Note: Advance written questions by WTO Members and replies provided by Malawi are reproduced
in document WT/TPR/M/96/Add.1 and will be available online at:  http://www.wto.org
english/tratop_e/tpr_e/tp_rep_e.htm.WORLD TRADE
ORGANIZATIONWT/TPR/M/96
19 March 2002
(02-1425)
Trade Policy Review Body
6 and 8 February 2002
TRADE POLICY REVIEW
MALAWI
Minutes of Meeting
Chairperson:  H.E. Mr. Pekka Huhtaniemi (Finland)
Page
I. INTRODUCTORY REMARKS BY THE CHAIRPERSON 3
II. OPENING STATEMENT BY THE REPRESENTATIVE OF MALAWI 4
III. STATEMENT BY THE DISCUSSANT 7
IV. STATEMENTS BY MEMBERS OF THE TRADE  POLICY
REVIEW  BODY 10
V. REPLIES FROM THE REPRESENTATIVE OF MALAWI
AND ADDITIONAL COMMENTS 14
VI. CONCLUDING REMARKS BY THE CHAIRPERSON 17WT/TPR/M/96
Page 3
I. INTRODUCTORY REMARKS BY THE CHAIRPERSON
1. The first Trade Policy Review of Malawi was held on 6 and 8 February 2002. The
Chairperson welcomed the delegation of Malawi, headed by Mr. Peter Kaleso, Minister  of Commerce
and Industry, and the discussant H.E. Mr. Charle s Thembani Ntwaagae (Botswana).  As usual, the
discussant would speak in his personal capacity and, in accordance with established procedures, hehad made available in advance a broad outline of the themes he intended to raise (document
WT/TPR/D/75).
2. The Chairperson noted that Malawi was the 100
th Member to be reviewed by the Trade Policy
Review Body.  The Appraisal of the Trade Policy Review Mechanism, conducted in 1999
(WT/MIN(99)/2), had concluded that all Members should be reviewed once as soon as possible.
Members had taken this instruction very seriously :  in 2001, 12 Members had been reviewed for the
first time.  
3. The Chairperson recalled the purpose of the Trade Policy Reviews and the main elements of
the procedures of the meeting. The Report by the Government of Malawi was contained in document
WT/TPR/G/96 and that of the Secretariat in do cument WT/TPR/S/96. Copies of advance written
questions, submitted by: Canada; the European Union;  Hong Kong, China;  Japan; Norway; and the
United States had been transmitted to the delegation of Malawi. These questions and the repliesprovided by the delegation of Malawi are reproduced in WT/TPR/M/96/Add.1.WT/TPR/M/96
Page 4
II. OPENING STATEMENT BY THE REPRESENTATIVE OF MALAWI
4. The representative of Malawi recalled that Trade Policy Reviews were important in the
multilateral trading system as they promoted transparency and understanding of Members' trade
policies. He noted that Malawi's trade policy's primary goals were: to reduce  poverty and to achieve
sustainable economic growth, to maintain stable prices and to achieve a viable balance-of-paymentsposition. Malawi wished to reduce fiscal imbalances, to diversify export products and markets, and to
broaden its economic base. This required the identification and the prioritisation of strategic areas of
production, including those with high growth potential. Through a widely consultative process,
Malawi had developed a national shared vision, the Vision 2020 , to give a long term policy direction
to the country. With the emphasis on a poverty reduction strategy emerging from the Poverty
Reduction Strategy Paper (PRSP) process, Malawi was working towards mainstreaming trade in the
national planning strategy.
5. Malawi was committed to participating in the WTO, and fully supported a rule-based trading
system. Members needed a system that aimed at achieving fair, transparent and predictable markets.
Since the 1980s, Malawi had been implementing economic reforms under the World Bank and the
IMF structural adjustment programmes, which had progressively enhanced openness in, and
transparency of, its economy.  To support its reform programmes, Malawi had, inter alia , reduced the
list of goods subject to licensing under the provisions  of the Control of Goods Act, and had eliminated
the requirement for industrial licensing except for manufacturing of weapons and radio-active
materials and the processing of waste.  Malawi had liberalized exchange markets, introduced
investment reforms, and reduced import duties to the extent that the current maximum import duty
was 25%.
6. The representative recalled the essence of the economic structural adjustment programmes.
The reforms had aimed at facilitating market determination of prices, interest rates and exchange
rates. Malawi had encouraged the active participation of the private sector in economic decision-
making, and, in recognition of the private sector as the engine of growth and economic development,
Malawi had embarked on privatization of public enterprises, thereby scaling down public sectordominance in the economy with a view to improving competitiveness and fair distribution of wealth.
7. Malawi had continued to implement economic structural adjustment reforms, and to embrace
economic liberalization. However, the performance of its economy had generally not been
commensurate with its efforts and investment. Poor performance in several sectors could be attributed
mainly to structural, financial and human constraints, which had a direct impact on levels of
investment, and on the poor state of infrastructural facilities, such as road and rail networks,
telecommunications services, electricity and water supplies. Weak legal and regulatory frameworkhad affected Malawi's competitiveness. The lack of improvement in the terms of trade was due to
Malawi's poor, or under-developed, industrial base, which undermined the scope of its
competitiveness.  As a landlocked country, Malawi was dependent on its neighbouring countries for
the transit of its exports and imports, therefore, its trade performance would depend on their political
stability and security.
8. In line with the principles of a market-based economy, Malawi's policy on investment was to
provide an enabling environment for investment to ensure the private sector's leading role in Malawi's
economic development.  In this regard, Malawi had enacted the Capital Market Development Act
(1990) and the Investment Promotion Act (1991),  and had subsequently published a Statement on
Investment Policies, which, inter alia , clarified the issues of freedom of investors, ownership and
protection of investment. In its effort to stream line its investment approval process, the Malawi
Investment Promotion Agency had been granted the status of a one-stop investment centre.
