Domestic and Foreign Market Access

Overview: Trade Policy and Business Environment

The Republic of Malawi is classified as a low-income country. Malawi was ranked 85th out of 132 countries in the World Economic Forum (WEF) Enabling Trade Index (2012), which measures institutions, policies and services to facilitate trade in countries. Malawi has implemented key trade policy reforms since the new government came to power in 2012 that have helped to improve macroeconomic health and revive the economy. This has included encouraging the FDI, addressing imbalances and market distortions, providing for a stable government tax revenue base and promoting inclusive growth. However, the country’s economy continues to be narrow based with agriculture and tobacco the mainstays of the economy, accounting for 60 per cent of export earnings, highlighting the need for diversification. Malawi has a plentiful base of natural resources that remain relatively unexploited, especially with regards to minerals which have the potential to transform the economy going forward (African Development Bank 2013 & 2012).

WEF, 2012, Global Enabling Trade Report

INDICATOR, UNITS RANK/132 SCORE
Domestic Market Access The pillar assesses the level and complexity of a country’s tariff protection as a result of its trade policy. This component includes the effective trade-weighted average tariff applied by a country, the share of goods imported duty free and the complexity of the tariff regime, measured through tariff variance, the prevalence of tariff peaks and specific tariffs, and the number of distinct tariffs. 45 4.90
Foreign Market Access The pillar assesses tariff barriers faced by a country’s exporters in destination markets. It includes the average tariffs faced by the country as well as the margin of preference in destination markets negotiated through bilateral or regional trade agreements or granted in the form of trade preferences. 11 4.08
Tariff rate (%) This indicator is calculated as a trade-weighted average of all the applied tariff rates, including preferential rates that a country applies to the rest of the world. The weights are the trade patterns of the importing country’s reference group (2012 data). An applied tariff is a customs duty that is levied on imports of merchandise goods. 101 9.68
Complexity of tariffs , index 1-7 (best) This indicator is calculated as the average of the following indicators: Tariff dispersion, Specific tariffs and Number of distinct tariffs. See description of each individual indicator for more details. Prior to averaging, values for each indicator were transformed to a 1–7 score, using the min-max method. 39 6.47
Tariffs dispersion (standard deviation) This indicator reflects differences in tariffs across product categories in a country’s tariff structure. The variance is calculated across all the tariffs on imported merchandise goods, at the 6-digit level of the Harmonized Schedule. 110 12.00
Tariffs peaks (%) This indicator is the ratio of the number of tariff lines exceeding three times the average domestic tariff (across all products) to the MFN (most-favoured nation) tariff schedule. The tariff schedule is equal to the total number of tariff lines for each country. These tariffs are revised on a yearly basis. 27 0.09
Specific tariffs (%) This indicator is the ratio of the number of Harmonized System (HS) tariff lines, with at least one specific tariff, to the total number of HS tariff lines. A specific tariff is a tariff rate charged on fixed amount per quantity (as opposed to ad valorem) 1 0.00
Number of distinct tariffs This indicator reflects the number of distinct tariff rates applied by a country to its imports across all sectors. 35 9.00
Share of duty-free imports (%) Share of trade, excluding petroleum, that is imported free of tariff duties, taking into account MFN tariffs and preferential agreements. Tariff data is from 2013 or most recent year available and imports data is from 2012 36 68.23
Tariffs faced (%) This indicator is calculated as the trade-weighted average of the applied tariff rates, including preferential rates that the rest of the world applies to each country. The weights are the trade patterns of the importing country’s reference group (2012 data). A tariff is a customs duty that is levied by the destination country on imports of merchandise goods 31 5.14
Index of margin of preference in destination markets, 0-100 (best) This indicator measures the percentage by which particular imports from one country are subject to lower tariffs than the MFN rate. It is calculated as the average of two components: 1) the trade-weighted average difference between the MFN tariff and the most advantageous preferential duty (advantage score), and 2) the ratio of the advantage score to the trade-weighted average MFN tariff level. This allows capturing both the absolute and the relative margin of preference. 4 67.61
Source : World Economic Forum, Global Enabling Trade Report 2014

Trade Policy and Market Access

 Malawi has been a member of the WTO since 1995. The Malawian economy is open to trade and investment and imposes no restrictions on foreign ownership, size of investment, source of funds, or the destination of the final product. The average MFN applied tariff in 2012 was 12.7 per cent with agricultural imports facing higher average rate (18 per cent) and non-agricultural imports facing slightly lower average rate (12 per cent). Malawi is a member of the regional trade agreements including the Common Market for Eastern and Southern Africa (COMESA) and Southern African Development Community (SADC). It has aligned its common external tariffs with COMESA requirements and generally applies no customs duties to imports from COMESA countries. The country has other preferential trade arrangements in place such as African Growth and Opportunity Act which allows Malawian textiles and apparel for duty and quota free market access to the United States, and Everything-But-Arms Initiative which is especially beneficial to Malawian exports of tobacco, followed by sugar and tea, duty and quota free into the EU.

African Development Bank, 2013, Malawi Country Strategy Paper

African Economic Outlook, 2012, Malawi Country Profile

Malawi Government, 2011, Growth and Development Strategy II 2011-2016

WTO, 2012, Tariff Profile (Malawi)

WEF, 2012, Global Enabling Trade Report

WTO, 2010, Trade Policy Review (Malawi)

Standard Compliance and Other Relevant Import/Export Restrictions

 The Malawi Bureau of Standards (MBS) is responsible for standards development and conformity assessment. Both the formulation procedure for national standards and sanitary and phytosanitary (SPS) requirements have not much changed since 2002. This is with an exception that the Ministry of Agriculture developed an agricultural sector-wide approach, implemented from 2008 to 2013. With respect to the issue of technical barrier to trade, most standards and technical specifications are based on international norms or those of South Africa. With respect to SPS issue, Malawi is participating in initiatives to harmonize SPS measures with SADC members and to adapt its National SPS Committee in accordance with SADC requirements. The lack of testing equipment and testing facility, particularly accredited laboratories has been an obstacle to Malawi. It led only some mandatory standards to be implemented through conformity assessment and certification procedures and made it difficult to test products for import and export.

WTO, 2010, Trade Policy Review (Malawi)

WHO, 2012, Country Profile (Malawi)