Sixth Session

Cape Town, South Africa, 9-11 November 1998


Table of Contents



1. At its Fifth Session in 1996 the Sub-Group considered the restraints which are imposed by some countries on their exports of hides and skins, and it requested more complete information on these policy measures and their effects.

2. This document consists of a brief overview of the subject prepared by the FAO Secretariat, together with two annexes provided, respectively, by the Eastern and Southern Africa Leather Industries Association (ESALIA) and the Confederation of National Associations of Tanners and Dressers of the European Community (COTANCE) outlining their analyses of the impact which export restrictions have, both in the countries concerned and in the international arena. The annexes contain the views of these two organizations, and are reproduced without editing, as a contribution to the Sub-Group's discussion of this matter.


3. Restrictions on exports are typically imposed in order to assist the development of tanning and leather manufacturing industries. By limiting the flow of raw material onto export markets, the supply within the country is increased, and thus local tanneries enjoy a more abundant availability at a lower cost. With this more advantageous cost structure, investment in processing and manufacturing becomes more profitable.

4. Such restrictions reduce the availability of raw material to tanners in importing countries, thereby increasing their costs. At the same time, the lower prices in producing countries reduce the incentive to supply good quality material, and the overall effect may be to lower the quality and quantity of raw hides and skins reaching the market. In some cases, hides and skins are smuggled across borders in order to realize higher prices in neighbouring countries.

5. At its Third Session in 1992 the Sub-Group reviewed the results of a quantitative economic model used to analyse the effects of export and import restrictions on trade. This study estimated that the aggregate value of exports of hides, skins and leather from developing exporting countries was reduced by some US$56 million annually due to the restrictions which at that time were applied to exports. At the same time, the value of exports of manufactured leather goods increased by some US$40 million also as a result of these restrictions. Consequently, the total value of exports of hides, skins, leather and leather products from developing countries was estimated to have been around US$16 million lower than without export restrictions. At the same time, however, restrictions on imports of leather goods, particularly those imposed by developed countries, were shown to have a considerably greater effect on world trade than did restrictions on exports of hides, skins and leather. It might be noted, however, that this study addressed only the immediate or short-term effects of these policies. It did not allow for the possible development of industry which might take place over time as a result of the protection provided to it.

6. At its subsequent Session in 1994, the Sub-Group considered the impact of the Uruguay Round, which was at that time close to concluding. A further analysis of the likely impact of the Uruguay Round on hides and skins was considered by the Fifth Session in 1996. These studies showed that as raw hides and skins were already subject to virtually no import tariffs, they were not expected to be directly affected by the changes agreed to under the Uruguay Round. By contrast, tariff reductions on leather and leather manufactures by some countries were quite significant. It is too early to provide an "ex post" assessment of the effect of the Uruguay Round, particularly as some of its provisions have yet to come into force, but it is hoped that it might be possible to undertake such a study in the future.


7. At the request of the Sub-Group, the present document is made available in order to permit further analysis of the effects of export restraints, by providing detailed presentations by two trade associations on the nature of the effects which, in their view, these policies have on trade in hides, skins and their derived products.

8. Delegates to the Session are invited to inform the Sub-Group of the trade policies implemented by their countries, and comment on the studies.

Annex 1
Hides And Skins Export Trade Restrictions In Selected Sub-Saharan African Countries

This annex was provided by the Eastern and Southern Africa Leather Industries Association (ESALIA)


This paper identifies the different types of trade restrictions presently in force in selected African countries and analyses inter alia the following:


Most African countries have, in recent years, undergone great changes in their economies by adopting wide ranging liberalization policies. However, in a number of cases these changes have been applied selectively so as not to touch what is perceived to be of strategic importance to their national economies. Historically, most African countries lack competitive export capacity for the products they produce and, since manufacturing is a complex issue, the establishment and running of tanneries in these countries largely depended on the protection against competition they obtained from their governments.