9. As elaborated in the Integrated Trade and Industry Policy, Competition Policy, SME Policy
and Cooperatives Development Policy, Malawi was focusing on improving infrastructural services,WT/TPR/M/96
Page 5
development of agro-industries, research and technology, and on the export-oriented industry with the
view to reducing poverty, attaining economic gr owth, creating employment and boosting foreign
exchange earnings.
10. Malawi was also committed to regional integration and multilateral trade. It had entered into
bilateral trade agreements with Zimbabwe and South Africa and had proposed bilateral tradeagreements with Zambia, Mozambique, and Tanzania. Malawi was a member of the Southern African
Development Community (SADC) and the Common Market for Eastern and Southern Africa
(COMESA).  Malawi was actively involved in the Spatial Development Initiative with its neighbours
aimed at opening the hinterland to development, in developing corridors, which would guarantee
access to the sea as alternative import and export routes. Malawi was a Member of the WTO. Malawi
was a beneficiary of the ACP-EU Cotonou arrangement. He recalled that Malawi's negotiating
process as well as the formulation and the implementation of trade policies were carried out throughbroad-based consultations, involving stakeholders in the Government and in the private sector.  A
National Working Group on Trade Policy, set up in 1997 and chaired by a private sector
representative, had brought together private and public sectors. There was also an
inter-Ministry/Agency Committee on WTO matters, comprising Ministries/agencies, concerned with
the WTO Agreements, to follow up on WTO matters, including on implementation of theAgreements.
11. Agriculture remained the backbone of Malawi's economy, and accounted for over 85% of its
export earnings and 80% of employment creation.  Tobacco, tea, sugar and coffee were Malawi's
major exports. Among the reforms undertaken in the agriculture sector were the liberalization of
fertilizer and seed and output commodities, the repealing of the Special Crops Act, which restrictedsmallholder farmers from participating in the growing of high-value export commodities such as
tobacco. These agricultural reforms, though, had not fully brought about the expected or satisfactory
results.  Competitive practices were still weak and market failures apparent in several subsectors
apparent. The Ministry of Agriculture and Irriga tion had formulated the Agriculture and Livestock
Development Strategy and Action Plan to revitalize the activities of production and marketing in theagriculture sector. Industry, tourism, and transport were equally not competitive: Malawi continued to
face the problems of instability of export prices. The country also faced non-tariff barriers in some of
its export markets. Malawi welcomed the non-reciprocal trade arrangements, such as the Everything-
But-Arms (EBA) Initiative of the EU and the U. S. Africa Growth and Opportunity Act ( AGOA) as
instruments for assisting poor countries in accessing the markets of developed countries, and noted
that issues of standards, sanitary and phytosanitary measures and rules of origin were seen as
constraining factors in taking advantage of these schemes. There was also the concern about theuncertainty regarding the sustainability of these initiatives in terms of promoting long-term
investments and trade.
12. The implementation of the Uruguay Round Agreements had posed a major challenge to
Malawi as it lacked the human, financial and institutional capacity for analysing the legal implications
of the Agreements and, hence, for aligning the national laws, rules and regulations to the WTOAgreements.  The capacity to negotiate effectively in the negotiations was also limited. However, in
the quest to implement some of the requirements of the WTO, Malawi, with the assistance of the
United Nations Economic Commission for Africa (UNE CA), and the British Government through the
Department for International Development (DFID), was working on amendments to some of its
existing trade-related laws to realign them with the Agreements. Work on promulgating a TradeRemedies Law, covering issues of Dumping, Safeguards and Subsidies, had started and a Draft Bill
was under consideration.  Malawi had not yet established a mission in Geneva due to its financial
constraints. This exacerbated difficulties faced by Malawi to participate in the current and future
negotiations under the WTO. Nothing could replace a permanent representation, if Malawi is to
effectively and meaningfully integrate into the multilateral trading system, and take advantage of theopportunities arising therefrom.  Malawi was, therefore, seriously looking into this matter.WT/TPR/M/96
Page 6
13. Malawi greatly appreciated technical assistance received from the WTO, international
agencies and bilateral donors, and thanked the Integrated Framework Core agencies and the IF
inter-Agency Working Group for including Malawi as a potential candidate for the second phase of
the IF pilot scheme. Malawi hoped that the Integrated Framework will assist the integration and
mainstreaming of trade priorities into the national development plans and poverty reduction strategies.Malawi was expecting a World Bank Team at the end of February 2002 to finalize its diagnostic
study. Malawi also thanked the British Government and the Commonwealth Secretariat for assisting
Malawi in preparing this Trade Policy Review.
14. In conclusion, Malawi was committed to the implementation of the WTO Agreements, and
would strive to contribute to the strengthening of  the multilateral trading system despite the limited
financial and human resources at its disposal.  Malawi appealed to the multilateral and bilateral donor
community to provide adequate financial and technical assistance to address its supply-side, marketaccess and institutional capacity constraints, thus helping Malawi to comply with its obligations
under, and to effectively participate in, the multilateral trading system.WT/TPR/M/96
Page 7
III. STATEMENT BY THE DISCUSSANT
15. The discussant (Mr. Charles Thembani Ntwaagae ) commended Malawi for the numerous
far-reaching political, legislative and economic measures taken to launch the country on a path of
democracy, good governance and economic prosperity. Based on estate-owned agriculture and large
public and private enterprises, Malawi’s GDP had grown at an average annual rate of 6% in the first
15 years after independence from the British rule in 1964. As a result of the Structural AdjustmentProgrammes since the mid 1980s, Malawi's economy had been substantially liberalised, contributing
to high economic growth of  almost 9% in 1996, and to the reduction of inflation to single digit rate
(9 per cent in 1997). In the late 1990s, policy slippages, especially expansionary fiscal policies, had
resulted in macroeconomic imbalances, which precipitated an economic and currency crisis, as a
consequence of which, economic growth had slowed to under 2% in 2000. The economic
performance of Malawi had remained quite unsatisfactory in the past five years, with high levels of
inflation, fiscal imbalances, external shocks, depreciation of the Kwacha, high interest rates and thedecline in tobacco prices.  Relative stability and growth had been experienced only to a limited extent.
