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TRADE-MALAWI: Government Joins Chorus of Concern about EPA

Pilirani Semu-Banda

BLANTYRE, Aug 23 2007 (IPS) - Manufacturers, exporters and even government officials in Malawi are jittery about January 1, 2008. On that day the economic partnership agreements (EPAs), currently being negotiated between the European Union (EU) and six groupings of African, Caribbean and Pacific (ACP) countries, will come into force.

The Malawian government has all along displayed optimism about the EPA, concentrating on the brighter side of the trade agreement. The ministry of trade assured citizens of this poor southern African country that they need this new agreement to ‘‘become part of the global economy’’.

The government is also eager for the EPA to provide access to EU assistance with the improvement of infrastructure in areas such as transport and energy.

The ministry of trade was not impressed with the protests by influential non-governmental organizations (NGOs) earlier this year.

They went as far as writing to the EU president, German chancellor Angela Merkel, in April about the proposed EPA being detrimental to the interests of Malawi and the other 15 poor nations in the Common Market of Eastern and Southern Africa (COMESA) as it prevents them from protecting domestic industries with tariffs and other measures.

But now the government seems to have joined the ranks of the concerned NGOs. Last week, on August 14, the ministry of trade teamed up with the county’s manufacturers and exporters to develop a list of domestic products which may be sensitive to international competition.

The Malawian meeting also came up with the country’s position on rules of origin, measures which regulate product inputs in trade agreements. The rules of origin usually demand that a product accorded preferential market access originates from a country that is party to the agreement that accords such preferential access.

At the meeting, the stakeholders agreed that the rules in their current form encumber Malawi’s access to the EU market. Both the traders and the government agreed to emphasize that the EPA should take into account economic realities and the different levels of development of the two partners in the EPA.

Deputy director of enterprises in the trade ministry Alfred Vilili said that Malawian business does not want the rules to be restrictive. The rules should allow manufacturers to source materials at preferential rates from third countries (countries outside the EPA).

The existing ACP-EU rules of origin are very restrictive. Consequently, there is low utilization of preferential tariffs offered as part of the ACP-EU trade regime, said Vilili.

It was also agreed at the meeting that the administrative procedures involved in applying the rules of origin have cost implications and should therefore be simplified.

Rules of origin are important to companies that manufacture products for exportation as it is an instrument which could facilitate export trade between Malawi and the EU, said director of trade Harrison Mandindi.

Some 40 companies turned up for the meeting and, together with the government, listed 102 products as being sensitive. The list includes the country’s main foreign exchange earners: tobacco, cotton, tea, textiles and sugar and its products.

Other sensitive products are beer, cement, dairy products, eggs, poultry, iron and steel, refined edible oil, some types of fuel and ethanol, yeast, some types and parts of motor vehicles, some types of stationery, eggs, wheat, maize, macadamia nuts, rice, paprika, potatoes, some meat products, fruit, fish, arms and ammunitions and wild animals.

‘‘We want to protect the small countries which are producing such goods by encouraging them to produce huge amounts of goods that add more value. They should also be encouraged to use more local material,’’ Mandindi said at the meeting.

The list was compiled based on various criteria. The first is revenue sensitivity which refers to sectors that rank high as foreign exchange earners. The second is employment sensitivity, referring to sectors that provide employment to large numbers of Malawians.

The third is the protection of infant industries, referring to new and upcoming industries which may have difficulty competing with established firms from the North.

The criterion of general and social security refers to production by resource-poor farmers. A related factor is food security and rural livelihood development which takes into account whether a product contributes to the country’s food basket.

Other criteria include environmental protection which looks at the impact the production of some goods has on the country. Products such as ammunition, firearms and explosives were included on the list because of security reasons.

Along with Mandindi, Vilili emphasised the importance of the sensitive products list at the meeting. He said that all ACP countries and not only Malawi are worried about de-industrialization which may occur due to trade liberalization under the EPA.

‘‘The level of development of the two parties in the agreement (the EU and the ACP) is different. Malawi’s economy is agricultural and therefore agriculturally based industrial activities are significant. The competitiveness of such industries is a matter of concern in the EPA negotiations. It is logical that Malawi should develop this list of sensitive products,’’ said Vilili.

In many developed countries in the EU, the steel and textiles industries employ large numbers of workers. If these industries should close down there would not be alternative employment for the affected workers over the short term. These industries are therefore on the EU’s sensitive products list, together with rice and sugar.

Malawi had to draw up its sensitive products list and submit it to COMESA secretariat by August 15, 2007. COMESA is compiling a regional list for consideration in the EPA negotiations.

The initial sensitive products list from the eastern and southern Africa (ESA) grouping in the EPA negotiations included 2,900 products, with Uganda and Kenya having the longest lists.

After the 12th regional negotiating forum meeting (RNF), organized by the COMESA secretariat at the beginning of August, countries were requested to reduce the number of sensitive products in consultation with stakeholders.

The RNF recommended that countries should remove pharmaceutical, medicinal, educational products and products with zero duty from the list.