A Public Letter to The President

His Excellency Dr Lazarus Chakwera,

I have observed that your government has a great concern about the trade deficit due to the imports being more than exports. 

The concern exists to either push for depreciation of the Kwacha or floatation of the currency which is quoted in many textbooks as a solution to the trade deficits but they result in our goods and services being greatly undervalued. Selling things at a cheaper price does not always result in increased value gain. I will give an example of the current value of my services in Malawi as a PHP Developer compared to that of a PHP Developer in the USA. We virtually go through the same training yet my services are currently valued at an average of US$8,400/year while in the USA, a person receives US$84,000/year.  I find this unfair. If you are opting for depreciation how much cheaper would you want my services to go? $8,400/year does not meet my expenses to finish the month. I have to get an extra from borrowing or from a relative. Furthermore, cheaper does end up looking incompetent. Please stop depreciating the Kwacha. Start appreciating the Kwacha so that our goods and services may trade at a fair international price.

I cannot always complain without suggesting a solution. I observed that Europeans decided to implement a trade policy that is always resulting in a trade surplus. I feel we could do the same as I have outlined in the following short article:

• Improving Our Balance of Trade

I hope that this will be helpful to Malawi.

Sincerely,

Kondwani Hara.

Improving Our Balance Of Trade

Learning from the historical context of Balance of Trade in Europe:

Many countries in early modern Europe adopted a policy of mercantilism, which theorized that a trade surplus was beneficial to a country. Mercantilist ideas also influenced how European nations regulated trade policies with their colonies, promoting the idea that natural resources and cash crops should be exported to Europe, with processed goods being exported back to the colonies in return.
An early statement concerning the balance of trade appeared in Discourse of the Common Wealth of this Realm of England, 1549: "We must always take heed that we buy no more from strangers than we sell them, for so should we impoverish ourselves and enrich them." Similarly, a systematic and coherent explanation of the balance of trade was made public through Thomas Mun's 1630 "England's treasure by foreign trade, or, The balance of our foreign trade is the rule of our treasure".

Source: https://en.wikipedia.org/wiki/Balance_of_trade#Historical_example

I resolved that we can create similar trade policies to improve our Balance of Trade and adopt them as follows:

EXPORT POLICY:

NEVER EXPORT NATURAL RESOURCES AND CASH CROPS, WHICH ARE OUR RAW MATERIALS, TO FOREIGN NATIONS BUT EXPORT ONLY FINISHED PRODUCTS WHICH WE HAVE MANUFACTURED OURSELVES.

 

IMPORT POLICY:

NEVER IMPORT FINISHED PRODUCTS FROM FOREIGN NATIONS BUT IMPORT ONLY RAW MATERIALS WHICH WE CAN USE TO MANUFACTURE FINISHED PRODUCTS OURSELVES.

This is because finished products have a higher value than raw materials the direction of trade of these, determine the balance of trade whether it will be a deficit or surplus.