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Bingu’s vision under threat

The Nation, Malawi

Bingu’s vision under threat

by Taonga Sabola

25 March 2007

President Bingu wa Mutharika must have had a brilliant vision for Malawi of shifting its goal posts from being an predominantly importing and consuming country to a predominantly producing and exporting country, when he ascended to the throne in May 2004.

Many analysts have agreed with Mutharika that changing the country’s trade position from being a net importer to a net producer is the only way for Malawi to move out of its poverty trap as well as combat economic stagnation which has haunted the country since it attained democracy in 1964.

But wait a minute. Brilliant as Bingu’s vision may appear, analysts believe it is about to face probably its biggest challenge come January 2008 when the Economic Partnership Agreements (EPAs) are expected to take effect.

EPAs are free trade agreements between the African, Caribbean and Pacific (ACP) countries and the European Union (EU) which point to the direction that ACP countries will have to remove tariffs on imports from the EU as stipulated in the Cotonou Agreement.

This is a direct contrast of the Lome Agreement which provided for a non-reciprocal trade package between the ACP and EU. Since the First Lomé Convention in 1975, the EU has granted non-reciprocal trade preferences to their ACP partners.

Under the Cotonou Agreement, however, this system will be replaced by a new scheme which is to take effect in 2008: the Economic Partnership Agreements (EPAs). These new arrangements provide for reciprocal trade agreements, meaning that not only the EU provides duty-free access to its markets for ACP exports, but ACP countries also provide duty-free access to their own markets for EU exports.

Global Fair Trade lobby group Action Aid UK, believes the deal being currently negotiated between the European Union and African, Caribbean and Pacific countries and could have a disastrous impact on the economies of these developing countries.

“EPAs are skewed in favour of rich countries and threaten to leave 750 million poor people worse off.

“We are concerned that unless EPAs are radically reformed, the impact in African, Caribbean and Pacific countries will be: job losses, government revenue losses and cuts in public services as developing countries are forced to open up their markets to the EU before they are ready for corporate domination as African, Caribbean and Pacific governments’ ability to regulate big business is restricted.

It will also lead to weakened democracy as governments will be prevented from choosing their own development strategies,” says Action Aid.

Local economic watchdog, the Malawi Economic Justice Network (Mejn) believes Malawi will have very little to nothing to gain by assenting to EPAs.

Mejn programme manager for trade Temwa Gondwe argues that accepting the EPAs would have many negative repercussions to the country’s economy in the same way globalisation and trade liberalisation has done.

Under the EPA, Malawi has teamed up with other countries like Burundi, Comoros, Djibouti, DR Congo, Eritrea, Zambia, Zimbabwe and Sudan to form what is called the Eastern and Southern Africa (ESA) lobby group to negotiate for better trading packages with the EU.

Other countries in the region like South Africa have also formed up their lobby group and are negotiating as the Southern African Development Corporation (Sadc).
Gondwe believes that the ESA group to which Malawi belongs has no legal binding unlike other lobby groups and that it will be hard for the country to have a better trading package at the end of the day.

He further said under the current situation removing trade barriers for European and African goods on either side may work to a greater disadvantage of Malawi, whose production sector remains underdeveloped.

“Malawi has failed to fully capitalise on its trade on a more favourable agreement with EU under that Lome Convention because it did not develop its production potential. Assenting to the EPAs will bring various problems to Malawi in many ways ranging to job loses, suffocation of local businesses as well as loss of government revenue,” notes Gondwe.

He noted that a review of the impact of liberalisation tells a sad story of the majority poor people in Malawi as well as other sectors like manufacturing.

“Based on experiences and studies, the trade liberalisation agenda has had various negative impacts. These include, high input prices, loss of markets, unfair pricing and closure of companies,” said Gondwe.

A quantitative and qualitative potential impact assessment of EPAs on Malawi notes that adopted trade liberalisation in 1989 and that over the years Malawi’s population has lost US$196 per person- which is a huge sum of money considering that the per capita GDP in 2000 was US$165 per person.

“It’s as if everyone in Malawi stopped working for 14 months,” reads the report.

Trade and private sector development minister Ken Lipenga argues that government is aware of the conditions in the new trade agreement with the EU and that Malawi is doing everything possible to get the best deal for its people.

Lipenga confided in the Economic Report on Wednesday that there was no way government could put pen to paper on a deal which will end up in jeopardising the country’s vision.

He noted that government appreciates the concerns raised by the various quota regarding the trading package with the EU but said that there was no need to panic.