The Importance of International Trade and Investment Treaties for Mozambique

August 2007

The role of treaties in the promotion of trade and investments

International treaties are now, more than in the past, playing a fundamental role in international trade relations. With the fast developing communication systems and technology, and as the phenomenon of globalization of economy is affecting all aspects of modern activities, transactions between countries on all continents are becoming more complex and intricate. With this new 21st century, trade and foreign investment transactions, as well as capital flows have reached unprecedented levels. The more complex are the trade operations, the higher is the number of rules and treaties adopted for a safer management and fairer governance of the global market.

It is estimated that there are currently more than 50.000 international treaties. Around 600 of these treaties deal only with multilateral trade issues. There are 210 major treaties of prime interest for the promotion of trade and investment, covering issues of highest concern in the global trade such as international contracts, investment, intellectual property, illicit trade, customs, finance, transport, environment and products, dispute resolution, treaty law and WTO agreements. According to a recent study published by the ITC, all these treaties do not have the same importance for trade and their impact can considerably affect trade interest of a country according to their interests focus.

The importance of international treaties for the private sector

The issue concerning the importance of international treaties and their impact on the performance of the private sector is of great concern for least developed countries. Experts generally agree to assert that effective international treaties are very important since they can facilitate safer inter-state relations, reduce problems of conflicts between states, enhance international cooperation and understanding between states, and most of all, they promote the international rule of law. Trade treaties such as WTO Agreements and the United Nations multilateral treaties are shaping the way trade is conducted. Adopting these treaties sends a signal to international investors and trade operators that a country is serious about creating a secure climate for business.

The choice of treaties to ratify and their effective implementation can make a decisive difference in terms of economic development as a result of greater business confidence and public awareness within a country’s business community. Many least developed countries such as Mozambique risk being victims of economic stagnation because they don’t adopt major existing treaties, and do not contribute to new ones. Faced with the intricate rules contained in the multitude of trade and investment treaties, these countries frequently don’t know where to focus their specific interest nor to concentrate their limited resources.

The current issues on the ratification and implementation of treaties by Mozambique

Considering the particular case of Mozambique, there are only 42 treaties ratified out of the 210 considered by the ITC as most important for trade promotion and facilitation. Thus, in terms of number of instruments ratified, Mozambique is ranked at the global level no. 154 (out of 192 countries in the world), and at the regional level, no. 35 (out of 47 countries in Africa). In terms of country ratification level, Mozambique scores 24.83 (out of 100), lower than the average score in the Africa region (26.26) and the world average (33.87). The meaning of these figures simply puts Mozambique among the least performing countries in the world and in Africa in terms of international trade and investment facilitation.

The assessment of the current state of ratification of treaties reveals that there is generally a limited awareness on the importance of international treaties and their impact on the development of the private sector. While capacity building activities are very limited, there is no strategic approach developed to spot the most interesting treaties and agreements, and there is no mechanism for monitoring and evaluation of treaties ratified or to be ratified.

The point is “how can Mozambique participate more in the drafting new trade rules and most of all, involve the stakeholders, including the private sector operators?” Many government departments have competence to conclude and sign agreements, but there seems to be no consolidation or coordination mechanism at the level of Foreign Affairs or the Assembly of Republic (Parliament). There are apparently some gaps and inconsistencies in the implementation system, including weaknesses at the level of the judicial system whenever there is a need to uphold fundamental rights protected by international treaties.

The way forward

In order to draw the best benefits from the potential impact of treaty law development in Mozambique, it is advisable to go beyond routine conclusion and management of treaties. It is also important to build a positive image of Mozambique as a trade and investment destination. The worldwide dissemination of information on the domestic policies could be a valuable exercise. A case in point is the cover page article published by journalist Joshua Kurlantzick in the New York Times (May 19th, 2005) under the title: “Mozambique…the raising star of Africa” was an excellent opportunity. There are currently various projects on tourism in Mozambique, which, we hope, will reinforce this initiative.

Opening of new frontiers in treaty law for business, investments and technology, promoting better cooperation opportunities; spotting and transforming into concrete benefits potential transactions of prime interests in the economic, political and cultural areas are some of the actions that can be initiated by the Government with the active participation of the private sector and media organizations.

As a practical measure, there is an urgent need to develop a comprehensive inventory and an updated, accurate data base of treaties currently in force in Mozambique. A mechanism for the monitoring and permanent evaluation of the implementation of treaties in force is of great importance. Government departments and institutions involved in the treaty management process need to provide more information, and facilitate the awareness activities and public debates on the importance of treaties. The Government could for instance use the treaty making process as a development policy tool for poverty eradication; i.e. more trade and investments as well as business opportunities can reduce unemployment, improve the welfare of trade operators and thus can represent a sure way for wealth creation in the country.

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