To face these challenges, Malawi had launched a number of policy reforms, including fiscal,
monetary and trade policy reforms.  A privatisation programme had been implemented and a PRSP
drafted to facilitate equitable distribution of the country’s wealth, and to improve living conditions
and social welfare of the poor.
16. With regard to Malawi’s economic environment, the discussant sought information on:  (i) the
size of Malawi’s external debt, and its impact on external trade relations, and on Malawi's efforts to
transform the country’s economy;  (ii) how Malawi intended to address the challenge that 65.3% of its
population lived below the poverty datum line;  (iii) the impact on the economy and on foreign
relations of Malawi’s transition to multiparty democracy in the early 1990s;  (iv) the impact, inquantitative terms, of the anti-smoking lobby in the United States, the European Union and elsewhere,
on Malawi’s foreign exchange earnings;  (v) how Malawi intended to address the consequent shortfall
in foreign exchange earnings;  (vi) measures put in place to curb corruption in Malawi’s public
administration;  (vii) how effective the cash budget system was in instilling accountability and
financial discipline in the Government budgeting sy stem;  (viii) how Malawi proposed to address the
problem of constantly growing inflationary pressures on the economy.  He invited Malawi to
comment on its efforts to enhance domestic resource mobilisation,  the rate of growth of the country’s
economy, and to mainstream trade in the country’s development agenda, with a view to achieving
sustained economic growth and poverty alleviation.
17. Prior to 1996, Malawi’s economy had been controlled, through, inter alia,  foreign exchange
rationing, industrial licensing, import and export licensing, price controls and official determination
of exchange, which had made it difficult for the various sectors of the economy to perform optimally
and efficiently.  The discussant recalled that the primary objective of trade policy was to create
an environment conducive to the effective, effi cient and competitive, both domestically and
internationally, performance of the private sector, and to make it a viable partner in development with
a view to ensuring the sector’s maximum contribution to the achievement of overall socio-economic
objectives.  In this regard, Malawi planned to focus on industrial and trade development. On theindustrial front, emphasis would be placed on the development of support infrastructure for industrial
growth, development of agro-industries, broadening the industrial base, development of small and
medium scale industries, development of science and technology to enhance industrial
competitiveness, development of export oriented industry aimed both at increasing the volume and
diversifying the range of manufactured exports.  On the trade front, attention would be focussed onensuring the supply of essential goods and services, consolidation of existing export products and
markets, diversification of export products and markets to enhance foreign exchange generation,
development of a conducive trading environment, and increased participation of Malawi's population
in trade and commerce. Capacity-building, including production capacity, to address supply-side
constraints was, therefore, required. At the moment, minimal export diversification had occurred:Malawi’s trade was concentrated, in commodities, with primary products, in particular tobacco,WT/TPR/M/96
Page 8
accounting for most of its exports. In 1999, non-traditional exports accounted for only 13% of
Malawi's exports. Most manufactured products, including fuels, machinery, transport equipment,
chemicals and other intermediate inputs were imported. Tariffs were Malawi’s main trade policy
instrument. Virtually all tariffs were ad valorem .  The tariff structure was escalatory, with six bands,
rates of zero or 5% to apply to essentials, and rates of 10% applied to intermediate goods. Themaximum duty rate of currently 25% applied to consumer goods.
18. Widespread use of exemptions and rebates, including under several local-content schemes
was not transparent, and provided tailor-made protection to certain industries. The discretionary use of
these instruments was extensive and their rationale, other than as distorting protective measures, was
unclear. Since 1992, Malawi had been applying mandatory preshipment inspection on most imports,
due to end in March 2003. Import documentation had been simplified. In the context of the Uruguay
Round, Malawi had bound tariffs on all agricultural products at a ceiling rate of 125% (except for afew products with ceiling rates of 50%, 55% and 65%), and on less than 1% of tariff lines for non-
agricultural products; at ceiling rates ranging from 30% to 65%.  Other duties and charges on these
products were bound at a ceiling rate of 20%. Malawi had removed most formal non-tariff barriers,
including import quotas, and efforts were made to produce new anti-dumping legislation and rules on
countervailing and safeguard measures, with a view to meeting the provisions of the relevant WTOAgreements, including tax concessions and investment incentive schemes for many activities,
especially for agricultural activities.
19. Malawi was heavily dependent on agriculture, especially tobacco.  The agricultural sector
contributed 36 to 39% of Malawi's GDP, accounted for 80% of total employment, and 90% of export
earnings. Agriculture would remain the major source of Malawi’s economic growth for theforeseeable future. Due to the communal land ownership system, there was no land market in Malawi,
and this situation might constrain agricultural development. Manufacturing accounted for about
14%of Malawi's GDP in 1999.  Most prices had been de-controlled, and industrial licensing removed,
except for health, safety and environmental reasons. Malawi planned to introduce incentives that
would target production of up to 20 selected products, especially textiles, clothing and agriculturalprocessing activities. Companies would be assisted based on their export orientation, import
substitution capacity, product quality and financial performance. The telecommunications market in
Malawi was being liberalised, and Malawi Telecom was slated for partial sale to foreign investors.
The Communications Regulatory Authority was responsible for ensuring that the new entrants gained
competitive access to the public network. Substantial progress had been made in liberalising banking
and insurance services, including improved regulatory supervision and divestment of the National
Insurance Company in 2000 and the Commercial Bank in 2001. It was noted that under the GATS,Malawi had made commitments in business services, construction, health and social services, tourism
and travel-related services and banking services.
