liberalisation was a central pillar of regional integration. Thus, after the Lusaka declaration was renegotiated in 1992 to transform SADCC to SADC, the Trade Protocol was therefore signed in the quest to strengthen the region’s pursuit towards regional integration. 2. Literature review and theoretical framework Different studies have been undertaken in the area of free trade protocol and a number of them have highlighted the need for host country to sustain and development the local industries in the country. Therefore, this chapter explores various literature related to trade protectionism, free trade protocol and empirical studies. 2.1. Trade Protectionism It is much more difficult to find the theories or scholars advocating trade protectionism through literature reviews compared to free trade. But there are still several arguments for protection, such as national security, local industry, and diversification analyzed by Franklin. One of the reasons to protect national industry is the need to maintain an ‘adequate’ national defence. Even Adam Smith, the venerable father of free trade, wrote in 1776 that ‘defence is much more important than opulence’ (Adam Smith, 1937). The problem lies in defining the specific requirements of national defence and the proper way to meet those requirements. Otherwise, the national security argument may be used to justify complete self-sufficiency or the World Journal of Advanced Research and Reviews, 2025, 27(01), 2407-2420 2409 protection of any industry. Since most producers consider their activities essential to the defence of their country, the national security argument is particularly subject to abuse. The government policy instruments may have economic effects to the flows of commodities and services in the world economy. The traditional policy instrument is the import tariff. At the time governments have also resorted to bewildering variety as measures to restrict imports/subsidize exports. The measures are normally collectively designated as non-tariff trade barriers (Root, 2000). 2.1.1. Free Trade Protocol and the Sustainability of the Local Industries in Zambia Table 1 Highlights a critical protectionist argument pertaining to the very real risk of dependency upon other nations for economic sustainability. S/N Author Methodology Main Findings 1 Duma (2017) Objectives of the study 1. To understand conditions and factors that make it difficult for SADC member states, who are signatories to the trade protocol, to honour their commitments to the FTA. 2. To understand the impact of the economic growth and development on the identified states’ commitments to the Trade Protocol. 3. To understand the impact of these states’ trading structures and patterns to their commitments to SADC’s Trade Protocol. This study adopted a qualitative approach. It was noted that it free trade protocols destroyed the Angola’s infrastructure and collapsed the local industries. Thus, the country is not yet ready to be open up to the free duty imports from the entire SADC region and they are still busy trying to revamp the country’s manufacturing sector and the built of the infrastructure. In Zimbabwe, the local industries almost collapsing which led to the government seeing the need for the protection of the local industries from an influx of duty free imports from the rest of the region and Malawi failed to uphold their commitments to the SADC's Trade Protocol with fear of local industries collapsing. 2 Redvers (2013) Qualitative Methods Angola fears that, if it opens up its borders to duty-free trade with the rest of SADC member states, it will be exposing its nascent industries to the unfair competition, which will kill them. 3 Chimhangwa (2014) Qualitative Methods Zimbabwean industries lack the requisite to capacity utilization levels to effectively compete at the regional level, they continue to suffer in the face of an influx of cheap imports 4 Khumalo (2016) Qualitative Methods Zimbabwe had imposed duties on South African imports in defensive of the local industries, despite the provision by the trade Protocol that member states should refrain from the imposition of any form of Non-Tariff Barriers The negotiations leading up to the continental free trade area (CFTA) present a unique opportunity to improve the livelihoods of millions of African people. The jobs and wealth that the CFTA can bring about have the potential to contribute significantly to alleviating poverty, creating jobs and promoting equality. The CFTA is more than a trade agreement. Its wide scope covering trade in goods, trade in services, investment, competition policy and intellectual property rights provides a platform to facilitate the inclusive structural transformation of African countries, contributing to the attainment of Africa’s Agenda 2063 and the global Agenda 2030. But trade agreements and economic integration do not necessarily lead to fair and sustainable outcomes. Economic interdependence and globalization have resulted in a system, where each country is largely dependent upon other countries for economic sustainability (though to varying degrees). This results in a substantial national security threat in the form of conflicting or offensive trade strategies between countries. Indeed, economics is often used directly as a weapon of war and conflict via trade sanctions. This highlights a critical protectionist argument pertaining to the World Journal of Advanced Research and Reviews, 2025, 27(01), 2407-2420 2410 very real risk of dependency upon other nations for economic sustainability (https://courses.lumenlearning.com, 25 Mar. 19). 