Zim trade's balancing act between China and EU

The Zimbabwean government’s isolation from the international economic arena has forced it to turn right while indicating left.

The country’s Deputy Minister of Industry and International Trade, Pheneas Chihota, recently made a startling admission when he said that the European Union, which imposed targeted sanctions against the Zimbabwean political elite over its blighted human rights record, remains the troubled Southern African country’s key trade partner.

The Zimbabwean government stands accused of a string of human rights abuses, including the arbitrary arrest, detention and random assault of perceived enemies of the state.

The minister’s remarks, made in Parliament’s House of Assembly, came as a surprise to some since the government had in the past year earmarked the Asian continent, particularly China, as its trade partner of first resort. China has been granted approved destination status (ADS), which gives the Asian country easy access to Zimbabwean markets.

The government even went a step further, launching the “Look East” policy that was designed to find new markets for the country’s products. But this move is yet to bear fruit, as a former Zimbabwean ambassador to China, Chris Mutsvangwa, has admitted.

He said that “local business people are reluctant to partner Chinese business”.

Chihota’s candid comment was seen as an admission by the government that the “Look East Policy”, derisively dismissed by Zimbabweans, has failed to contribute any meaningful development to Zimbabwe’s crumbling economy.

The government has seemingly realised that the EU remains a crucial market for Zimbabwean products.

“The country is benefiting from trade with the EU, and the EU is by far the most important donor to this country,” Chihota told the House of Assembly before the presentation of Zimbabwe’s supplementary budget by Finance Minister Samuel Mumbengegwi last month.

“Zimbabwe exports 55 000 tonnes of sugar to the EU every year. Our companies are benefiting from sugar exports,” Chihota added. He expressed support for the economic partnership agreements (EPAs) currently being negotiated between the EU and African, Caribbean and Pacific (ACP) states.

Sugar exports

Chihota’s comments come at a time when the EU’s EPA offer includes the phasing-out of duties and quotas on sugar from ACP countries. The minister used the time to rally parliamentarians around this process, which is scheduled to start in January 2008 if the EPA talks are concluded.

Zimbabwe is a major exporter of sugar from its gigantic plantations in the south-west of the country. Accepting the EPA, Chihota said, would ensure that the country could export sugar at improved terms. The EU says low-cost producers such as Zimbabwe and Malawi stand to benefit immensely from the proposed liberalisation of the sugar trade market.

However, the cutting of duties and quotas also coincides with the EU’s decision to cut its minimum guaranteed price for sugar. The EU price will drop by 36% between 2006 and 2009, which will bring it in line with the world sugar price.

Producers in Malawi and Mauritius have expressed concern about the effect the drop in prices will have on new investment that is planned in the industries to capitalise on the lower duties.

Inter Press Service has reported that sugar prices could fall from €400 to €500 per metric tonne to just €335 per metric tonne. The drop may continue even further in 2009 when duty-free access will be extended with safeguards. Quota and duty requirements will only be scrapped in totality in 2015.

Despite the political stand-off with the EU and the United States, official statistics indicate that Zimbabwe’s imports from the United Kingdom and Germany totalled about $330-million in 2006.

The EU was once the largest consumer of Zimbabwean beef, with more than 9 000 tonnes per year being exported at the peak of the bilateral trade relations. It has since set stringent conditions for the importation of Zimbabwean beef products.

Last month, the Ministry of Lands and Agriculture suspended all efforts to resume trade with the European beef market, saying that it was not worth trying because it would not get a fair deal.

Exports to the two countries totalled about $100-million last year, while tourist arrivals from the EU and the US closed the year at about 140 000 in 2006. This figure is four times that of arrivals from the East (including China), which recorded only 37 000 arrivals during the same period.—IPS

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