Trade liberalisation has increased poverty levels, claims report

A new report says Malawi's trade liberalisation policies have adversely affected smallholder farmers and undermined the food security of the poor. 'Trade Liberalisation: A Poverty Trap for the Poor in Malawi' by the Malawi Economic Justice Network (MEJN), a local NGO, assessed the impact of various trade liberalisation policies on farmers growing tobacco, maize and cotton - the country's major crops. Prior to market liberalisation all produce was sold to ADMARC, but restructuring of the state marketer had created a vacuum and producers no longer had an established market paying set prices for their crops. Grave food shortages are being experienced in the country as a result of recurring drought compounded by HIV/AIDS and weakened governance capacity, which have caused cereal prices to rise sharply, leaving the poor unable to afford food. The MEJN acting executive director, Mabvuto Bamusi, told IRIN that "if trade is left to private market agents, prices will be higher or more volatile, and there might be complete lack of maize in most parts of the country". Bamusi said the majority of farmers in the rural areas were not happy with crop buyers, "because they dictate the prices and the farmers have little say". The restructuring of ADMARC from a social organisation into a commercial entity meant "households have lost direct income from the sale of produce or employment as farm workers", he added. "The welfare implications of these [economic policy] changes need to be understood in full if poverty reduction is to become a reality in agrarian economies like Malawi. There are no social security systems in Malawi that can mitigate the negative impacts of lost income for rural households," Bamusi noted. It is estimated that over 80 percent of Malawians are involved in agricultural production, while about 65 percent of the 12 million population live on less than a US $1 a day. According to the report, trade liberalisation had "not promoted market integration for the poor". The MEJN highlighted a number of problems in the tobacco industry, including alleged collusion and price-fixing by buyers at the expense of farmers. Smallholder farmers also could not compete with large commercial tobacco growers, as they lacked access to agricultural inputs. The report made several recommendations, among them that the dissemination of market information in the agricultural sector be improved, and that subsidised fertiliser and other inputs be extended to smallholder farmers.