2.2. Empirical Review 2.2.1. A Case Study of Angola Angola is one of the signatories of the SADC's Trade Protocol, having acceded to it in the year 2002, as of 2012 it was yet to implement the protocol’s provisions, most notably the elimination of tariff and non-tariff barriers and further refrain from the imposition of new ones; despite 2012 having been set as the year for full implementation of the Protocol (Redvers 2013). Angola’s decision to remain outside the SADC’s FTA, according to the South African Institute of International Relations, has both the economic and political drivers. The government of Angola has attributed its steady pace to the full accession of the SADC Trade Protocol to being not yet ready to open up the country's borders to the free flow of duty-free imports as it had recently emerged from the long-lasting civil war which destroyed its infrastructure and the economy (Redvers 2013). According to Redvers (2013), Angola fears that, if it opens up its borders to duty-free trade with the rest of SADC member states, it will be exposing its nascent industries to the unfair competition, which will kill them and that will push the country to be more oil-dependent than ever before. The South African Institute of International Affairs concluded in 2013 that, it is an undeniable fact that after the three decades of the civil war, Angola has nothing much to offer other than crude oil which accounts for up to 45% of the country's Gross Domestic Product (GDP), 75% of government revenues and 90% of the exports earnings (Redvers 2013). 2.2.2. A Case Study of Zimbabwe Zimbabwe also has had problems with adhering to the SADC's Trade Protocol. According to Chimhangwa (2014), due to the fact that Zimbabwean industries lack the requisite to capacity utilization levels to effectively compete at the regional level, they continue to suffer in the face of an influx of cheap imports. Thus, the government has continued to protect these industries. Zimbabwe had imposed duties (Surtax) on South African imports in defensive of the local industries, despite the provision by the trade Protocol that member states should refrain from the imposition of any form of Non-Tariff Barriers (Khumalo, 2016). According to an article published by the Financial Gazette in 2015, "As a result of the Rand's loss of traction against the US dollar in the year, prices of the South African products tended to be lower than those produced in Zimbabwe, and consumers switched to the imports, which triggered an outcry from the local manufacturers (Financial Gazette 2015). 2.3. Theoretical Framework 2.3.1. Liberalism Argument Liberal economic theoretical framework assumes that productive efficiency is improved if states undertake economic production in areas where they have relative advantage compared to others, therefore rationalizing costs and prices. In general, economic theories view the existence of tariffs and quotas as hostile to free flow of goods within a region. Both in theory and in practice liberalism has favoured private property and the market economy as efficient, just and essential to the underpinning of liberal political institutions and a free society. Choice is seen as a positive good and a key element of freedom in a liberal society. Liberalism encourages that individuals should be rewarded according to the market value of their talents, thus rewarding the ones who perform better than others. The market is viewed as an incentive to individual efforts and the full realizations of human potentials. Because of this approach, liberalism is often perceived as favouring the ‘strong’ and opposing the ‘weak’ industries. For any given product, market or trade creation occurs when high cost production is replaced by low cost production because of regional integration while economic diversion occurs when low cost production is substituted by high cost of production. Nevertheless, besides to trade creation and trade diversion effects, the static effects of regional integration can involve other impacts. Thus, we are going to look at these static effects by classifying in to traditional (trade creation and diversion) and nontraditional static effects in broader sense. Viner takes into account only tradecreation and trade-diversion effects, which are considered by Cline (1978) as traditional static gains. On top of these traditional static effects, Cline (1978) provides additional non-traditional static effects from regional trade integration, which are as follows: Labour opportunity effect, economies of scale effect and foreign exchange saving effect Further studies also discover more static gains from regional trade integration, depending on the models used. Following the classification of Baldwin and Venables (1995) and that of Lloyd and Maclaren (2004), the models assuming perfect competition and constant returns to scale identify that trade volume, trade cost and terms of trade as World Journal of Advanced Research and Reviews, 2025, 27(01), 2407-2420 2411 beneficial effects of regional trade integration. However, models assuming imperfect competition and increasing returns to scale identified benefits from regional trade integration in the form of output, scale and variety effect. 2.4. Conceptual Framework for the Study Based on the local industry argument, a new industry which has a potential comparative advantage may not get started in a country unless it is given temporary protection against foreign competition. Most often, the argument stresses the necessity of protected domestic markets that will offer an opportunity for economies of scale in production. The free trade protocols should therefore be made to protect and enable local manufacturers to get competitive with foreign manufacturers who already enjoy huge economies of scale. In additional, bilateral and unilateral agreements should be made in such a way that, it provides the local manufacturing with enough time to gain skills in management, production and marketing and be able to apply the latest technology. As a result, the local firms in Zambia will gain the competitive advantage and hence develop into big corporations. Figure 1 Conceptual Framework (Author, 2019) 3. Research methodology 3.1. Introduction This chapter explains more about the methodology that was used for the study. These were research design, study area population, sample size, sampling procedures, data collection methods, data analysis and ethical issues. 3.2. Research Design Descriptive study was used and its relevance to the study was to examine the objectives of the research in order to get various responses that would help to draw a comprehensive analysis to the study. 3.3. Study Area The study was conducted in the national capital, Lusaka city. Lusaka city was chosen as a study area because of vast number of small scale and large scale manufacturing who are involved in the exportation and importation of finished goods and raw materials respectively. 