IPS | 31 Jan 2008
TRADE-MALAWI: Caught Between Two Economic Blocs
LILONGWE, Jan 31 (IPS) — Malawi finally has to face up to the dilemma of choosing between being a member of the Southern African Development Community (SADC) or to stick with the Common Market for Eastern and Southern Africa (COMESA) if it is to continue receiving funding from the European Union (EU).
Developing countries like Malawi have been promised assistance to adapt as they open their markets to the EU by agreeing to an economic partnership agreement (EPA) with the EU.
EPAs are a new set of ‘‘trade and development’’ deals aimed at removing barriers and creating a free trade area (FTA) between the EU and African, Caribbean and Pacific countries (ACP).
The European Development Fund (EDF) is the instrument with which the EU has promised to help EPA signatories.
International law expert George Naphambo told the media that Malawi is compelled to choose between belonging to either SADC or COMESA because aid from the EDF will be disbursed on the basis of membership to a regional economic community such as SADC or COMESA.
Naphambo said a country cannot receive EU funding from both bodies, which are two different regional economic communities, as this would mean the country has double access to funds compared to other states.
‘‘It is clear that if Malawi is to benefit from EU funding, it has to belong to one regional economic community — unless the EU comes up with a formula for funding countries which belong to more than one such community,’’ said Naphambo.
He said if this formula is not developed, there will be pressure on Malawi to leave either one of the bodies as soon as possible. ‘‘When push comes to shove, Malawi will have to make a decision because it cannot forego EU funding,’’ said Naphambo.
Economic analysts in Malawi are recommending that the small southern African country is better off staying on in COMESA instead of SADC since the rules of origin in COMESA offer better market access than those in SADC. Rules of origin refer to the country-based exclusion of certain inputs that go into exports.
SADC, on the other hand, is seen as outdoing COMESA as a major export destination, according to Andrew Kumbatira, executive director of the Malawi Economic Justice Network, the country’s primary influential non-governmental organisation that promotes economic and trade justice.
Kumbatira says no country should belong to two customs unions. ‘‘SADC will soon formalize its own regional customs union and the COMESA customs union is also set to come into effect by next year,’’ he says.
He recommends that Malawi should opt for COMESA since it offers a greater variety of economic dynamics than SADC.
COMESA is the largest economic bloc in Africa, comprising 20 countries with a population of about 385 million people, total gross domestic product of 165 billion dollars and overall exports of 25 billion dollars, according to a 2006 COMESA report.
SADC, on the other hand, is geared towards the political development of its members, according to influential human rights activist Mavuto Bamusi, who also thinks COMESA is the preferable bloc for Malawi to align itself with.
Bamusi says that, as Malawi is at the moment looking at trade as the best development pillar to put in place, COMESA would be its best bet.
‘‘Of course, the decision is not an easy one. Malawi has to be very strategic in making the decision since there are also political implications that will arise. In SADC, Malawi subscribes to a number of very important protocols on issues like anti-corruption and women’s participation — these issues cannot just be left hanging.
‘‘There has to be a strategy on how the country will still apply these commitments,’’ says Bamusi.
He says Malawi’s predicament on its dual membership with SADC and COMESA is a long-standing issue which should now be resolved quickly — but not because of the EPAs. ‘‘Malawi should make an independent decision on this and not do it just to make the EU happy.
‘‘The EU should not hold Malawi or any other country to ransom over the EPAs. The EDF should not be aligned to the EPAs — as civil society organisations we are against such an alignment,’’ says Bamusi.
Bamusi, who also opposes the EPAs, says the EU should be obliged to compensate countries that will be ‘‘harmed’’ by the EPAs. ‘‘We are saying that countries like Malawi have so much more to lose than gain in the EPAs. They should be compensated regardless of what customs union they belong to,’’ argues Bamusi.
Malawi should make its choice between COMESA and SADC now because it will be safer sticking to one bloc to avoid a situation where it could be ‘‘tossed from one bloc to another" based on regional integration.
Malawi’s trade minister Ken Lipenga is on record that the government is still consulting on the way forward on the COMESA-SADC predicament.