Comparative Economic Advantage Analysis of Alternative Agricultural Production Options in Tanzania

Abstract

The objective of this paper was to analyze the comparative agricultural economic advantage and extellt of policy distortion in alternative agricultural production activities in various agro-ecological zones andfamling systems, in Tanzania. The Domestic Resource Cosf (DRC) ratio derivedfrom the Policy. Analysis Matrix (PAM) was used to evaluate comparative economic advantage. Tlie methodology was also used to evaluate effects ofpolicy in the production and trade patterns using Nominal Protectien Coelficient (NPC) and Effective Protection Coelficient (EPC) as measures of policy distortion. Data was collected from selected locations in a number of agro-ecological zones and famll'ng systems in Tanzania, Domestic Resource Costsfor Southern Highlands colfee (DRC = 0.91), Western zone cotton (DRC = 0.60) and Morogoro rice (DRC = 0.97) were less than one. On the other hand DRCs for Northern highlands colfee (DRC = 1.98) and Morogoro maize (DRC = 1.47) were greater than one, These results suggest that Tanzania possesses comparative advantage in the production of Southern Highlands coffee. Western"-Zone cotton and Morogoro rice. Tile country has comparative disadvantage ill production of northern highlands co.ffee and Morogoro maize. Wide variations in comparative advantage shown emanate from differences in resource and biophysical conditions, farming systems, technology levels and tenure arrangements. In general the measures of distortion (NPCs and EPCs) indicate that government price policy protected food crops while cash crops (except northern zone co.tfee) were taxed. Given these results, effective measures toalleviate production constraints and improve gross margins must be instituted in' order to motivate farmers to increase resource allocation to the crops for which specific locations have comparative disadvantage.

Keywords: Comparative advantage, Domestic resource cost, Policy analysis .matrix, Agricultural production and trade, Coffee, Cotton, Maize, Rice, Tanzania