Trade Agreements

Trade in Malawi is liberalized with import and export license only required for very few products that have a bearing on security, health, food self-sufficiency, and the protection of infant industries. Since independence, Malawi has been signing trade agreements with other countries at bilateral, regional and multilateral levels with the objective of providing increased market access for Malawian exports.

Malawi is a signatory and beneficiary of a number of bilateral and multilateral trade agreements. These include the African Free Trade Zone, the Common Market for Eastern and Southern Africa (COMESA), the Southern Africa Development Community (SADC) Trade Protocol, the Cotonou Agreement between the European Union (EU) and African Caribbean Pacific (ACP) countries, and the United States-African Growth Opportunity Act (US-AGOA) initiative for concessional exports to the US market. Malawi also signed the African Continental Free Trade Area (AfCFTA) agreement but is yet to ratify it. Malawi also has bilateral agreements with South Africa, Zimbabwe, Malaysia, Mozambique, India, and China as well as a customs agreement with Botswana. Further agreements are currently under consideration with Zambia and Tanzania. These, alongside other initiatives such as the Growth Triangle and Spatial Development Initiative, offer considerable opportunities for increasing trade and investment in the region and stimulating growth.

 

Malawi’s Main Export Commodities in 2019

Commodities

Value (US$ Million)

Percentage of Total Export Value

Tobacco and manufactured tobacco substitutes

560.55

65.7

Coffee, tea, maté and spices

88.40

10.4

Edible fruit and nuts; peel of citrus fruit or melons

40.37

4.7

Edible vegetables and certain roots and tubers

40.02

4.7

Sugars and sugar confectionery

26.58

3.1

Articles of apparel and clothing accessories, knitted or crocheted

23.48

2.8

Oil seeds and oleaginous fruits; miscellaneous grains, seeds and fruit; industrial or medicinal

13.55

1.6

Residues and waste from the food industries; prepared animal fodder

9.77

1.1

Plastics and articles thereof

6.28

0.7

Electrical machinery and equipment and parts thereof; sound recorders and reproducers, television

5.32

0.6

 

Source: National Statistical Office of Malawi 


The main trading partners are South Africa, China, Belgium, India, UK, USA, Germany, Canada, Netherlands, Egypt, Poland, UAE, Switzerland, India, Russia, Mozambique, Portugal, Republic of Korea, Zimbabwe, Zambia, Kenya and Tanzania.
Source: National Statistical Office of Malawi 

 

THE AFRICAN FREE TRADE ZONE

The African Free Trade Zone (AFTZ) is a free trade zone announced at the EAC-SADC-COMESA Summit on 22 October 2008 by the heads of Southern African Development Community (SADC), the Common Market for Eastern and Southern Africa (COMESA) and the East African Community (EAC). The African Free Trade Zone is also referred to as the African Free Trade Area in some official documents and press releases.

In May 2012 the idea was extended to also include ECOWAS, ECCAS and AMU. In June 2015, at the African Union Summit in South Africa, negotiations were launched to create a Continental Free Trade Area (CFTA) with all 55 African Union states by 2017.

 

MULTILATERAL TRADE AGREEMENTS

A. COTONOU AGREEMENT

The Cotonou Agreement, signed on the 23rd June,2000, provides a framework for the European Union (EU) cooperation relations for the economic, social and cultural development of African Caribbean and Pacific states, Including our dear Malawi. It entered into force in 2003 and was subsequently revised in 2005 and 2010.

The Cotonou Agreement is aimed at the reduction and eventual eradication of poverty while contributing to sustainable development and to the gradual integration of ACP countries into the world economy. The revised Cotonou Agreement is also concerned with the fight against impunity and promotion of criminal justice through the International Criminal Court.

The Cotonou Agreement replaced the Lomé Convention, which had been the basis for ACP-EU development cooperation since 1975. The Cotonou Agreement, however, is much broader in scope than any previous arrangement has ever been. It was designed to last longer, for a period of 20 years and is based on four main principles:

Equality of partners and ownership of development strategies

Participation- with the central government as main actor, Civil Society Organizations and the Private sector are also involved.