The strategy adopted differed from country to country but typically government agencies or parastatal organizations were created to coordinate trade in hides and skins at both the national and international levels. In most cases the organizations created tended to be monopolistic and imposed restrictions on both local and export trade.

The present situation in nine selected countries in Eastern and Southern Africa is briefly described below:


Ethiopia has a much longer tanning tradition than most other African countries within the Eastern and Southern Africa region. It also has a large livestock base upon which its leather industry is founded, estimated at 30 million cattle, 24 million sheep and 18 million goats.

In August 1992 the National Leather and Shoe Corporation (NLSC), which used to formulate a pricing structure for hides and skins, was dissolved and the state enterprises were placed under independent management boards. Since then there has been gradual deregulation of the sector especially in establishment of tanneries and privatization of some of the government owned enterprises. However, the ban on exports of raw hides and skins is still in place.


In Kenya, the hides and skins trade is governed by the Hides, Skins and Leather Trade Act. This Act enables the Ministry of Agriculture and Livestock Development to oversee the coordination and control of the hides and skins trade and development through licensing. It limits the role of the government mainly to aspects of animal production, slaughtering and preservation of hides and skins. However, it allows the government control and monitoring of exports not only of raw hides and skins but also semi-processed and finished leathers, although the market is fully liberalized.


Malawi has a small national herd with one million heads of cattle, 0.9 million goats and about 0.1 million sheep.

The Cold Storage Company (CSC) was the most important and only exporter of raw hides and skins until 1992 when other Malawian entrepreneurs were allowed to participate in this trade. The trade of hides and skins is not subject to any legal restrictions, but for historical reasons the CSC remains the main hides and skins buyer and exporter.


In Namibia livestock rearing is the most important agricultural economic activity. It does not have a regulatory mechanism for the hides and skins trade other than veterinary requirements for exports and more particularly for raw material movement from the quarantine area in the north to the south.


Sudan is endowed with large livestock population ranking second to Ethiopia in Africa. Livestock resources therefore play a significant role in the economy through exports of live livestock as well as leather mostly in semi-processed form.

A ban on exports of raw hides and skins was included in an Economic Policy Measure put in place in May 1993 by the Ministry of Finance, in order to support the domestic tanning industry. The ban faces some opposition, but is supported by tanners.


Tanzania has a relatively large livestock population widely distributed throughout most of the country. Exports of hides and skins were restricted from 1967 to 1987 to enable parastatal tanneries to acquire raw hides and skins easily. However, the trade was partially liberalized in 1987, allowing some companies to export raw hides and skins. In 1993 the government embarked on a privatization programme targeting the leather sector. Tanzania's trade in hides and skins is now fully liberalized and the existing legislation on licensing does not hinder exports of raw hides and skins.


In 1975 a government body, Uganda Leather and Tanning Industries Ltd (ULATI) was created and was given the monopoly to handle all hides and skins trade. As a consequence of the monopoly, hides and skins prices dropped and were often smuggled out of Uganda. In 1991 the government privatized ULATI. The trade is now liberalized but the tanneries in Uganda continue to experience high prices while purchasing in competition with raw materials exporters.


The Zambian Government established a tannery early in 1990 and at the same time imposed a ban on exports of raw hides and skins to enable the tannery to acquire raw materials at competitive prices. However as the sector became liberalized, other private abattoirs and tanneries were built. The Leather and Industries Association of Zambia (LIAZ) has from time to time requested the government to restrict exports of raw hides but the industry remains fully liberalized.


The rapid development of the tanning and footwear sub-sectors in the early 1980s created demand for raw hides in the country and exports of raw hides and skins were no longer feasible because of the limited quantities of hides and skins available and the good prices the raw materials fetched in the local market.

In 1993 Zimbabwe embarked on a liberalization policy which repealed tariffs and subsidies formerly used to protect domestic industry from external competition. Zimbabwe is now one of the few countries in Africa which import good quality hides to supplement the available raw materials and would therefore benefit from the abandonment of trade restrictions in other African countries.


