Trade and Development When Exports are Volatile: A Case Study From Malawi

Several countries in Africa, Latin America, and the Caribbean depend heavily on a limited number of cash crop exports such as tobacco, coffee, tea, cocoa, sugar, and cotton. Among countries with a narrow range of exports, Malawi stands out. One cash crop, tobacco, accounts for approximately 60% of Malawi's total merchandise export earnings and 13% of its gross domestic product (GDP). ERS research found that the relationship between Malawi's exports and GDP is asymmetric -- the negative impact of falling tobacco export revenues on Malawi's GDP is almost three times greater than the positive impact of an equivalent increase in export earnings. Variability in tobacco exports, therefore, is a drag on overall economic growth.