Experts doubts benefits of CFTA
Experts have said Malawi may not benefit much from the African Union’s (AU) proposed Continental Free Trade Area (CFTA) as it has a weak and narrow export base.
CFTA, to be implemented by 2017, is a brainchild of AU. The initiative will see African countries either reducing or completely doing away with barriers to trade such as customs.
In an interview on Monday, National Working Group on Trade Policy (NWGTP) chairperson Geoff Mkandawire said Malawi cannot reap much benefits from CFTA as it has a weak and narrow export base.
“We need to critically analyse the proposal and decide what to do. Such trade agreements usually have both advantages and disadvantages.
“We first need to improve our export base because it is weak and narrow. We have been talking of turning Malawi from a predominantly importing and consuming country into a producing and exporting one, but not much has been done.
“We need to improve our policies to stimulate growth. Malawi should not just accept the agreements, but it should ask itself what it has to offer on the international market,” said Mkandawire.
Economics Association of Malawi (Ecama) executive director Nelson Mkandawire agreed with Geoff Mkandawire that Malawi needs to put its house in order before appending its signature to CFTA.
“We do not have products for export, so what is the free trade area for? We first need to work on our supply side constraints.
“Malawi relies heavily on import duties and donor support for our budget. If we remove the tariff barriers, we may lose tax revenue and end up entirely depending on donor aid,” he said.
Malawi’s Ministry of Industry and Trade spokesperson Wiskes Nkombezi in an interview on Monday said the proposal is welcome, but Malawi will first diversify its export base before implementing CFTA.
“We have been taking part in CFTA negotiations and we know the implications. We know Malawi has a weak economy, but the current policies such as the National Export Strategy will take care of that.
“The strategy does not only look at access to international markets, but also at increasing our productive capacity and this will help get rid of productivity bottlenecks,” said Nkombezi.
CFTA is expected to provide the basis for the establishment of the Continental Customs Union and later, the creation of the African Common Market which is expected to dramatically expand intra-African trade by breaking down tariffs and non-tariffs barriers, and enhancing mutually advantageous commercial relations through trade liberalisation schemes.
CFTA action plan outlines skepticism by some countries as one of the challenges the project is facing. The plan indicates that some countries are skeptical of the whole regional integration, arguing the facility may only work to the advantage of rich and powerful countries in Africa.
“The relatively small weight of intra-regional trade in Africa is due largely to the structure of production and the composition of exports. Many countries still specialise in a few primary commodities while most of their imports consist of manufactures, thus the potential for intraregional trade is limited because of this lack of diversification and competitiveness,” reads the plan in part.
The action plan also notes that trade-induced adjustment costs experienced by weaker economies such as Malawi are a major concern within the proposed Pan-African free trade area.