20. Malawi's policy in the fisheries sector aimed at sustaining the contribution of the sector, and
to help alleviate poverty. However, this sector had experienced substantial decline from the beginning
of the 1990s. Fishing contributed about 4% of Malawi’s GDP. He asked:  (i) when Malawi intended torationalise the widespread use of exemptions and concessions in Malawi’s trade regime;  (ii) what
measures had been put in place to enhance transparency and accountability (as well as compliance
with WTO national treatment and Most-Favoured Na tion principles) in Malawi’s public procurement
system;  (iii) how the 5-year Tourism Strategic Development Study intended to address policy,
institutional, infrastructure and other deficiencies in the tourism sector;  (iv) what was the basis foroptimism regarding the envisaged FDI increase in the tourism sector;  (v) about reasons for the
continued dominant role of the twin financial giants; the National Bank of Malawi and the
Commercial Bank of Malawi, despite the liberalisation of the financial services sector;  (vi) and how
Malawi intended to address this situation;  (vii) whether, given the adverse impact on the environment
of biomass resources, there were any plans to develop alternative sources of fuel energy;  (viii) whatwas the explanation for the drastic decline in fish production between the 1980s and the 1990s;
(ix) how Malawi intended to enhance public particip ation in this industry;  (x) how Malawi proposedWT/TPR/M/96
Page 9
to enhance the contribution of the fisheries sector  to Malawi’s GDP;  (xi) how Malawi proposed to
invigorate agriculture so as to increase its contribution to the country’s GDP;  (xii) when Malawi
planned to adopt a more rational land tenure system, given that the communal land ownership system
constrained agricultural development;  (xiii)  what safeguards existed to ensure that the Starter-Pack-
Initiative did not create a dependency syndrome in the country’s subsistence farming community;  and(xiv) when Malawi planned to operationalize the proposed One-Stop-Shop-Investment Promotion
Agency.
21. Malawi was an original Member of the WTO. Malawi saw the WTO as an increasingly
important framework for achieving its national trade policy objectives. However, it noted that the
increasing complexity and demands of the multilateral trading system worked against small
developing countries, like Malawi, given its limited technical, financial and institutional capacities.
The lack of permanent representation in Geneva exacerbated difficulties faced by Malawi toeffectively participate in the WTO meetings and negotiations. In this respect, he asked:  (i) when
Malawi planned to open a Mission in Geneva;  (ii) how the multilateral trading system could
effectively contribute to the achievement of Malawi's national trade policy objectives.
22. Interpretation of the Uruguay Round Agreements remained a challenge. Malawi’s major
implementation challenges related to: amending national laws, rules and regulations to bring them inline with WTO requirements; complying with WTO notification requirements, and with
WTO Customs Valuation Procedures; enforcing WTO compatible laws and regulations relating to
Anti-dumping, safeguard measures, countervailing duties and intellectual property rights. To help
Malawi to develop its capacity to fully and effectively implement its rights and obligations under the
WTO, a substantial amount of technical assistance was required from both bilateral and multilateraldonors.
23. Malawi was a member of both the Common Market for Eastern and Southern Africa
(COMESA) and the Southern African Developm ent Community (SADC), and a signatory to a
bilateral trade arrangement with Zimbabwe. Malawi was currently negotiating similar arrangements
with Mozambique, Tanzania and Zambia. Malawi received non-reciprocal preferential treatment fromthe European Union under the Cotonou Agreement and the “Everything-But-Arms” (EBA) Scheme,
the United States of America under the Africa Growth and Opportunity Act (AGOA), from other
developed countries under the Generalised System of Preferences (GSP), and from a separate trade
agreement with South Africa. Malawi was one of the pilot countries under the Integrated Framework
for Trade-Related Technical Assistance to Least-Developed Countries, jointly managed by six
multilateral institutions, including the WTO.  Malawi was eligible for the World Bank/IMF Initiative
for the Highly Indebted Poor Countries. Malawi’s overlapping membership of regional and bilateraltrade arrangements with different and conflicting liberalisation agenda, timeframes and trading rules
posed a serious challenge, and added to the complexity of its trade regime. In this respect, he sought
information on:  (i) how Malawi proposed to reconcile conflicting tariff liberalisation schedules and
other commitments resulting from its overlappin g membership in SADC and COMESA;  (ii) what
was the impact of SACU on Malawi’s economy given Malawi’s strong trade relations with SouthAfrica.
24. In conclusion, he noted that Malawi's economy remained very fragile, with a narrow
production and export base, and a lack of key social services and infrastructure. Malawi's greatest
challenges related to expanding its production and export base, restoring and sustaining macro-
economic stability and attaining progressively higher growth rates, while taking measures to reduceits vulnerability to both internal and external shocks. Effective implementation of Malawi’s
multilateral commitments would greatly assist its on-going reforms and economic recovery.WT/TPR/M/96
Page 10
IV. STATEMENTS BY MEMBERS OF THE TRADE POLICY REVIEW BODY
25. Members noted favourably Malawi's commitment to the multilateral trading system, and
appreciated its substantial efforts as a small landlocked least developed country. They encouraged
Malawi to make greater strides to liberalize trade and investment and to restore macro-economic
stability, especially fiscal consolidation. Members supported the divestment of state banks, and theGovernment's decision to resume privatization of key sectors, such as telecommunications. Members
appreciated Malawi's determination to make its trade-related legislation conform to its WTO
commitments, and hoped  that it could establish a representation in Geneva. Members strongly
supported the provision of trade-related technical assistance to Malawi, and other least-developed
countries, under the Doha Development Agenda (DDA) for capacity-building, and within the
Integrated Framework (IF) to help mainstream trade policies into its Poverty Reduction Strategy.
