Clear trade policy direction enhances sustainable economic development
By Byron Mutingwende
Stakeholders have been urged to craft a clear trade policy direction that will enhance sustainable economic development to extricate Zimbabwe from its myriad of challenges.
This emerged at the State of Economic Partnership Agreements (EPAs) Dialogue meeting organised by the Southern and Eastern African Trade Information and Negotiations Institute (SEATINI) at Holiday Inn Hotel on Wednesday 26 October 2016, which ran under the theme, ”Prospects of Regional integration in the context of European-Africa mega deal.
“We are debating the EPA implementation in Zimbabwe, taking cognisant of the obtaining socio-economic challenges, changes in global trade relations and increasing calls for regional integration. The idea is to share information and knowledge on the state of play on Economic Partnership Agreements (EPAs) in Zimbabwe, challenges of mega-regional deals in relation to the implementation of Economic Partnership Agreements, and the relations between Economic Partnership Agreements and sustainable development,” said Lodwick Chizarura, the Country Co-ordinator of SEATINI-Zimbabwe.
Zimbabwe is facing a cocktail of challenges: among the most critical are de-industrialisation, high levels of in-formalization and erratic agricultural growth that have failed to bring down high levels of general poverty estimated to have remained above 70% for over two decades. Unemployment is above 80% and more than 94% of the labour force is informally employed: under-employment is widespread. The people remain vulnerable to food insecurity and standards of living are declining. Recently, the country has started experiencing a liquidity crunch.
Trade has long been considered an instrument for sustainable economic development and the current global trade dynamics are largely shaped by the free trade and free markets ideology pushing for the liberalisation of all sectors of the society except those considered sensitive.
SEATINI said that Zimbabwe’s trade position is inherently weak as characterized by its dependence on raw commodities for exports (with falling prices on the international markets) and a collapsing manufacturing sector necessitating the importation of basic consumer goods; the outcome being a ballooning trade deficit averaging US$2.5 billion per annum.
External vulnerabilities and the need to improve domestic manufacturing capacity have recently led to the adoption of a selective protectionist policy stance through Statutory Instrument 64 of 2016 that removed a number of goods from the General Open Import License. These goods can be viably manufactured locally
It remains uncertain how the dynamics on the global trade will affect the country going forward especially on issues regarding industrialization, revitalizing agriculture, improving the standards of living of rural smallholder farmers, structure of the economy (formal vs in-formal economies) and poverty eradication.
Rangarirai Machemedze, the Manager of Regional Economic Integration for the Southern African Development Community (SADC) Council of Non-Governmental Organisations said key issues for consideration under the EU-AFRICA Regional mega deals and development were diverse.
“The current national economic crisis inluding the challenges to regional integration and industrialisation efforts should be enough justification to call for a review on the conclusion of a full comprehensive EPA. The global environment has since changed since EPAs were first negotiated with the latest BREXIT posing serious fundamental questions that need to be asked and answered! Emphasis from the alternatives perspective should be around rebuilding regional cohesion and solidarity,” Machemedze said.
Naome Chakanya from the Labour and Economic Development Research Institute of Zimbabwe (LEDRIZ) said that the informal economy had become the centre of production and distribution following deindustrialisation, creating a class of both elites and the poor.
“This has the spill over effects of liberalisation in the EPA. Informalisation has negative impact on economic development as it causes revenue losses for government as a result of tariff phase.
“The exports to the EU mainly consists of sugar, textiles, tobacco, horticulture and ferro-alloys yet informal economy players normally produce plastics, animal products, rubber, textiles and clothing, footwear and glass ceramics,” Chakanya said.
Chakanya bemoaned the fact that many informal economy players including small to medium enterprises were not fully aware of obligations taken by the government on EPAs nor the full market opportunities that are available, although there is significant role in articulating their interests to improve their trade potential.
The stringent international health standards, sanitary and phytosanitary (SPS) measures for food products versus low levels of productivity and quality and the high cost of finance and difficulties in accessing credit and inadequacy of infrastructure (finance is not adapted to their needs and specificities) will limit the participation of informal economy actors in EPAs.
Thus there is the need for the effective trade defence measures – which can allow a country to impose temporary barriers to trade, including the re-introduction of tariffs, in the event of a surge in imports that would cause injury to the domestic industries.
A representative from the ministry of industry and commerce said that interim EPAs provide a variety of benefits.
“They offer more secure market access to the EU. All of Zimbabwe’s exports (apart from arms and ammunition) are allowed duty-free and quota free access to the EU market (unlike the GSP with duty for tobacco around 12%) including raw cane sugar and horticulture products (cut flowers and vegetables).
“In addition, Zimbabwean manufacturers are able to source EU-produced inputs and materials more cost – effectively, which helps make Zimbabwean products more competitive. There is also the relaxation of Rules of Origin (RoO) on textiles. All these contribute to the improved product standards as exporters seek to achieve/meet the EU standards which also enables exporters to access global markets.”
Despite the above low-hanging benefits, Zimbabwe’s exports over the past decade have become increasingly concentrated in primary commodities and resource-based manufactures.
The exports of pure manufactures fell in both absolute and relative terms over the decade. One implication of this increased concentration in resources, was that Zimbabwean exports had became more vulnerable to fluctuations in world commodity prices