Different types of restrictions on trade in hides and skins trade aim at achieving different objectives. The following objectives have been used as a base to formulate various restrictive measures:

The following measures are commonly put in place in developing countries in order to influence trade either directly or indirectly with the aim of protecting the local leather industry.

A. Purchasing and selling licences for domestic and export trade

These "Buyer/ Seller" Licences are usually granted to companies or individuals who meet certain conditions and in most cases specify their areas of operation. The condition is sometimes that the person originate from the area of his operation and has some knowledge of the industry. These regulations usually perpetuate family businesses and limit entry of newcomers into this line of business.

B. Selective licensing

Selective licensing usually discriminates against foreigners and protects locals from external competition in the domestic market. This type of restriction may or may not be legislated. However the licensing officers stipulate that only the country's citizens are eligible for licensing or that there must be a substantial share holding in a company by citizens.

C. Controlled pricing of raw hides and skins

In those countries where the industry is still protected by bans on exports of raw hides and skins, the local industry is able to influence the pricing of raw materials as competitors from outside are excluded from the market.

D. Subsidy through export compensation

Subsidy through export compensation has been used by many countries to increase competitiveness of their exports in the international market. In many African countries the tanning sector benefited for many years from this form of subsidy but this has largely been phased out in line with the World Trade Organization (WTO) Uruguay Round Agreements.

E. Use of variable levies

Some countries protect their tanning industry by the use of variable levies applied according to the needs of their industry and depending on the country of import. Levies in form of tariffs are raised or lowered after consultations with the local industry. If there is a shortage of raw hides and skins, the import tariffs are lowered and if on the other hand there is substantial availability, the tariffs are raised. Where regional trade agreements are in place, variable levies may apply to exports and imports from outside the region.


A. Local Markets

Most of the countries in Sub Saharan Africa with raw hides and skins export restrictions have found quantitative restrictions (export quotas) difficult to implement and, as is the case in Ethiopia and Sudan, have resorted to a total ban on exports of raw hides and skins. Border trade of smuggled hides and skins have largely remained small in these two cases due to effective enforcement of the export ban.

Export restrictions generally reduce the price to the producer. In the case of Tanzania, export restrictions applied during the operations of Tanzania Hides and Skins Company drove down producer prices to a level where smuggling of the raw hides and skins to neighbouring Kenya, where prices were much higher, became lucrative, and most of the trade shifted from the formal to informal sectors. When producers are not adequately compensated, they do not maintain quality, producing lower grade material thus leading to even lower incomes. There is almost always a pattern showing that hides and skins recovery increases when producer prices increase and the reverse occurs when prices drop.

B. International Market

Trade restrictions on raw hides and skins exports at the international level hinder free movement of this commodity. The situation is further complicated by lack of information on national rules and regulations applicable to imports from most of the African countries. This has in some way prevented integration of the African leather into the global leather trade system and Africa therefore plays a minor role in international leather market.

At the international level, trade restrictions on exports of hides and skins are viewed as having impacted negatively on the leather sector globally. The restrictions have made it possible for companies in protected countries to have an advantage over the competition in those countries where the industry is liberalized. Protection measures in some countries have made it possible for leather industries to refuse implementation of actions which would lead to more efficiency in production processes.

On the whole the major impact on the sector caused by restrictions is in the following three areas:

· Poor image of the leather sector in developing countries

Lack of information on the sector in restricted markets tends to limit market access to only those buyers who have long term connections to these markets. In order to maintain a grip on these markets the buyers project a negative image of trading conditions citing existing restrictions. The image created is in most cases attached to hides and skins trading conditions in developing countries as information on individual countries is not readily available to most importers. In this situation business is regarded as being risky with delivery times in many cases not adhered to due to paper work associated with exports.

· Reduced quantities of raw materials available

Trade restrictions make it difficult for local traders to fully exploit hides and skins available by increasing collection. The low prices obtained by hides and skins producers act as a major disincentive. They therefore do not want to incur costs like those of "transportation" as the returns are not always assured. Trade liberalization in Tanzania in 1987 resulted in increased collection of raw hides and skins and consequently more hides and skins entered the global market. Liberalization however does not favour the local processing industries, which encounter competition from new entrants and only the more competitive obtain sufficient raw materials.