26. The representative of Hong Kong, China appreci ated Malawi's difficulties in implementing
WTO commitments, and agreed that technical assistance needs of LDCs should be addressed in the
new round of trade negotiations. Improved market access for all developing country exports was
important.  Malawi was commended for its efforts to rationalize the tariff structure, and to eliminate
discriminatory internal taxes.  Hong Kong, China noted that additional reforms should include:
increased tariff bindings up from 17% of lines, reduced gaps between bound and applied levels, andelimination of duty and tax concessions.  It was hoped that Malawi would expedite the introduction of
WTO-compliant anti-dumping legislation.
27. The representative of the European Union encouraged Malawi to pursue its integration  into
world economy, and to follow sound liberal economic and trade policies to eradicate poverty.  The
Cotonou agreement established comprehensive links between the EU and Malawi.  Malawi receivedfree non-reciprocal market access to the EU under th e ACP agreements and the EBA initiative  for all
products except arms. He noted that the internationa l community needed to strengthen its support for
least developed countries.  The EU was committed to ensuring that the benefits of further multilateral
trade liberalization benefitted poor countries, like Malawi.  Trade needed to be integrated into
development aid more systematically, and the Integrated Framework made fully effective.  Domesticpolicies of LDCs had to be conducive to trade, investment and private sector growth, subject to
environmental and sustainable development objectives.  While it welcomed Malawi’s regional
integration under SADC and COMESA, the EU recalled that overlapping membership had created
difficulties. Malawi faced problems with trade policy formulation: better co-ordination among
stakeholders was needed. The EU supported Malawi's efforts to meet its WTO obligations, and urged
it to continue simplifying procedures to facilitate  trade.  The EU sought additional information on
measures taken by Malawi to reduce and simplify its import and export procedures, and on itstechnical assistance needs in the areas of trade facilitation and simplification of customs, import and
export procedures.   
28. The representative of Canada congratulated Malawi's recent efforts to enhance economic and
trade policy reforms, including removal of export/import licensing, and elimination of most non-tariff
barriers. Malawi worked closely with international institutions and donors, had developed a PovertyReduction Strategy Paper, and had created a National Working Group on Trade Policy to assist
private sector participation in trade policy formulation. Malawi was also participating in the
Integrated Framework.  Malawi, which had simplified its tariff structure, was urged to use fewer duty
exemptions, and to increase its coverage of tariff bindings at rates closer to applied levels.  Malawi
was encouraged to fully implement its intellectual property obligations within the allowed transitionalperiods, including on patents for pharmaceutical products. Canada suggested that privatization be
extended to telecommunications and transport.  Malawi needed a more harmonized approach to
negotiating overlapping regional agreements, such  as COMESA and SADC, to prevent making its
trade regime more complex.WT/TPR/M/96
Page 11
29. The representative of Japan appreciated that, in spite of economic difficulties, Malawi had
been making structural reform efforts, and expressed the belief that Malawi's further efforts would
surely lead to its sustainable growth. She sought details on how Malawi intended to diversify exports,
and use of regional arrangements, such as COME SA and SADC, to expand trade. Tariffs were
Malawi's main trade policy instrument: Japan requested  it increase its tariff bindings on non-agricultural products. The extent to which Malawi applied guide prices and other non-transaction
values for customs valuation was unclear. Japan considered that if a minimum price system was
maintained, Malawi should submit its notification to the WTO for greater transparency.
30. The representative of the United States recalled the ties between the two countries, and
referred to  expanded duty-free access to the U. S. market under th e AGOA, as  a means of assisting
Malawi's export diversification.  Malawi's market-based economy had a relatively free investment
climate, and economic liberalization and deregulation had fostered its agricultural development. TheUnited States supported effective bilateral and multilateral trade-related assistance to Malawi, and
noted that its fragile and narrow-based economy remained a matter of concern.  Lowering tariff rates
would improve efficiency and increased bindings w ould aid the  predictability of Malawi's trade
regime.  Malawi's stabilization policies had improved, thanks to financial controls on parastatal
entities, closer monitoring of monetary issues, and exchange rate reforms.  The United States urgedMalawi to continue these reforms, and to pursue its privatization programme following its suspension
from July to October 2001.  The United States hoped that Malawi would agree to transfer the tariff
and trade data collected by the Secretariat for this Review to the WTO's Integrated Tariff Base (IDB).
The United States also noted that liberalization of transports would help lower costs thereby
increasing Malawi's competitiveness, and encourage investment.
31. The representative of Norway encouraged Malawi to simplify its tariff structure by reducing
disparities, and eliminate the use of non-transparent exemptions to deliver "tailor made" protection to
certain industries. Noting Malawi's need to diversify its economy, Norway supported special and
differential treatment for developing countries in the ongoing negotiations on agriculture. Malawi and
other LDCs would receive tariff- and quota-free acces s to the Norwegian market from July 2002.  She
sought Malawi's views on schemes providing preferential market access. Norway agreed that
enhanced market access, balanced rules, and well targeted financial and technical assistance,
including capacity building, would reduce marginalization of Malawi and of other LDCs, and asked
Malawi to identify its needs in this area.
32. The representative of India commended Malawi for its reforms, including expenditure
controls, trade liberalization, privatization and preparation of a Poverty Reduction Strategy.  Malawi
needed to diversify its heavy reliance on tobacco exports to the U.S. and the EU markets where anti-smoking campaigns were adversely affecting sales.  Tourism and financial services had significant
growth potential. Malawi faced severe problems as a small landlocked, highly indebted least-
developed country vulnerable to fluctuating world commodity prices and adverse climatic conditions.
India understood Malawi's concerns in relation to financial costs of fully implementing its WTO
obligations.   Malawi needed increased assistance, and would benefit from the Integrated Framework.
