Mozambique - International trade

Like most countries in sub-Saharan Africa, Mozambique's international economic transactions are based on the exportation of agricultural commodities in exchange for capital goods. Since the international terms of trade accord higher value to the latter, Mozambique routinely suffers from a balance of payments deficit, hence, in part, its constant need to borrow money from the IFIs and wealthy foreign governments. The balance of trade deficit varies widely, depending upon, among other things, the market success of agricultural export commodities in a given year (as we have seen, this, in turn, depends on both weather conditions and international commodity prices). In 1995, for instance, the deficit stood at $552.7 million, while this figure increased dramatically to $930.9 million in 1999. In 2000, the gap between the value of imports vis-á-vis exports increased even more, with the latter outnumbering the former by more than 5 to 1.

Mozambique's principal exports include prawns, cashews, cotton, sugar, copra, citrus, coconuts, and timber. The value of exports designated to the wealthy countries of the Organization of Economic Cooperation and Development (OECD), including Japan, the Netherlands, Portugal, Spain, the United Kingdom, and the United States, decreased considerably throughout the second half of the 1990s, dropping from $60.7 million in 1995, to $37.3 million in 1999. This decrease in export value, reflects, in large part, declining terms of trade and the market exit of peasant producers resulting therefrom (as was recently the case in the cotton sector). Conversely, the value of exports designated to African countries, mainly South Africa and Zimbabwe, increased somewhat during the same period—from $23.6 million in 1995, to $26.2 million in 1999. Increased trade between the countries of southern Africa has been facilitated by a rehabilitation of transportation infrastructure in Mozambique. With 16 percent of exports reaching the South African market, that country is Mozambique's second largest export partner, second only to Spain (17 percent).

Mozambique's chief imports include food, clothing, farm equipment, petroleum, and transport equipment. The value of imports from the OECD countries has also decreased considerably, falling from $46.7 million in 1995, to $27.2 million in 1999. This precipitous decline may reflect increased trade diversion (a redirecting of trade) towards South Africa, which increased its share of imports designated to Mozambique from $25.9 million in 1995, to $57.2 million in 1999. In 2000, South Africa accounted for 55 percent of all Mozambican imports.

As part of the country's structural reforms, the Mozambican government has promoted significant trade liberalization in recent years, simplifying its tariff structures and applying an average tariff of 13.8 percent to countries accorded most-favored nation status. Mozambique's tariffs are among the lowest import duties in southern Africa. While the international financial institutions and Western governments in general tend to support trade liberalization, it may have negative effects for a country like Mozambique that depends on agricultural exports in exchange for higher value-added capital imports. If Mozambican manufacturing firms cannot compete with their foreign counterparts, reduction of trade protection measures, such as tariffs, will simply lead to the retardation of the Mozambican industrial sector. The disastrous effects of tariff reduction on the cashew-processing industry is a case in point. The results of such negative developments might be further entrenchment of the agricultural sector in the economy, and thus the prolonging of the unequal trading patterns that sustain the country's severe balance of trade deficit. In such a context, it is hardly likely that Mozambique will benefit from the pro-trade idea of specializing in exporting products it produces comparatively better than other nations, and in importing those that it does not.

Mozambique is a member of the World Trade Organization (WTO) and the Southern African Development Community (SADC)—a regional trading agreement among 14 countries in southern Africa designed to lower tariff barriers between member countries. While it is difficult to justify completely free trade between wealthy and poor countries since they cannot compete from a level playing field, some argue that free trade between developing countries can be beneficial. The argument is based mainly on the idea that free trade between developing countries enables them to benefit from economies of scale in a more equitably competitive context. Still, more relatively developed countries, such as South Africa in the SADC, the most powerful economy in all of Africa, might benefit disproportionately due to their more competitive positioning.