TRADE AGREEMENTS As part of efforts to continue Malawi's integrate into regional and multilateral trading systems, the country continued to participate actively in bilateral, regional and multilateral trading agreements. These are summarised below. Multilateral Commitments Malawi is currently benefiting from the Integrated Framework for Trade-related Technical Assistance Programme (IF) whose objective is to promote the integration of least developed countries into the global economy, and to integrate trade issues into national development strategies. The Integrated Framework is funded jointly by the WTO, the International Monetary Fund (IMF), the World Bank, the International Trade Centre (ITC), the United National Development Programme (UNDP) and the United Nations Conference on Trade and Development (UNCTAD). Malawi is currently benefiting from two technical assistance projects under the Integrated Framework (Window II resources - US$ 1 million in total): a Trade Policy Advisory Services and Capacity Building for Trade Integration Project in the Ministry of Trade and Private Sector Development; and a Standardisation, Quality Assurance, Accreditation and Metrology (SQAM) Infrastructure Project at the Malawi Bureau of Standards. An additional multilateral programme through which Malawi is receiving trade-related technical assistance is through the Joint Integrated Technical Assistance Programme (JITAP). JITAP is an initiative of the WTO, ITC and UNCTAD aimed at building capacity in selected African countries in the following areas: trade negotiations, implementation of WTO agreements and related trade policy formulation; national knowledge base on the multilateral trading system; and the supply capacity and market knowledge of exporting and export ready enterprises. Among other initiatives, during the year under review JITAP provided training and capacity building on the multilateral trading system for stakeholders in Malawi, provided information technology investments in the Ministry of Trade and Private Sector Development, and provided technical assistance for the development of a cotton sector strategy. Malawi is currently participating in the ACP/EU Economic Partnership Agreement (EPA) negotiations, which were launched in September 2002 at the all ACP level, under the Eastern and Southern Africa (ESA) configuration. Negotiations at the regional level between the ESA countries and the EU were launched in February 2004. The Cotonou Agreement (signed in 2000 between ACP and EU states) introduced the concept of the EPAs, replacing the Lome Convention with agreements that will be compatible with the provisions of the WTO. This means changing the relationship from non-reciprocal trade preferences to reciprocal trade. Negotiations on the EPAs should be completed by the end of 2007. Identified clusters for negotiations include agriculture and fisheries; market access; trade in services; trade related issues; development cooperation and legal issues. The second phase of the EPA negotiations are dealing with substantive issues at the regional level. Malawi has opted to negotiate with the EU within the Eastern and Southern Africa (ESA) configuration and formal negotiations for the ESA region were launched in February 2004. The objective is to complete negotiations by end December 2007. Within the ESA configuration, Malawi is the lead ministerial spokesperson on agriculture and lead ambassadorial spokesperson on trade in services. During the first half of 2006, Malawi is also holding the chairmanship for the ESA configuration. In order, at national level, to effectively prepare for and participate in the negotiations, a National Development and Trade Policy Forum (NDTPF) has been established in Malawi, with financial support for the EC. It is multi-sectoral and representative of the private and public sectors, academia and civil society. This NDTPF's mandate is to determine and develop negotiating positions for the country which will feed into the Regional Negotiating Forum. Sub-committees have been established under each cluster including lead ministries. For example, the Ministry of Economic Planning and Development will lead on Development issues while the Ministry of Agriculture will lead on Agricultural issues. Negotiations have now reached the stage where they are based on a draft EPA text as prepared by the ESA negotiating team. As an LDC, Malawi already enjoys preferential access to the EU under the "Everything But Arms (EBA)" agreement and results have been seen in terms of Malawi's increased sugar exports to the EU. The initiative entails extending duty and quota free access to all imports from all LDCs except arms. Minor variations apply to bananas, sugar and rice (full liberalisation will take place for these commodities in 2006, 2009 and 2009 respectively). The disadvantage, from Malawi's perspective, is that the EBA initiative is unilateral and therefore in theory could be withdrawn at any time. Hence the initiative does not provide guaranteed access for products over the long-term. Under the African Growth and Opportunity Act (AGOA), Malawi is granted preferential access to the United States market for an 1,800 products (duty and quota free) in addition to the standard GSP programme of the US. Previously Malawi was benefiting through increased garments exports to the US after being designated as an AGOA textiles and apparel beneficiary country in October 2000. Garments exports to the US peaked during 2004 at around USD 30 million per year. However, with the phasing out of the WTO Agreement on Textiles and Clothing on 1 January 2005, US quota restrictions on more competitive garments producers in Asia were eliminated. This has lead to the US garments market becoming much more competitive for African manufacturers. Hence during the year under review, Malawi's garments manufacturers have switched exports back to the South African market. Previously some 70 percent of garments exports were destined to the US market, with the remainder sent to South Africa. As of end 2005, this distribution has been reversed with South Africa becoming the principal market. Garments are exported to South Africa under the MMTZ-SACU arrangement. A more recent development during 2005 was the success enjoyed by Malawian exporters of macadamia nuts to the US. Malawi is now the largest exporter of macadamia nuts to the US under AGOA. Regional and Bilateral Commitments Consideration is made of the fact that Malawi already operates a low tariff rate regime under the FTA and other preferential trade arrangements, and that apart from the WTO, Malawi has other multilateral obligations. Specific attention will be drawn to tariff rates, the treatment of goods of economic significance, including sugar; possibilities with regard to non-tariff protection, and the timing of membership in the Customs Union. Malawi is also a member of the Southern Africa Development Community (SADC). Under SADC, Malawi is committed to reducing tariffs on intra-SADC trade progressively. The implementation of the SADC Trade Protocol aims at creating a SADC Free Trade Area (FTA) by 2008. A Mid-term Review of the SADC Trade Protocol is currently ongoing with a view to assessing progress on these issues. Malawi has an asymmetrical bilateral trade arrangement with South Africa, a bilateral trade agreement with Zimbabwe and a customs agreement with Botswana. During the period under review, Malawi renegotiated the Malawi-Zimbabwe Bilateral Trade Agreement to provide for better terms for Malawian firms and the new Agreement is set to be signed into force in May 2006. In December 2005, Malawi and Mozambique signed a bilateral trade agreement that provides for duty-free trade between the two countries, with only a limited number of excluded products. This agreement, due to be entered into force in July 2006, provides for significantly enhanced trade opportunities for Malawi's private sector. Click here to download the Malawi-Mozambique bilateral trade agreement.
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