33. The representative of Kenya, on behalf of the African Group
, referred to the bold steps taken
by Malawi to liberalize its economy, and noted that such efforts, including the implementation of
Structural Adjustment Programmes supported by the IMF and World Bank, had failed to deliver the
expected benefits. Therefore, the practice of prescribing uniform international economic policies for
all countries irrespective of their unique situation needed rethinking.  Malawi's FDI had not, forexample, increased after investment liberalization, and trade reforms without effective trade remedies
had adversely exposed nascent domestic industries to stiff import competition.  Greater coherence in
international economic policy setting was also needed. Malawi could not, for example, use its tariff
flexibility negotiated under the WTO because its applied rates had been lowered more rapidly and
bound under the IMF and the World Bank lending conditionalities.  These prescriptions oftenoverlooked that Malawi was an LDC entitled to certain exceptions and transitional periods within theWT/TPR/M/96
Page 12
WTO.  Malawi's Poverty Reduction Strategy required full support from the international community.
Although, Malawi had taken steps to diversify agriculture, the long-term solution required a
multilateral approach. Malawi also actively participated  in initiatives to advance regional integration,
such as SADC and COMESA, where it launched the Free-trade Area (FTA) from November 2000.
These arrangements would help Malawi diversify its export base provided it was assisted to overcome
supply-side constraints as Malawi's limited technical, financial and institutional capacities posed
difficulties in implementing WTO Agreements.
34. The representative of Mauritius referred to the countries' common membership of SADC and
COMESA. Malawi, a small landlocked highly indebted LDC, was in a dire situation.  Malawi's high
dependence on tobacco exports made it vulnerable to world markets. The international community
should more actively try to improve Malawi's trade and economic situation, including by providing
debt relief. Malawi's situation required secured preferential access to major markets, and assistance tomeet international sanitary and phytosanitary standards to diversify its exports.  Tourism and mining
also needed to be encouraged. Malawi needed technical assistance, multilaterally and bilaterally, and
capacity-building to implement WTO-consistent policies.
35. The representative of Zimbabwe referred to the difficulties confronting Malawi as a
landlocked, highly indebted LDC dependant on agriculture, and noted that Malawi's needed technical
assistance to tackle, for example, its transportation problems.  Zimbabwe shared the view on the need
to ensure policy coherence among the Bretton Wood institutions.
36. The representative of Zambia supported the African Group's statement, and noted that some
positive results were emerging from the EU-EBA initiative and the U.S.-AGOA for textiles, clothing
and sugar. These would be of greater benefit if accompanied by more predictable and relaxed rules oforigin and standards.  Malawi needed more international assistance, especially to improve its supply
capacity. Zambia noted that textiles and garments offered potential growth opportunities for Malawi.
Clarification was sought on:  (i)  how Malawi intended to rationalize its bilateral trade arrangements;
(ii) whether these trade arrangements conflicted ; and (iii) the institutional capacity needed to
implement them;  and (iv) how Malawi reconciled the implementation of the Agreement on CustomsValuation with the pre-shipment inspection.
37. The representative of Malaysia highlighted the difficult reforms taken by Malawi and
encouraged their continuation.  The international community should provide technical assistance to
help Malawi reform, and reap the benefits of improved preferential treatment and of multilaterally
agreed market access. Malawi had a narrow export base and faced poor prices for its main agricultural
products.
38. The representative of Chinese Taipei noted that Malawi, as a landlocked agrarian economy,
faced a number of supply-side constraints, including inadequate infrastructure and weak institutions.
Chinese Taipei noted Malawi's commitment  to trade and investment liberalization as part of its long-
standing recovery programme as well as its efforts to promote business confidence, and to attract
private investment.  It was hoped that Malawi could utilise preferential market access to successfully
link its trade liberalization programme to the WTO framework, and to its overall economic andindustrial development strategy.
39. When invited by the Chairperson, the representative of the International Monetary Fund
(IMF) asked to take the floor when the meeting resumed on 8 February.
40. Also invited by the Chairperson, the Director of the Trade Policy Review Division noted that
to his knowledge the IMF and the World Bank had not made bindings as part of their programme
conditionalities. These institutions, along with the WTO, were committed to avoiding cross-
conditionality and achieving policy coherence. He mentioned that IMF/World Bank conditionalities
frequently included appropriate suggestions on rationalizing or simplifying a country's tariff regime.WT/TPR/M/96
Page 13
However,  in some instances, these might have caused a breach of WTO bindings, such as in the case
of Pakistan. Institutions needed to better coordinate policies to ensure that conflicting obligations did
not arise.
41. He recalled that Malawi was preparing a Poverty Reduction Strategy, and that the Secretariat
had recently met with a World Bank consultant who was preparing a country economic memorandumfor Malawi. This, together with the results of Malawi's Trade Policy Review, would feed into the
Government's Poverty Reduction Strategy Paper. This exercise was being coordinated among relevant
institutions under the Integrated Framework.  He concluded by noting that the Trade Policy Review of
Malawi had tried to integrate technical co-operation aspects to improve policy coherence. Since the
Trade Policy Review Mechanism  had been assessed in 1999, the Secretariat automatically provided
country tariff data to the I D B.  Such a request was routinely included in the Secretariat's initial
request for information to countries being reviewed.  No country had yet refused to grant suchpermission.  Malawi also had agreed for the Secretariat to provide data to the World Bank for the pilot
IF study.WT/TPR/M/96
Page 14
V. REPLIES BY THE REPRESENTATIVE OF MALAWI AND ADDITIONAL
COMMENTS
42. The Chairperson invited the representative of the IMF to take the floor as agreed at the end of
the previous session.
