Regional economic groupings

It is the ambition of every developing country to industrialise its economy since the existence of factories is the hallmark of a developed country.

The late president Bingu wa Mutharika talked of making Malawi a producing and exporting instead of a consuming and importing country. Obviously, he wanted to introduce new industries in the country.

Malawi, of course, produces and exports, but it mainly produces and exports primary products. Malawi needs secondary industries. This is easier said than done.

To produce in the home economy is one thing, to sell the products in foreign market, is another.

In production, we mostly face technical problems while in selling, we face both economic and political hurdles and it is these problems that will form the gist of this discourse.

Students of economics learn of the doctrine of free trade as enunciated by David Ricardo.

It says countries should produce and export goods in which they enjoy comparative advantage in costs of production, and import products which they have comparative disadvantages.

In practice, we see a complex of political and economic rules through which trade moves. Few countries, if any, truly exist which confine themselves to producing products in which they enjoy comparative or absolute advantages.

Highly industrialised countries produce food and industrial crops instead of depending entirely on imports from countries which have comparative advantages.

Prosperity comes to a country when it easily penetrates rich foreign markets with its products. By and large, industrial countries welcome and encourage the arrival of raw materials from developing countries.

But processing and manufacturing products face varying degrees or heights of tariffs and non-tariff barriers.

There is a maze of barriers. If our determination to diversify the economy of our country is to succeed we must organise ourselves for global competition.

Let international soccer matches remind us that what we are up to when we try to make or produce goods for the international market.

When we have made thorough preparation for regional or continental matches we do better than when we have been cavalier.

On the international scene, no concession is made to the Malawi team. When a team fails to score goals, it returns without the trophy. No matter how often we enter the competitions if we do not improve, we fail. There is no consideration for long service.

If our products are to bring us foreign reserves and highly needed imports, they must meet the expectations of the buyers. We must begin by having technocrats who fully understand the tangled skein of international trade. Trade between countries responds not only to economic tendencies, but also geopolitics.

The World Trade Organisation (WTO) exists to facilitate and encourage trade of member countries on the principles of most favoured nation (MFN) clause. But nations of the world, both developed and developing have established regional groupings which improve prospects of member countries, but frustrate the interests of non-members.

Take, for instance, the intricate of the General System of Preferences (GDP).

Under the sponsorship of the United Nations Conference on Trade and Development (Unctad) between 1971 and 1972, Japan and Western Europe introduced GSP, the US and Canada did so in 1976.

This system offered less developed countries tariff preferences, but left nontariff barriers intact. The schemes varied greatly in product coverage, lists of beneficiary countries and measures to safeguard domestic output and employment.

Under the US scheme over 100 developing countries, 32 of which were classified as least developed and were granted GSP duty free privilege, yet various items were excluded from the scheme because they were said to be sensitive.

A feature known as graduation was introduced to the programme in 1985. A product could be taken out of duty free list if authorities felt it was capable of competing on the market even if duty was collected on it. Some countries could be removed from the GSP list if they were seen as developed enough to compete with the old developed countries.

The first to qualify were the four tigers of the Far East: Taiwan, Hong Kong, Singapore and South Korea.

For a country to be considered for inclusion on the GSP of the US it had to offer protection for the US intellectual property rights, refrain from unreasonable export practices and guarantee its workers intellectually recognised rights.

Under the EU scheme, 130 developing countries qualified for the GSP. All dutiable manufactured and semi-manufactured products were accorded duty-free status. But 550 products were classified as sensitive.

Obviously, the global market is like a primeval forest, there is no clear path through it.