Special Economic Zones Bill [B3-2013]: consideration of NCOP amendments; Outcome of 9th WTO Ministerial Conference: Departmental briefing

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Trade and Industry

25 February 2014
Chairperson: Mr N Gcwabaza (ANC) (Acing)
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Meeting Summary

The Department of Trade and Industry (DTI) briefed the Committee on the outcomes of the 9th World Trade Organisation (WTO) Ministerial Conference. The presentation began with some introductory comments the country’s role in the multilateral conference and general insights into the Conference. The outcomes were twofold focusing on (1) decisions taken on the regular work of the General Council and (2) decisions taken on the Doha agreement. The presentation also covered the trade facilitation agreement, dynamics of the Bali outcome and the post-Bali process.

Members raised issues around the arguments and reasoning behind the phasing out of subsidisation, agricultural subsidies in relation to timelines discussed, developing country issues, the mandate by SA to “punch” on behalf of the Southern Africa Development Community (SADC) and implications of the global financial crises.

The Committee also considered two amendments made by the NCOP to the Special Economic Zones Bill. The first proposed amendment was to remove the word “import” in relation to the definition of “free port” under clause 24 (5) (A) “designation of special economic zones” while the second amendment dealt with clause 25 (5) and (6) –“government and management of Special Economic Zones” - and would give the Minister ministerial power to make regulations as to how special economic zones should be governed by the entity responsible for the governance of the zone/s. The amendment would allow for the Minister to intervene in the governance and management of special economic zones. Members decided to accept the amendments as to challenge them meant the Bill would go to mediation which would take too much time.

A number of outstanding committee minutes for 2014 were also adopted at this meeting.
 

Meeting report

Committee Business
Mr Andre Hermans, Committee Secretary, noted the standing apology from Mr M Oriani-Ambrosini (IFP) and Mr Geordin Hill-Lewis (DA) and an apology for Mr Marais (DA). Mr G Sealu (ANC) had indicated that he was running late as he was stuck in traffic. 

Members then adopted the agenda for the day.

Department of Trade and Industry (DTI) briefing on Outcome of the 9th WTO Ministerial Conference
Mr Brendan Vickers, Chief Director: Research and Policy, DTI, began the presentation through an introduction stating that South Africa (SA) was a proponent of multilateralism to manage globalisation and interdependence. Imbalances in the World Trade Organisations (WTO’s) rules which prejudiced developing countries’ interests needed to be addressed. It was felt that reform should enhance transparency and inclusiveness and be re-balanced in favour of developing countries. SA’s support for the Doha Round was premised on overcoming identified imbalances and securing a developmental outcome for developing countries.

The Bali 9th Ministerial Conference (MC9) was held in Bail, Indonesia from 3 – 7 December 2013. In preparation for the MC9, SA held consultations with the National Economic Development and Labour Council (NEDLAC), Parliament and the national WTO conference. The SA delegation was led by Minister Rob Davies and included Members of Parliament and NEDLAC constituencies from business, labour and the community. MC9 delivered its first outcome of the Doha round following a prolonged impasse in negotiations since 2008. Minister Davies, the WTO DG and WTO members paid tribute to former President Mandela on his passing.

In terms of the Bali outcomes, ten ministerial decisions were taken at the conference. The decisions were twofold, with one focused on decisions related to regular work while other decisions were related to the Doha development agenda.

The decisions taken on the regular work of the General Council were that standard decisions were taken to extend waivers for e-commerce and Trade Related Aspects of Intellectual Property Rights (TRIPS) non-violation complaints. Members instructed the committee on trade and development to consider proposals on small economics and make recommendations. Here Ministers also reaffirmed their commitment to Aid for Trade.
The decisions taken on the Doha development agenda, in relation to agriculture, saw that India, supported by the Africa Group, managed to deliver positive outcomes on food security through public stockholding food programmes for the poor and also dealt with improving the transparency and administration of Agri Traffic Rate Quotas (TRQs). The concern was that there was no movement on key issues of interest to developing countries such as the elimination of agricultural export subsidies, cotton and Duty-Free Quota-Free (DFQF) market access for the Least Developed Countries (LDCs). A major outcome from the Doha development agenda was trade facilitation.


Mr Vickers then looked at the Trade Facilitation Agreement (TFA) noting that this was the only binding agreement adopted following relentless pressure by the developed countries. There were imbalances within the TFA in terms of how the burden of implementation was distributed and having binding rules without binding commitments to support implementation. Developing countries were required to “self-designate” their commitments under A, B or C categories. This would be a highly constrained and politicised process that required agreement from other WTO members. Furthermore there were possible concerns of implications for African regional integration.

The dynamics of the Bali outcome implied that, formally, the Bali outcome may lay the basis for re-starting the Doha Round negotiations in its totality under the single undertaking principle. However there was some concern that MC9 delivered an imbalanced trade deal. The outcome laid a basis for an approach where issues of importance to powerful WTO members were advanced while the interests of the weaker WTO members were marginalised. Whereas trade facilitation and its binding commitments must be implemented immediately, developing country issues were adopted with best endeavour language and may only be addressed in the future.

In terms of the post-Bali process, members were mandated to develop a clearly defined work programme by the end of 2014 to ensure delivery of remaining issues. Priority would be given to issues in the Bali package where legally binding outcomes could not be achieved. Committee work had started to ensure entry into force into TFA and its implementation. Chairs of the negotiating groups had also started work guided by the principles outlined by the WTO. SA would continue to build alliances with its Southern partners (Africa Group, NAMA 11, G20 and G90) to champion a development outcome to the Doha round. 