· Quality of raw hides and skins

At the international level, prices of raw hides and skins are closely tied to quality. In a restricted market the practice of buying according to grades may be implemented in some cases but sometimes the buyer of raw hides and skins at the local level will not fully reward the producer for efforts put into improving quality. There is also little motivation for traders to maximise quality because of the weak competition for the available quantities of raw hides and skins. While the foregoing is true, other factors come into play, for instance the prevailing market situation and the effectiveness of the hides and skins improvement system. A restricted market will on the whole not maximize improvement of quality of hides and skins.


Restrictions on exports of hides and skins give short term advantages to exporters in a country practising restrictive trade policies. In these countries, tanneries are able to purchase raw materials at prices lower than the global level. This discourages producers and inhibits creativity and reduces competitiveness of the sector.

Annex 2
Analysis of export restrictions on hides and skins

This annex was provided by Confederation of National Associations of Tanners and Dressers of the European Community (COTANCE)


Access to raw materials is possibly the most important factor for the viability of a leather industry. Hides and skins resources are, however, unevenly distributed throughout the world and some countries, notably those endowed with an abundant livestock, are more advantaged than others for developing a profitable leather industry.

International trade in hides, skins and leather serves to compensate local imbalances between supply and demand of input materials. It provides a mechanism for determining prices and contributes to the best allocation of resources on a global basis. Open markets for raw materials are thus essential, particularly for those countries whose resources are limited.

However, over the last decades there has been a proliferation of export restrictions on hides and skins affecting both availabilities and prices on a global scale, and exacerbating the concerns of sectoral operators on open markets.

The present paper describes the types of measures currently in force, it outlines some of their effects on international trade and analyses a series of consequences they may produce in the sector both in developing and developed countries.


Export restrictions of hides and skins can be considered according to (i) the rationale of their establishment, (ii) their nature (iii) the product coverage:

(i) Rationale of establishment

The objective of such measures is to influence local conditions regarding supplies and prices of raw materials.

Reducing or stopping the exit of hides and skins from a country increases supply and depresses domestic prices of raw materials, thus enhancing the viability and of processing industries, and enhance the competitiveness of domestic tanning industries on export markets.

Export restrictions on hides or skins have also been put in place as a safeguard mechanism to prevent critical shortages due to sudden and unpredictable situations of scarcity of an essential and unsubstitutible raw material.

Export restrictions on hides and skins have also been advocated as a reverse protection mechanism by developing countries to compensate for import tariffs for leather in developed countries.

(ii) Nature of restrictions

Export restrictions can take different forms and may restrict trade flows totally or partially.

Export bans generally consist in a simple piece of legislation stating that the export of hides and skins is prohibited (Pakistan, Egypt, Bangladesh, etc.). All the hides or skins produced in the country become then exclusively available to local tanners.

Export quotas are quantitative restrictions which limit exports to a certain amount per year securing either sufficient local supplies to cover the installed production capacities of domestic tanners (Poland, Romania, etc.), or traditional trade flows so as to avoid an excessively detrimental disruption of business to traders (Croatia, etc.). This type of measure is normally coupled to an export licensing system.

Export duties, taxes or surcharges are fiscal measures which increase the transaction price of hides or skins when exported, making them less attractive to the international markets (Argentina, Brazil, Uruguay and most countries applying export restrictions).

Minimum export prices are measures of equivalent effect to quantitative restrictions or taxes. Irrespective of the price of the raw material on the local market, prices are fixed authoritatively for exports. The foreign buyer must pay the official price (Morocco, Argentina, etc.).

Export licences are administrative obstacles to trade as exports will only be permitted if the local procedures have been followed and the authorities resolve that the shipment can take place according to a given set of criteria (India, Tunisia, etc.).