43. The representative of the IMF referred to the institutional arrangements between the IMF and
the WTO that required them to "consult with a view  to achieving greater coherence in global policy-
making."  The IMF was against imposing cross-conditionality on governments.  It tried its utmost to
avoid this, and to give advice that was not inconsistent with WTO rules. However, since IMF's policy
advice on trade was guided by economic efficiency considerations, countries were often required to
undertake trade reforms much faster and deeper th an simply complying with WTO rules.  Malawi's
disappointing overall economic performance refl ected non-implementation of IMF programmes to
liberalize the economy, including the trade regime.  Malawi's growth rema ined elusive, owing to
continued fiscal slippages, inflation and high interest rates.  Low foreign direct investment reflected
macroeconomic instability, governance issues, red tape and improper infrastructure, such as electricity
and telephone services.
44. The IMF's advice to Malawi had neither restricted its flexibility under WTO rules nor been
inconsistent with them.  Its tariffs were never "bound" by Fund conditionality.  The current IMFprogramme contained no formal conditionality on trade reform, and the previous 1995 ESAF
arrangement required only the elimination of export and import licensing requirements.  The IMF
encouraged Malawi to rationalize its tariff struct ure and to eliminate inconsistencies arising from its
various regional trade arrangements.  Malawi was benefiting from liberalizing trade faster than
required under WTO rules. This had allowed its manufacturing sector to receive correct price signalsand investments had begun to reflect comparative advantage.  The IMF believed that WTO disciplines
are beneficial.  Those developing countries that had made the greatest progress in adopting such
disciplines and an outward orientation had benefited most economically.  However, non-participation
in such disciplines or their delayed acceptance either by exceptions, transition periods or other special
and differential treatment provisions had been detrimental for many developing countries andcontributed to their marginalization. Many countries therefore had chosen to liberalize faster than
required by their WTO commitments to more quickly improve overall economic efficiency.
45. The representative of Kenya, on behalf of the African Group, stated that in the African
Group's view, the issue of coherence had not been addressed by the IMF statement. Noting that the
issue of coherence was referred to in Article 3(5) of  the Marrakesh Agreement Establishing the
WTO, in the Declaration on the Relationship between the WTO and the IMF, and the Doha
Ministerial Declaration, he indicated that the lack of policy coherence was the Group's main concern,and that this issue needed to be seriously addressed.
46. The Chairperson referred to the Doha Development Agenda, and suggested that a joint
seminar be held on the issue of coherence in the coming months.
47. The Director of the Trade Policy Review Division confirmed that the WTO, the IMF and the
World Bank had a mandate to achieve greater coherence in global economic policy-making, and that a
great deal of cooperation existed between these institutions as they fully understood the importance of
coherence, and of not imposing cross-conditionality.  He also expressed his intention to report to the
Director-General the Chairman's suggestion that the WTO and the IMF conduct a seminar in the near
future on the issue of  coherence.
48. The representative of the IMF indicated that the Fund management was reviewing its
conditionality requirements to narrow their focus on  the critical elements needed to achieve growth
and poverty reduction. The Fund was also reflecting on the role of trade reforms in its conditionality
programme. He acknowledged that the issue of policy coherence required additional work.WT/TPR/M/96
Page 15
49. Then, the Chairperson invited the representative of Malawi to focus his responses on three
main themes: (i) economic environment; (ii) trade policies and measures; and (iii) sectorial policies
and measures.
(i) Economic environment
50. The representative of Malawi  presented his delegation's written responses under this theme to
questions raised by Members in advance and during the meeting (WT/TPR/M/96/Add.1), and
undertook to reply in writing to some of the questions at a later stage.
51. He stressed that to sustain Malawi's efforts to  pursue its economic reforms, adequate financial
and technical assistance, including capacity-bu ilding had to be provided. SADC and COMESA
members were consulting to rationalize the integration programmes and emphasized that Malawi
regarded trade agreements essentially as a fast -track approach to promoting trade. A Bill on
Government Procurement would be presented by the authorities at the next Parliament session.  Pre-shipment inspection was a temporary or a stop-gap measure to enable Malawi to strengthen its
customs administration, an objective which it hoped to accomplish soon. Malawi was trying to
improve investment inflows, and was establishing  the Investment Promotion Agency as a one-stop-
shop. However, poor infrastructure, such as electricity, water and transport were still to be improved.
Supply-side constraints also existed. Malawi was unable to take full advantage of preferential marketaccess arrangements because of its insufficient market promotion.
52. The discussant noted the satisfactory replies provided by the representative of Malawi, in
particular with regard to his country's procurement regime, measures taken to control public spending,
and to move away from the cash budget system to the commitment account system.
53. The representative of Canada thanked the Chairperson for his leadership of the TPRB in the
course of the year. Canada welcomed Malawi's statement that measures would be taken to address the
issue of overlapping regional agreements. Canada  sought clarification on whether it was the PSI
company or the Malawi's customs service that dete rmined, and calculated, the transaction value, and
whether the PSI company was providing technical assistance to Malawi's customs authorities. Canada
requested Malawi's views on the benefits of expanding the scope and degree of tariffs bindings.
54. The representative of the European Union was encouraged by Malawi's reply regarding its
intention to address the issue of overlapping memb ership of COMESA and SADC. He also explained
that countries joining the EU were required to leave EFTA.
55. The representative of India noted that Malawi was a pilot country of the IF, and asked for its
views on benefits and drawbacks of the IF.
