The Impact of a Liberalised Trade Regime on the Potential for Agricultural Value Addition in Uganda

Uganda is one of the LDCs in Africa whose economy is heavily dependent on agriculture for exports, GDP and domestic employment. However, Uganda has implemented a liberalised agricultural trade regime since the 1990s, and by 2005, Uganda was considered one of the most liberalised economies in Africa. Yet Uganda's experience seems to contradict recent evidence regarding import liberalisation, economic growth and effective integration in the global economy, which suggests that liberalisation, should follow rather than precede sustained periods of economic growth and should be gradual and sequenced. Uganda seems not to have followed that approach. This paper reports the findings of a study on Uganda's experience with import liberalisation of agricultural products and how this has impacted on agricultural value addition potential. The results show that liberalisation of the agricultural trade regime in Uganda has resulted in phenomenal growth in imports of agricultural products particularly the processed ones. The scope of the tariff lines has also expanded sharply. Secondly, almost all potential agricultural value addition possibilities were being supplied by competing imported products with import levels likely to increase. The locally produced value-added agricultural products had very limited competitive space and in many cases were already swamped by imported ones. Last but not least, agro-processing ventures seemed to have experienced declining competitiveness due to increased competition from agricultural imports resulting in declining demand and sales, market share and profitability. To reverse this trend, the study observes the need to accord additional protection to the agricultural sector and to implement specific measures to boost the competitiveness of agro-processing investments.