Malawi

1
Malawis Response to the adoption of the Swiss
calculation of tariff and impact to the
economyPresentation at Post Hong Kong WTO SADC
CSO Strategic ConferenceonThursday 6th April
2006 JohannesburgbyLloyd A. MuharaTrade Policy
National Working Group, Malawi
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Hong Kong WTO Ministerial

• Introduction Assumption is that WTO is familiar
  to all
• - First Ministerial 1996
• - DDA 2001 to 2005
• - 6 Meetings (4-2)
• Organisational Issues- Transparency, Involvement
  and participation of members
• Main players developed and developing
• Developing country coalitions African Group,
  ACP, LDCs, G90
• G110 G90 G20 New Development

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Hong Kong WTO MinisterialMAJOR ISSUES

• Agriculture
• NAMA
• Services
• Rules
• Trips
• LDCS
• Development
• Aid for Trade
• Other (Minor) Issues

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Agriculture

• Formula reduction of tariffs and TDS
• Increased market access
• Preferences
• Timeframe for reduction of TDS
• Elimination of export subsidies
• Special products and special safeguard mechanisms
• Sensitive products
• Cotton

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Non Agricultural Market Access (NAMA)

• Origin of Swiss Formula
• DOHA Declaration Para 16 Market Access for
  Non-Agricultural Products.
• We agree to negotiations which shall aim, by
  modalities to be agreed, to reduce or as
  appropriate eliminate tariffs, including the
  reduction or elimination of tariff peaks, high
  tariffs, and tariff escalation, as well as
  non-tariff barriers, in particular on products of
  export interest to developing countries.

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Non Agricultural Market Access (NAMA) (Continued)

• Modalities to be Agreed
• - Swiss Formula Vs. Other Formula
• (Girard)
• - Debate in Cancun was
• Inconclusive

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THE SWISS FORMULA

• Formally adopted by WTO through Para 14 of Hong
  Kong Ministerial Declaration
• We adopt a Swiss Formula with coefficients at
  levels which shall inter alia
• - Reduce or as appropriate eliminate tariffs,
  including the reduction or elimination of tariff
  peaks, high tariffs and tariffs escalation, in
  particular on products of export interest to
  developing countries and

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THE SWISS FORMULA (Continued)

• - Take fully into account the special needs and
  interests of developing countries, including less
  than full reciprocity in reduction commitments.
• The Negotiating Group was instructed to finalise
  the Formulas structure and details as soon as
  possible.

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THE SWISS FORMULA (CONTINUED)

• Paragraph 6 to 16 of Annex B HKM Contains
  details of the Formula as proposed by Chairman of
  the Negotiating Group.
• Meaning Those members of the WTO which or who
  have higher tariffs will face greater reduction
  while those maintaining lower tariffs will face
  lower reduction.

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THE SWISS FORMULA (CONTINUED)

• What Ministers agreed is the general
  principle the actual coefficients which will
  determine the reduction levels were not agreed
  upon and this is what was deferred and referred
  to the Negotiating Group.
• What Ministers agreed, however, is to establish
  modalities no later than 30th April 2006 and to
  submit comprehensive draft schedules based on
  these modalities no later than 31st July 2006.
  (Para. 23, HKM).

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Swiss Formula (Continued)

• Do we have a formula? Maybe yes. But we surely
  do not have the values to go into the formula.
• So formula incomplete at this stage

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SWISS FORMULA AND THE MALAWI ECONOMY

• Malawi Economy, Agriculture based, commodity
  exporter.
• Very low Industrialisation
• Importation of a large proportion of finished and
  intermediary goods
• Swiss Formula ?NAMA?industrial tariffs

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SWISS FORMULA AND THE MALAWI ECONOMY (CONTD)

• Tariffs Tariffs introduce a wedge between the
  world price of a product and the price in the
  domestic market (p. 219, Richard Newfarmer,
  Trade, Doha, and Development)
• Tariffs are barriers to free trade

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The Issues

• Malawis highest industrial tariff is 25. For
  Agricultural goods it is 20-25.
• Low applied industrial tariff a result of WB
  IMF structural adjustment programmes.
• The premium (from tariffs) normally accrues to
  the government of the importing country as tariff
  revenue - (p.219, Richard Newfarmer).
• Tariff Revenue forms 11 to 16 of total Malawi
  Government revenue.

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The Issues (Continued)

• Reduction from 25 under Swiss Formula?
• As observed in Hong Kong and prior to Hong Kong,
  most developing countries are reluctant to reduce
  industrial tariffs as such cuts will adversely
  affect not only their budget support but will
  also affect their industrialisation policies
  (cheap imports Vs. domestic production).
• Products of export interest to Malawi tobacco,
  tea and sugar.

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Twist to the Tail

• New dimension
• Para 24 HKM Balance between Agriculture and
  NAMA
• We recognise that it is important to advance
  the development objectives of this Round through
  enhanced market access for developing countries
  in both Agriculture and NAMA. To that end, we
  instruct our negotiators to ensure that there is
  a comparably high level of ambition in market
  access for Agriculture and NAMA. This ambition
  is to be achieved in a balanced and proportionate
  manner consistent with the principle of special
  and differential treatment.

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Twist in the Tail

• Has Para 24 been adopted as a counter measure to
  the provisions on SDT as well as relating to
  non-reciprocal preferences accruing to LDCs?
• Does this mean nothing moves in NAMA unless there
  is movement in Agriculture and vice-versa?
  Single undertaking.
• Meeting of Ministers in Geneva April 2006.

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WHICH WAY MALAWI?

• As an LDC Malawi is exempted from making
  commitments or reducing tariffs under the Swiss
  or any Formula. (Para 9 of NAMA Framework)
• Thus Malawi advised to cling to Para 8
  Flexibilities so that at best 25 industrial
  tariff be maintained (subject to Progress on
  Regional Integration) with possibility of hiking
  it when need arise.

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WHICH WAY MALAWI (CONTINUED)

• Exports Agricultural Reliance on
  non-reciprocal preferences such as EBA, AGOA,
  GSP.
• Keep watch Resist Trade offs between
  Agricultural export preferences and industrial
  tariff cuts/disadvantageous.
• Survival Kit SDT with preferences as main tool
  as Swiss Formula not very relevant.

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• Watch out Swiss Formula may affect the level of
  preference erosion to be experienced by the
  Malawi economy.
• Extend of dependence on preferences by Malawi.

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Classification of Sub-Saharan countries by
magnitude of the value of combined (non-oil)
preferences in the European Union, Japan and
United States relative to total (non-oil)
exports, 2002 (p222, Richard Newfarmer)
Less than 1 percent Angola, Burundi, Central African Republic, Chad, Congo, Democratic Republic of Congo, Djibouti, Equatorial Guinea, Gabon, Guinea, Liberia, Mali, Niger, Nigeria, Rwanda, Sao Tome and Principe, Somalia, South Africa
Between 1 percent and 5 percent Benin, Botswana, Burkina Faso, Cameroon, Cape Verde, Comoros, Eritrea, Ethiopia, Ghana, Ivory Coast, Mauritania, Sierra Leone, Sudan, Tanzania, Togo, Uganda, Zambia
Greater than 5 percent but less than 10 percent Gambia, Guinea-Bissau, Kenya, Madagascar, Mozambique, Namibia, Senegal, Zimbabwe
Greater than 10 percent Lesotho, Malawi, Mauritania, Seychelles, Swaziland