Trade complementarities between Europe and Tanzania

This research aimed at studying the movements in comparative advantage of Tanzanian exports and identifying opportunities for trade with Europe. Comparative advantage is measured using Balassa’s index and Volrath Index as robustness check. Additionally, trends in intra-industry trade between Tanzania and the world and with Sub-Saharan Africa is measured using Grubel-Loyd Index. All the products under HS-2-digit classification were studied from 2009 to 2018. Tanzania’s exports still rely heavily on raw materials such as stone and glass, animals, vegetables. However, from 2012 onwards Tanzania has gained export advantage in intermediate goods. These intermediate exports are highly correlated with exports of textiles and clothing as well as processed vegetables. Tanzania has an opportunity to export processed fish and animal products to Europe. All these are chances to industrial growth through widening the market. In addition, we find import opportunities in rubber and plastic, transportation, chemical and woods. All these products can be used in the production process, hence removing of trade barriers will lower the cost of production for the local industries. Trade between Tanzania and the rest of the world is found to be inter-industry as opposed to intra-industry except for textile products. The research adds to the pool of literature for Tanzanian exports and offers policy implications on which sectors can be improved and the country is implementing export promotion strategy towards industrialization.