56. The representative of  Malawi  stated that for his country tobacco had been a high-value crop
since the 1960s. It now accounted for 60% of Malawi's GDP. A debate was underway in the WHO
among tobacco-dependent countries. He stressed that diversification was problematic. Malawi hoped
that financial resources would be made available to assist them to find viable alternatives. Malawi had
looked at coffee, mining and other agricultural  products, but an answer remained to be found. On
customs valuation, it was Malawi's customs authority that assessed the value of goods. The PSI
company assisted in determining the value.  PSI inspection applied to goods valued over US$2000.He confirmed that the PSI company had provided assistance to the Malawi's customs authorities,
including in the areas of  training and operations. Importers had the right to appeal decisions taken by
the customs authorities, including through the courts. Malawi announced that a meeting would be held
on the 18 February 2002 involving all IF stakeholders to develop a document on trade-related
technical assistance. Malawi promised to reply in writing to the questions relating to the assessment ofbenefits and drawbacks of the IF at a later stage. On tariff bindings, Malawi would consult all parties
involved, and provide a written reply at a later stage.WT/TPR/M/96
Page 16
(ii) Trade policies and measures
57. The representative of Malawi presented his delegation's written responses under this theme to
questions raised by Members in advance and during the meeting (WT/TPR/M/96/Add.1), and
undertook to reply in writing to some of the questions at a later stage.
(iii) Sectoral policies
58. The representative of Malawi presented his delegation's written responses under this theme to
questions raised by Members in advance and during the meeting (WT/TPR/M/96/Add.1), and
undertook to reply in writing to some of the questions at a later stage.
59. The discussant noted that the comprehensive responses provided by Malawi had reaffirmed
his conviction that Malawi was posed to become a full partner in the proposed African Union.
Malawi's actions would help integrate the African continent into the multilateral trading system, and
in the implementation of the New Partnership for African Development.
60. The meeting ended with the presentation by the Director of the Trade Policy Review Division
of the revised TPR programme for 2002, and the provisional one for 2003.WT/TPR/M/96
Page 17
VI. CONCLUDING REMARKS BY THE CHAIRPERSON
61. This first trade policy review of Malawi has provided the opportunity for an open and very
useful discussion of its trade-related policies at a critical time for the economy.  This discussion, and
the fact that we all learned a lot about Malawi, was greatly helped by the active and frank involvement
of Minister Kaleso and his delegation.
62. Members welcomed Malawi's commitment to the multilateral trading system and appreciated
the substantial effort this requires from Malawi, a small landlocked least developed country with no
representation in Geneva.  They were encouraged by the Government's economic reforms, including
trade and investment liberalization efforts to foster increased efficiency and private sector
development.  Members welcomed the resumption of Malawi's privatization programme.  Greater
private sector involvement in key infrastructural se rvices combined with regulatory arrangements to
safeguard competition was seen as highly desirable.  Further efforts were needed to improve Malawi'sinstitutional framework and business environment, and to restore macroeconomic stability, including
fiscal balance.
63. Members encouraged Malawi to further mainstream trade policy reforms into its national
development policy through the Poverty Reduction Strategy which involved principal stakeholders.
Referring to the increased opportunities for provid ing technical assistance under the Doha initiatives,
such as the Development Agenda Global Trust Fu nd, and within the Integrated Framework, Members
supported the need to extend trade-related technical assistance to Malawi, including in areas of
intellectual property protection and trade-remedy measures.  Some Members commented on the need
for greater policy coherence among the WTO and other multilateral institutions in providing this
technical assistance and trade-related policy advice.  Members pointed out Malawi's activeparticipation in regional agreements, such as  COMESA and SADC, and in various bilateral
arrangements.  Noting that cross-membership of these agreements was complicating Malawi's trade
regime, Members urged it to adopt a more harmonized approach when negotiating such agreements in
order to ensure consistency in related obligations.
64. Members appreciated Malawi's on-going efforts to refrain from using non-tariff measures and
its reliance on relatively low average tariffs as th e main trade instrument.  They urged Malawi to
continue with these efforts, but also to further simplify its tariff structure, reduce maximum rates,
raise the coverage of its bindings on non-agricultural items and to lower bound levels closer to applied
rates.  Removal of widespread tariff concessions was also encouraged to reduce the scope for
providing "tailor made" protection to inefficient industries. Members also sought clarification on
Malawi's use of "guide prices" in the light of its adoption of the customs valuation method based on
the transaction value, and on its plans to phase out pre-shipment inspection by early 2003.
65. Noting that export diversification was of consid erable importance to the health of Malawi's
economy, particularly in agriculture and textiles, Members expressed some concern about Malawi's
dependence on tobacco, which was subject to international price fluctuations and to the adverse
effects of the anti-smoking campaigns in major developed markets. Members pointed out that
Malawi's agricultural policies aimed at food secur ity and rural development.  They questioned the
impact of communal land ownership on agricultural development and planned reforms in the sector,
mainly in land tenure.  Members encouraged Malawi to further liberalize key services, including
telecommunications, transport and tourism, and to improve its GATS commitments.  Such steps
would improve Malawi's performance in other sectors, mainly agriculture and manufacturing, and
attract investment.
66. Additional details were sought on a number of other issues, including:WT/TPR/M/96
Page 18
• external debt and its constraint on economic development;
• operations of the one-stop shop Investment Promotion Agency;
• experience with preferential access to developed markets;
• plans to establish a Geneva mission to facilitate WTO participation;
• trade facilitation measures;
• incentive schemes and export processing zones;
• technical barriers to trade; and
• government procurement regime.
67. Members appreciated the replies provided by the Malawi delegation and looked forward to
receiving additional material.
68. I believe that Malawi's Trade Policy Review has successfully contributed to a very much
improved understanding by Members of its trade and other economic policies.  I welcome assurances
expressed by Members to provide greater technical assistance through bilateral and multilateralinitiatives, and I urge that we follow through on this, particularly in the context of the Integrated
Framework.  Malawi needs such support to mainstream its trade-related policy into its development
strategy, address its supply-side constraints and diversify its economy.  Greater market access by
major trading partners will also be necessary if Malawi is to meet its development potential and fully
integrate into the multilateral trading system.
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