U.S. Statement at the WTO Trade Policy Review of Malawi

Statement by Charge d’Affaires David Shark

Geneva,
June 9, 2010

Thank you, Chair.

The United States is pleased to welcome Secretary of Industry and Trade Newby H. Kumwembe, along with the rest of the Malawian team to the second review of the trade policies and practices of the Republic of Malawi. We would also like to express our appreciation to the government of Malawi for the detailed report it submitted for this review and to the Secretariat for its thorough examination of Malawi’s trade regime. Finally, we would like to thank the discussant, Mr. Zhang Xiangchen, for providing an insightful context for our deliberations.

Malawi has made noteworthy progress since its last trade policy review in 2002. It has witnessed enviable economic growth – averaging 6.3 percent since 2003 and reaching 7.7 percent in 2009, when so much of the rest of the world saw low or negative growth rates. At the same time, inflation has been reduced to single digits, public debt has been reduced, and the proportion of the population living on under a dollar a day has decreased. The government of Malawi has also taken measures to address food security and to promote greater agricultural productivity, especially among small-holder farmers.

We recognize that Malawi continues to face an array of daunting challenges – including supply-side constraints – as it seeks to participate more effectively in the global economy. We hope that this trade policy review will help to spotlight policy-related measures that the government can consider in order to increase trade flows, boost economic growth and diversification, and alleviate poverty.

The United States enjoys a vibrant bilateral trade relationship with Malawi. Two-way United States-Malawi goods trade totaled $105 million in 2009. Although that is down four percent from 2008,it is still a strong performance given the global drop in trade last year. By comparison, U.S. two-way trade with sub-Saharan Africa was down 40 percent in 2009. Since 2000 Malawi has been eligible for trade preferences under the African Growth and Opportunity Act (AGOA). In recent years, substantially all U.S. imports from Malawi have entered the United States duty-free, either under AGOA, the Generalized System of Preferences (GSP), or zero-duty most-favored-nation provisions.

Malawi exports a wide variety of products to the United States under the provisions of AGOA and GSP, including tobacco, apparel, sugar, macadamia nuts, leguminous vegetables, and imitation jewelry. At the same time, we recognize that the government of Malawi wants to find ways to increase its utilization of AGOA and GSP trade preferences and to further diversify its trade with the United States. We noted with interest, from the government’s report for this review, that the Malawi Ministry of Trade and Private Sector Development is finalizing National Export and AGOA Strategies. In this connection, we would be happy to consult with the government of Malawi on its plans for implementing these strategies, especially the AGOA Strategy. The USAID-managed Global Competitiveness Hub for Southern Africa, based in Botswana, has provided technical assistance to the government and private sector in Malawi on export diversification and may be able to help the government identify and develop new market opportunities under AGOA.

We are pleased to note that Malawi is involved in two major U.S. initiatives related to economic growth and development: the Millennium Challenge Account, administered by the Millennium Challenge Corporation (MCC), and Feed the Future, the United States’ global hunger and food security initiative. In December 2007, Malawi was named eligible for compact assistance from the MCC and is now in the process of developing a compact, which could be approved later this year. Malawi has completed a $20.92 million MCC threshold program focused in part on improving financial management and transparency. In April 2010, the U.S. Government announced that Malawi was also among the potential focus countries of the U.S. Feed the Future initiative that aims to decrease hunger and poverty and improve food security. We look forward to Malawi’s completion of its program to increase the country’s food security and the technical and high level reviews of those plans and the increased cooperation with Malawi as it moves ahead to boost its food security.

The Secretariat reports that, since the last review in 2002, Malawi has made progress in reforming its trade policy regime in several areas. Such progress is important to improving the development, food security, and overall well-being of Malawi’s citizens. The Secretariat’s report also notes that much work remains to be done to bring Malawi’s trade-related laws up to date and align them with the rules-based international trading system. We support the Secretariat’s recommendation that Malawi consider simplifying its tariff regime, which has become encumbered with a variety of concessions and drawbacks. We also support the recommendation that Malawi prioritize trade facilitation, including in a regional context, in its trade policy formulation as a way to mitigate the administrative costs associated with trading across borders. We agree with the Secretariat’s point that, as a land-locked country, Malawi’s export competitiveness is directly and indirectly challenged due to high transportation costs. Finally, we support the recommendation that the government give higher priority to meeting its notification commitments in the WTO. Transparency in the world trading system is central to its effectiveness and credibility.

We are pleased that the Secretariat devoted a chapter of its report to the issue of aid for trade. One of its findings is that while trade is one of the underlying objectives of the Malawi Growth and Development Strategy (MGDS), the MGDS does not specify how to translate this goal into policy. We urge the government of Malawi, as it develops the successor to the first MGDS, to ensure that trade be mainstreamed into the strategy, consistent with the high level of attention the -government has placed on export-led economic growth. As part of this process, attention should be given to the future development of the services sector, in particular tourism, and the necessary investment in human capital to enable growth in services. We are pleased to take note that, under the GATS, Malawi has made specific commitments in 33 services sectors, which is slightly more than the average in least developed countries. This kind of policy formulation and choice is commendable and we would like to encourage it to continue.

The United States has submitted a few questions on customs, SPS requirements, privatization of state-owned enterprises, intellectual property rights, and other topics described in the Secretariat’s report. We thank the government of Malawi for providing answers to our questions, and we look forward to reviewing them.

Finally, while recognizing the capacity constraints that have limited Malawi’s participation in WTO meetings, we encourage Malawi to play a more active role in the Doha Development Agenda negotiations. As the government notes in its report, an “ambitious outcome” of the Doha Round is “crucially important to create economic prosperity and growth globally.” We agree and believe that LDCs such as Malawi have much to gain from a balanced and ambitious result in the Doha negotiations that include meaningful new market access for all. Such a result could further enhance opportunities for Malawi to broaden its export base, its export markets and hence its opportunity to diversify. The United States looks forward to working with Malawi toward bringing the round to a successful conclusion. And we offer all good wishes to the government of Malawi for a successful Trade Policy Review.

Thank you.