Tanzania has imposed unilateral restrictions on trade from its partners in the EAC and COMESA. It says that trade cannot be done direct, but must be routed through registered agents in Tanzania. This will hit small traders in neighbouring countries. Our correspondents explain the move that could undermine plans for the whole free trade area.

Tanzania is taking controversial measures to protect its industries. It has refused to lower duty on goods imported from other East African Co-operation (EAC) countries and the 24 countries in the Common Market for Eastern and Southern Africa (COMESA), contrary to the policy of both these organisations which want to finally eliminate tariffs within two years. Tanzania has even raised taxes on some imported goods.

In October, it angered Kenya by restricting direct sales of goods. Instead, only Kenyan companies with agents registered in Tanzania were allowed to continue to trade.

The Kenyan trade minister Joseph Kamotho protested, saying that EAC member states of Kenya, Tanzania and Uganda are supposed to be working towards the elimination of trade barriers, but Tanzania is doing the opposite.

The chairman of the Kenya National Chamber of Commerce, Kassim Owango said "the move will definitely hit the small time business people involved in cross border trade. The requirement flies in the face of the new spirit of East African co-operation."

Owango points out that cross-border, small scale business between Kenya and Tanzania is 150% greater than big business and should not be killed unilaterally.

But Tanzanian officials say that the measures are necessary to tackle the problem of tax evasion by small traders. They also maintain that it is pointless to eliminate trade barriers and lose revenue in the process, because this will only benefit Kenyan manufacturers. Tanzanian industry is so run down that it cannot compete.

Eliminating trade barriers will benefit countries with stronger economies like Kenya, Mauritius and South Africa, while Tanzania will be condemned to being a consumer nation.

Juma Mwapachu, chairman of the Confederation of Tanzania Industries, said: "The government has to protect all local industries, and not be selective."

In September, Tanzania hiked duty by 69% on imported sugar. This sent retail prices soaring. The move came after sugar producers petitioned President Benjamin Mkapa to raise tax on imported sugar in an effort to protect the local sugar manufacturers.

When Mkapa toured Mtibwa and Kilombero sugar companies in September, he was shown an industry in dire straits. The imported commodity was choking the local product. He pledged: "We must protect our domestic sugar factories against the onslaught from imported sugar."

Suddenly, the tax was hiked and local sugar manufacturers supported the move. However, parliament was sucked into the controversy with many MPs saying the government was over-protecting the local sugar manufacturers.

They said over-protection would drive up prices and kill competition, and allow local firms to produce sugar of inferior quality. Some argued that local sugar was losing its market because it was poor quality and the manufacturers were not aggressive enough to beat their foreign rivals.

More than 20 years of socialist monopoly killed the industrial competition and poor goods were made for Tanzania's protected market. Factories performed below capacity, machines were worn out and there was no new investment because of the scarcity of foreign exchange.

But Tanzania's neighbours are dismayed at its decision to impose unilateral trade regulations that are contrary to the whole principle of reducing tariffs in a free trade area. It also appears to be defying COMESA rules which are designed to encourage free trade and reduce prices over the 24 member states.