April 26, 2007

EPA may destroy manufacturing potential

Economic circles in eastern and southern Africa are abuzz with discussions about the advantages and disadvantages of the economic partnership agreement (EPA) which governments of these countries are negotiating with the European Union (EU). Sixteen nations in the Eastern and Southern Africa (ESA) EPA grouping are scheduled to sign the agreement by December, along with other countries in the rest of Africa, the Caribbean and Pacific (ACP) regions.
While the Malawian government is looking forward to this step, non-governmental organisations (NGOs) in the country remain apprehensive. Five influential NGOs, whose voices are taken seriously on the political and economic scene in Malawi, warn that the EPA will undermine the country's economy. These NGOs are the Malawi Economic Justice Network; the Farmers Union of Malawi; the Civil Society Agriculture Network; the Malawi Council of Churches; and Oxfam in Malawi. They have written to the EU's president, German chancellor Angela Merkel, arguing that the EPA is a bad deal as it will not allow Malawi and similar poor countries to protect their domestic industries with tariffs and other measures.
The group of NGOs also argues that the EPA is different to the Lomé preferential trade agreement which it is replacing. The new trade deal will "force" Malawi to open up its market to the industrialised world and end up perpetuating economic misery among its population of 12 million people, say the NGOs. Some 65 percent of Malawians live below the poverty line of less than 1 US dollar a day. The organisations also contend that the EPA will open up Malawi's local markets to goods produced at lower costs in developed European countries. These goods will compete against Malawian goods which have been manufactured in a less advanced country that is already struggling against global economic constrictions.
"The EPA will decrease government revenue through loss of tariffs and undermine the benefits of regional trade integration," the NGOs argue. They believe that Malawi has the right to pursue autonomously determined trade and economic policies for the development of its economy, just like other countries do.
The NGO community in Malawi is not alone in its protestations. A report released in 2006 by Tearfund, a global Christian relief and development charity, warns that the EPA negotiations are unbalanced. The report says the EPAs will create a greater disparity between the ACP countries and the EU in terms of development and economic power. In the report, entitled "Much to lose, little to gain: Assessing EPAs from the perspective of Malawi", Tearfund warns that the EPA threatens to reinforce Malawi's position as an exporter of low-value, unprocessed commodities. This will undermine the Malawian government's development strategy to add value to agricultural goods and to develop a manufacturing sector. It will also undermine regional integration among Malawi and its neighbours and will lead to a significant loss of fiscal revenue. There will also be other major adjustment costs, says Tearfund. "EPA negotiations are cloaked in the language of partnership and development, but in the grossly unbalanced negotiating dynamic between the EU and the ACP, the European Commission is using EPAs to force its own agenda on Africa. "Malawi has little to gain and potentially a huge amount to lose from entering into an EPA with the EU," Tearfund concludes.
To allay fears, minister of trade Ken Lipenga has previously indicated that the government will conduct all the necessary consultations before signing the agreement. "We will not just sign for the sake of it. We know that trade liberalisation has some negative effects and we will consider these when negotiating," Lipenga said. In direct reference to the NGOs' concerns, Malawi's principal secretary for trade and private sector development Newby Kumwembe said that the country's private sector incurs heavy production costs in some areas which render them uncompetitive on the global economy. Kumwembe also argues that a lot of people have misunderstood trade agreements. Nowadays the big markets of Europe and the US have toughened up their entry requirements. Poor countries like Malawi need agreements such as the EPAs to be able to participate in the global economy. (IPS)

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