3.4. Identification of Variables • The independent variable was the free trade protocol (Bilateral and multilateral agreement). • The dependent variable was the development of the local industries in Zambia. 3.5. Population The population of study comprised of three categories of local manufacturing companies operating in Lusaka District namely: Fabric and garment (Tailors), Steel and iron products (Metal fabricators) and Wood product (Carpentry). A total number of 1593 local manufacturing companies were under the study. 3.6. Sampling Procedure Stratification sampling technique was used to select the respondents according to their categories to reduce biasness. World Journal of Advanced Research and Reviews, 2025, 27(01), 2407-2420 2412 3.7. Sample Size Estimation N = 𝑍2𝑥𝑃𝑄 𝐷2 Z = 90% Confidence Interval (1.29) D = Specific Margin of Error (7%) P = Estimate of population with characteristics of interest: Assume 82% complication of any type and magnitude. Q = 1 - P At 82% power, Alpha 5% N = 𝑍2𝑥𝑃𝑄 𝐷2 N = 1.292𝑥 0.82(1−0.82) 0.072 N = 1.6641∗0.1476 0.0049 N = 50.12677 N = 50 Respondents 3.8. Sample Size The study sample comprised of 50 respondents from 10 local manufacturing companies that were randomly picked from three different categories of industries. These three categories of manufacturers were chosen because that is where most of the local manufactures falls under. 5 respondents were purposively picked from each local firm from the management (Stores, marketing and sales, finance, human resource and production and engineering department). • Fabric and garment (Tailors) 14 Respondents • Steel and iron products (Metal fabricators) 13 respondents • Wood product (Carpentry) 23 Respondents 3.9. Research Instrument The questionnaire contained the following sections: Section A contained the respondent’s data and section B contained questions on the topic under study. In this study, the data collection technique that was used to ask respondents were self-administered questionnaires. 3.10. Data Collection Procedure The secondary data was collected from various sources such as journals/articles, published research reports, online and etc. Primary data was generated from the self-administered questionnaires. Self–administered was adopted as it allowed the researcher to generate information that was reliable and minimize biases due to personal characteristics of the respondents. 3.10.1. Documentary Search The secondary data was collected from various sources such as journals/articles, published research reports, government reports, online and etc. 3.10.2. Questionnaires The research instruments that the researcher saw fit for the study in collecting primary data were questionnaires surveys. A questionnaire is an instrument for collecting data through carefully laid down questions for completion by the respondents. A questionnaire was used to collect raw data. The questionnaire contained the following sections: Section A contained question on the individual’s data and section B contained questions on the effect of free trade World Journal of Advanced Research and Reviews, 2025, 27(01), 2407-2420 2413 protocol on the development of local industries in Zambia. In this study, the researcher used self-admitted questionnaires. 3.11. Data Analysis Data analysis was done through standard editing and coding procedures and also Simple and Cross Tabulations were used to analyze the data. The data was later coded and the Statistical Product for Service Solution (SPSS Version 21). 3.12. Ethical Issues Issues of confidentiality and privacy were dealt with. The identity of the companies/individual participants were also obscured to maintain confidentiality as names were not published. The completed answered questionnaires were kept under strict security conditions to avoid unauthorized access to the information contained therein. Furthermore, the researcher assured the participants that the data collected were solely used for academic purpose only 4. Data analysis and presentation 4.1. Introduction This chapter presents the results obtained from analysis of data. The results of the respondents are presented as follows 4.1.1. Demographic Data Figure 2 Demographic Data 50 respondents took part in the survey, of the 50, 9 were female, representing 18% of the sample size. The remaining 41 were male; representing 82% of the sample. World Journal of Advanced Research and Reviews, 2025, 27(01), 2407-2420 2414 4.1.2. Education Qualification Figure 3 Education Qualification level The respondents were of different education qualifications, 18 of them representing 36% possess secondary school qualifications, and 30% or 15 of the respondents possess a bachelor’s degree whilst 26% or 13 of the respondents have a diploma. The remaining 8% representing 4 of the respondents possess a master’s degree or above. 4.1.3. The Category of the Company’s Manufacturing Industry Figure 4 Category of the Company’s Manufacturing Industry The respondents were categorized into 3 industries types; 23 of them representing 46% deal in Carpentry, 14 respondents or 28% deal in the tailoring and fabric industry. The remaining 13 respondents representing 26% of the respondents deal in metal fabrication. World Journal of Advanced Research and Reviews, 2025, 27(01), 2407-2420 2415 4.1.4. The Unit of the Respondent in Company Figure 5 Unit of the Respondent in Company Of the respondents 40% work in management for their organization, 28 % work in the production unit of their organization, 14 % of respondents work in the marketing and sales department of their organization whilst the remaining 8% of the respondents are found in the operations and distribution departments of their organization. 4.1.5. The Greatest Competitors in the Zambian Manufacturing Industry Figure 6 Greatest Competitors in the Zambian Manufacturing Industry According to Chart 4.5, 66 % of the respondents pointed out Chinese products as being the greatest competition to Zambian products, 24% said it was South African products which were in competition with Zambian products whilst the remaining 10% of the respondents felt there was no competition to Zambian products.