Partial export restrictions may actually be de facto bans. This occurs when either the quotas do not allow commercially viable shipments, or the duties, taxes or surcharges are prohibitive, or the minimum export prices are excessive, or export licenses are simply not granted.

(iii) Product coverage

Export restrictions of tanners' raw materials principally affect raw hides and/or skins for the benefit of the local tanning industry. They may, however, be extended to intermediate products such as wet-blue or crust. In some cases they also affect the export of finished leather. This eventually occurs in successive phases, in case of industrialization policies seeking to increase the value adding potential of a country's leather sector.


(i) International markets for hides and skins

Export restrictions lead to a reduction of availabilities on international markets for hides and skins, and may also have an adverse effect on the variety of the offer on open markets. The quantities diverted from global markets will vary according to the type of measure that has been implemented and the relative importance of the country as a producer.

They contribute to increased price volatility in the international markets for hides and skins.

(ii) International markets for leather and leather products

Prices of leather in the different categories suffer a downward pressure where leather made out of restricted materials comes on the market. Operators unable to cope with price competition from counterparts in restricted raw material markets are progressively forced out of the leather market.

The effect of export restrictions are also visible on the leather splits market. With grain leathers coming on the market at prices close to those at which tanners on the open market used to sell leather splits, it becomes difficult and sometimes impossible to keep up business operations.

Export restrictions in hides and skins promote the creation of new trade flows in leather and leather products and the distortion of traditional trade flows to the advantage of tanners in countries implementing such measures.


Export restrictions are typically applied by developing countries, but some developed countries also implement export restrictions on hides and skins, notably in Central and Eastern European countries. The impact of the restrictions will depend on the relative significance of the country in hides, skins and leather production.

The proliferation of restrictions causes distortions in competitiveness and trade flows worldwide. and may have one or more of the following impacts:

(i) Impact on export earnings of hides and skins producing countries

Whereas it is possible to observe a short term fall or loss due to the reduction or halt of raw material exports, it is likely that in the medium term export earnings may increase due to the sale on export markets of more value added leather. However, export earnings for the hides, skins and leather sector tend to stabilise in the long term.

(ii) Impact on investments in countries implementing these measures

The availability of cheaper raw materials on the domestic market provides an incentive for investments, both local or foreign, in the country. However, the "hidden subsidy" in the leather production derived from export restrictions may also discourage protected tanners from seeking productivity improvements.

(iii) Impact on competitiveness of industry in countries without protection

Leather producers in countries that do not implement export restrictions on hides and skins face increased competition both in grains and splits. If operators are unable to adjust into higher product differentiation, they will lose market share to their protected competitors. This also applies to operators in countries implementing export restrictions providing less competitive advantages. Countries with common borders with protected raw material markets are likely to be the first to experience the adverse effects on competitiveness of their operators.

(iv) Impact on hides and skins quality improvement

Export demand has a beneficial effect on hides and skins quality improvement activities. Indeed, better prices on export markets encourage producers to improve the of their raw materials. The reduction or loss of export markets for hides and skins when exports are restricted demotivates operators as local prices are depressed and no reward is provided for quality improvements.


Export restrictions are generally adopted for the protection of infant industries and in times of shortages. It is supposed that in such cases normal trading conditions would ultimately be restored. However, concerns are justified when they are applied by countries whose tanning sector is sufficiently grown up and intervenes successfully in international trade. Export restrictions then become an unfair barrier to trade. As a countervailing measure against developed countries' tariff protection they are particularly questionable due to the low level of import duties for leather and the impossibility of applying them selectively.

Successive rounds of multilateral trade negotiations in industrial products have achieved a remarkable reduction of tariff import restrictions for the leather trade on a global scale, but nothing has been done so far in reducing the trade barriers stemming from export restrictions in hides and skins. The lack of rules and disciplines in this field is at the source of their uncontrolled proliferation and the adverse trade effects on international markets. The launch of a new round, the "Millennium Round", and the current sluggish market situation for hides, skins, leather and leather products may well be a good opportunity for the international leather community to regulate this field and to put an end to the worst types of export restrictions.