Discussion
Mr D Swanepoel (ANC) questioned the arguments and reasoning behind the phasing out of subsidisation in the developing world. In the timelines outlined in the Bali Conference, were agricultural subsidies included in the timelines discussed? What penalties were prescribed for non-compliance with the TFAs? Reference was made to developing country issues in the discussion on binding agreements – what were these issues?

Mr Vickers replied that subsidies maintained the existence of farms in the EU but they were considered to be trade distorting. The subsidies would however be looked at annually and would be placed on the agenda for the next negotiations in December 2014.

In terms of penalties, indirect penalties would be prescribed through the dispute settlement mechanism. On this matter, scheduling was critical because of the risk for African countries especially those with emerging markets.
 
Mr G McIntosh (COPE) was pleased with the presentation as he always learnt something new when talking about trade issues. He wanted to know what “entry into force” meant. What kind of mandate did SA have from other Southern African Development Community (SADC) countries to punch on their behalf in Bali? 

Mr Vickers replied that “entry into force” was simply a legal term to indicate that the decision had been ratified and would be implemented. He remarked that African collaboration occurred informally and formally.

Mr Z Wayile (ANC) asked, to what extent, did the global financial crises impact on and fuel the rigidity of the tactics and strategies used in the conference. He noted his concern about the trade facilitation agreement in relation to intra-Africa trade.   

Mr Vickers replied that there were policies of certain developed countries which limited the industrialisation of developing countries. These policies were often in relation to non-tariff barriers and raw materials. However a development deal could increase market access and provide a more level playing field. SA was in a difficult and different situation in terms of tariffs due to certain developed country commitments stemming from the Uruguay Round of negotiations.

Mr X Mabasa (ANC) remarked about Africa working in unison.

Mr B Radebe (ANC) commented on equality and the need for mainstreaming of developmental issues. He felt that key ambassadors needed to be lobbied before SA entered into international conferences and negotiations. 

Mr G Selau (ANC) questioned job creation in agriculture, minerals and manufacturing. He also wanted to know the implications of the Bali negotiations on the Industrial Policy Action Plan (IPAP).
Mr Radebe thought that as the Committee was winding down its work for this term, it should be stated in the legacy report that the next Committee hold public hearings to discuss the WTO was the institution was critical to the country and without it the country would never grow.
The Chairperson agreed with the Member saying that it would be irresponsible to not point the way forward for the next Committee following the election.
Adoption of Committee Minutes
Committee Minutes dated 28 January 2014

The minutes were adopted with minor amendments.

Committee Minutes dated 29 January 2014
The minutes were adopted with minor amendments.

Committee Minutes dated 30 January 2014
The minutes were adopted with minor amendments.

Committee Minutes dated 31 January 2014
The minutes were adopted with minor amendments.

Committee Minutes dated 4 February 2014
The minutes were adopted with minor amendments.

Committee Minutes dated 6 February 2014
The minutes were adopted with minor amendments.

Committee Minutes dated 7 February 2014
The minutes were adopted with minor amendments.

Committee Minutes dated 11 February 2014
The minutes were adopted with minor amendments.  

Committee Minutes dated 12 February 2014
The minutes were adopted with minor amendments.

Special Economic Zones Bill [B3-2013]: NCOP amendments
Ms J Fubbs (ANC) (Chairperson of the Committee, had just popped into the meeting to inform Members on this issue. She was attending a strategy meeting) appealed to the Committee to be allowed to address an outstanding matter related to the Special Economic Zones Bill. The NCOP had made two small changes to the Bill which affected the Minister more than anyone else. 

Clause 24
Adv. Johan Strydom, Law Advisor, DTI, outlined the two amendments made by the NCOP. The first was to remove the word “import” in relation to the definition of “free port” under clause 24 (5) (A) “designation of special economic zones”.

Mr Radabe thought that if the removal of this word from the definition was going to hamper the work of the South African Revenue Service (SARS) then the Committee would have to consider the amendment.
Clause 25
Adv. Strydom looked at the second NCOP amendment which was to clause 25 (5) and (6) –“government and management of Special Economic Zones” - and would give the Minister ministerial power to make regulations as to how special economic zones should be governed by the entity responsible for the governance of the zone/s. The amendment would allow for the Minister to intervene in the governance and management of special economic zones. He did not think that anything could go wrong with ministerial intervention.

Mr Swanepoel sought clarity on the amendment questioning whether it would give the Minister the right to dictate to or determine how private companies would determine their boards.
Mr Radebe noted this was not an amendment to clause 25 but an insertion.
Adv. Strydom clarified that the power would be non-discretionary given the use of the word “must”.
Adv. Charmaine van der Merwe, Parliamentary Legal Advisor, stated the Select Committee was very concerned about the boards of the entities especially about members which sat forever or those boards which acquired new members every other month. In order to find a mid-way between the Select Committee calling for tighter control and DTI’s feeling that the clause already provided for it, it was suggested the Minister be allowed to make regulations. This placed the obligation on the Minister to now do something already covered in legislation. If the Committee would not accept these proposed amendments by the NCOP, the Bill would go to mediation and she questioned whether there would be sufficient time for this.
Mr Mabasa moved to accept the amendments.
Mr Radebe, when listening to the advocates, felt the sentiments were clear. He noted this term of Parliament was about to close and if the Committee rejected the amendments, the Bill would go to mediation and this would show that the Committee was not in agreement with the Select Committee. He was concerned that there would not be enough time for mediation. 
Mr A Alberts (FF+) was not aware of the details of the time constraints. He supported the Bill but did not want legal redundancies. He could, however, accept the amendments as they were. He felt it would be in a more democratic spirit if the Minister briefed the Committee when publishing regulations.
Mr Radebe thought the Minister already brought regulations before the Committee.
The meeting was adjourned.
 

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