The FCTC and the Pattern of Unmanufactured Tobacco Exports in

Malawi

Donald Makoka.Centre for Agricultural Research and Development

LUANAR

University of Cape Town, South AfricaJuly 17, 2014

NIH Trade and Tobacco Control

NIH Trade and Tobacco Control

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Introduction• The economy of Malawi is heavily agro-based:

• Agricultural sector contributes over 29 percent of the country’s Gross Domestic Product (GDP);

• Accounts for over 82.5 percent of its foreign exchange earnings • Directly supports over 90 percent of the population • 84.5 percent of the total labour force is employed in the

agricultural sector, with the majority working as smallholder farmers.

• Tobacco is the main export crop.• Malawi has been exporting tobacco since 1893 (Wilshaw, 1994).• Today, Malawi is the world’s most tobacco dependent economy

(Otanez et al. 2009)• Almost all the leaf produced is exported unmanufactured.

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Introduction• Top Ten Tobacco Producing Countries in the World in 2012, (MT)

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Malawi Main Export Commodities in 2012

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Research Question• The debate around the FCTC continues to take centre-stage

• Tobacco leaf growing continues to shape the politics of tobacco control in Malawi.

• Policy makers often weigh the health benefits of tobacco control against the potential economic losses that may be brought about by tobacco control

• The central question that the paper attempts to answer?• Is there a difference in the pattern of Malawi’s

unmanufactured tobacco external trade during pre-FCTC period (2000-2005) and after the FCTC was introduced in February 2005?

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Methodology and Data• The study uses time series data from the International Trade

Centre (ITC)’s Trade Map. • The Trade Map provides trade statistics for international business

development.

• Trends in unmanufactured tobacco imports and exports were analyzed using trade statistics covering the period 2000 and 2013.

• The data were classified into two groups: • The pre-FCTC period covering the period 2000 to 2005; • The FCTC period covering the period 2006 to 2013.

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Result 1: RISING EXPORT VALUES

• Value of Malawi’s Tobacco Exports (US$, 000), 2001-2012

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Results: RISING EXPORT VALUES• Growth in Malawi’s Tobacco Values (%), 2001/2-2012/13

• Tobacco exports have growth by an average of 12.6% between 2005/06 and 2012/13

• For the pre-FCTC the annual growth was 1.7%

-11.4

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-16.8

29.2

54.7

3.3

39.6

28.7

-23

-2.4

16

-16

2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13

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Result 2: Steady Imports from Neighbouring Countries• Sources of Malawi’s Imported Tobacco Leaf in 2013

• Total imported leaf was valued at US$89.912 million; 88% was imported from Zambia.

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Result 2: Steady Imports from Neighbouring Countries• Share of Zambia’s Unmanufactured Tobacco Export Volumes

by Destination, 2001-2013.

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Result 3: Access to Traditional Markets Maintained• Destination of Malawi’s Tobacco Exports (2005-2012).

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Result 3: Access to Traditional Markets Maintained• Share of Malawi’s Tobacco Export Volumes by Destination,

Pre-FCTC and the FCTC Period.

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Summary and Conclusions• Up until now the threat of the FCTC on Malawi’s access to

European markets has not been significantly felt. • The data do not also agree with the assertion that Malawi is now

looking to China and other Asian markets for its tobacco exports, as the proportion of Malawi’s tobacco that is exported to China has remained below 4% between 2005 and 2012.

• Similarly, its share of tobacco exports to other Asian countries (Republic of Korea and the Philippines) has not gone beyond 7% per year.

• At least in the short term, Malawi will continue to rely on the European market for its exports.

• The flow of unmanufactured tobacco between Zambia and Malawi has continued unabated even after the signing of the FCTC in Zambia in 2008.

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Summary and Conclusions• In the short term, the large United States based tobacco leaf-

buying companies (Universal Corporation and Alliance One International), through their Malawian subsidiary companies – Limbe Leaf Tobacco Company and Alliance One Tobacco Company- will continue to advise Malawi on tobacco-related trade policies that attempt to undermine the global tobacco control agenda (Otanez et al, 2009; Otanez et al, 2007).

• Up until now, however, the Malawian policymakers may not yet be losing their sleep over the FCTC.

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Summary and Conclusions

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Sale of Tobacco Leaf, 2013 – Lilongwe Auction Floors

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End of Presentation

Thank You for Your Attention