Dialogue and mutual obligations- obligation like respect for human rights is strictly monitored.

Differentiation and regionalization- cooperation varies according to each partner’s level of development, the least developed and vulnerable ones get special treatment.

Probably the most radical change introduced by the Cotonou Agreement concerns trade cooperation. Since the First Lomé Convention in 1975, the EU has granted non-reciprocal trade preferences to ACP countries. Under the Cotonou Agreement, however, this system was replaced by the Economic Partnership Agreements (EPAs), a new scheme that took effect in 2008. These new arrangements provide for reciprocal trade agreements, meaning that not only the EU provides duty-free access to its markets for ACP exports, but ACP countries also provide duty-free access to their own markets for EU exports.

True to the Cotonou principle of differentiation, however, not all ACP countries have to open their markets to EU products after 2008. The group of least developed countries is able to either continue cooperation under the arrangements made in Lomé or the "Everything But Arms" regulation.

Malawi’s major exports to the EU include tobacco, sugar, coffee and tea, fruit, vegetables, nuts and cotton.  Malawi’s major imports from the EU include fuel, pharmaceuticals, electrical appliances, fertilizer, motor vehicles, medical equipment, military weapons, clothes and printed materials such as books, newspapers and pictures.

 

B. WORLD TRADE ORGANIZATION (WTO)

Malawi is a WTO member and is part of the WTO agreements. Through these agreements, WTO members operate a non-discriminatory trading system that spells out their rights and their obligations. Each country receives guarantees that its exports will be treated fairly and consistently in other countries’ markets. Each promises to do the same for imports into its own market. The system also gives developing countries some flexibility in implementing their commitments. The World Trade Organization (WTO) deals with the global rules of trade between nations. Its main function is to ensure that trade flows as smoothly, predictably and freely as possible.

 

C. TRIPARTITE FREE TRADE AGREEMENT

The Tripartite Free Trade Area (TFTA) is a proposed African free trade agreement between the Common Market for Eastern and Southern Africa (COMESA), Southern African Development Community (SADC) and East African Community (EAC).

On June 10, 2015 the deal was signed in Egypt and will be unveiled at the 25th African Union Summit in South Africa. Malawi is also a signatory to this agreement.

 

D. THE UNITED STATES-AFRICAN GROWTH OPPORTUNITY ACT (US-AGOA) INITIATIVE FOR CONCESSIONAL EXPORTS TO THE US MARKET.

The African Growth and Opportunity Act (AGOA) was signed into law in May 2000 with the objective of expanding U.S. trade and investment with sub-Saharan Africa, to stimulate economic growth, to encourage economic integration, and to facilitate sub-Saharan Africa's integration into the global economy. The Act establishes the annual U.S.-sub-Saharan Africa Economic Cooperation Forum (known as the AGOA Forum) to promote a high-level dialogue on trade and investment-related issues. At the center of AGOA are substantial trade preferences that, along with those under the Generalized System of Preferences (GSP), allow virtually all marketable goods produced in AGOA-eligible countries to enter the U.S. market duty-free.

The U.S determines annually whether sub-Saharan African countries are eligible for AGOA benefits based on progress in meeting certain criteria, including progress toward the establishment of a market-based economy, rule of law, economic policies to reduce poverty, protection of internationally recognized worker rights, and efforts to combat corruption. As of January 1, 2020, Malawi is eligible for AGOA and It also qualifies for textile and apparel benefits.

The U.S. and the Common Market for Eastern and Southern Africa (COMESA), which includes Malawi, also signed a Trade and Investment Framework Agreement (TIFA) in 2001. Since its inception, AGOA has helped to increase two-way trade between sub-Saharan Africa and the US.

Malawi was named the 176th largest goods trading partner with $74 million in total (two way) goods trade during 2018. Goods exports totaled $17 million; goods imports totaled $57 million. The U.S. goods trade deficit with Malawi was $39 million in 2018. Apart from that U.S. exports of goods to Malawi supported an estimated 1 hundred jobs in 2015.