International & regional trade agreements: status report

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Trade, Industry and Competition

27 February 2019
Chairperson: Ms J Fubbs (ANC)
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Meeting Summary

The Department of Trade and Industry provided a comprehensive status update on South Africa’s international trade agreements.

The Department explained that trade was an instrument of industrial policy and that the policy was to adopt a strategic approach to tariff decisions. That approach was informed by investigations into industry and was determined on a case-by-case approach. The priority was to focus on African development, industrialisation and integration. Africa needed to shift its current consumption and commodity-driven growth path onto a more sustainable industrial development path which was why South Africa pursued a “development integration” approach in respect of African trade agreements. Other priorities were to maintain trade and investment relations with industrialised economies, to build industrial complementarities and to shift the structure of trade with dynamic economies of the South through the country’s association with Brazil, Russia, India and China. South Africa aimed to ensure development outcomes at the World Trade Organisation.

Africa was the centrepiece of South Africa’s global economic strategy. As part of the strategy, SA had concluded agreements with the Southern African Customs Union, the Southern African Development Community, the Tripartite Free Trade Area and the African Continental Free Trade Area. The development integration agenda combined market integration, infrastructure development and industrialisation.

Members asked why South Africa continued to export raw material. The idea was not to dwarf the regional players but ensure that they were able to industrialise their own countries so what measures was SA taking, given that in many areas South Africa was more developed? What assistance was South Africa giving across the board? Was the infrastructure developing and did it continue to be a regional arrangement, and who was paying for it?

Members also asked an explanation of the term ‘trade geometry’. How was South Africa dealing with dumping? How did South Africa know whether products of origins other than from Southern African states were going through the Southern African Development Community countries? How far was the regional review, especially in respect of country of origin and dumping through trans-shipment? How was the low-growth in China going to affect SA? In the agreements, was there a master plan for infrastructure to integrate African countries?

Members had questions about the Inga Dam Project: what was happening about the project? Had South Africa taken its share of the project? Was it still the colonial masters controlling South Africa as renewables technology was coming from Europe? Should the Department not take over the Inga Dam Project from the Department of Water and Sanitation as industry needed electricity?

The Department presented a status report on trade agreements with Europe. A briefing had been given on Brexit the previous week and the trade agreement with Britain was close to completion. South Africa had joined the Economic Partnership Agreement between the European Union and the Southern African Development Community Economic Partnership Agreement group of Botswana, Lesotho, Namibia, Mozambique and Eswatini to establish a regional agreement with the European Union and to secure further market access, especially in agriculture. However, South African exports to the European Union were led by vehicles which contributed 26% of total exports to the European Union in 2017.

The European Free Trade Association comprised Iceland, Liechtenstein, Norway and Switzerland and included bilateral agreements with individual states on basic agricultural products, excluding processed agricultural products.

The Department presented an update on South Africa’s Preferential Trade Agreement with India, and the SACU-MERCOSUR Preferential Trade Agreement between the Southern Africa Customs Union and Argentina, Brazil, Paraguay and Uruguay.

The review of the World Trade Organisation and the proposed reforms were discussed in some detail as there were hopes that reforms to the Organisation could level the playing fields. The South Africa-United States trade relations received some attention, especially the implications of Section 232 measures to restrict imports into the United States, and the South African Poultry Association’s court case against chicken being imported from the United States.

Members were most concerned about South Africa’s position on eCommerce and the fact that South Africa was falling further and further behind the curve. What was DTI’s role in the South African Poultry Association’s court case? Did DTI oppose it?

One of the Members asked if an amendment of section 25 of the Constitution could cause an automatic exclusion from AGOA? How did the Department understand the situation, and had discussions been held with the United States about how things could play out it there was an amendment to section 25 to allow expropriation of land without compensation?

South Africa had not taken filled its quota of ethanol to the European Union. What had the Department done about that? What support was the Department giving the sugar industry? How would the global shift from multi-lateralism to bi-lateralism affect South Africa’s approach to trade agreements? Exactly where was South Africa in respect of the trading arrangements with Britain should there be a Brexit without trade agreements? The deadline for Parliament to ratify the agreement before it rose for elections was just a couple of weeks away.

Members were in agreement that the presentation covered such a wide scope of trade agreements, each of which was critical to South Africa’s economy, that three meetings should have been held to address the issues in sufficient detail, had there been sufficient time in the Committee programme.

Meeting report

Opening remarks
The Chairperson welcomed back the Committee Researcher who had been on study leave.
 
The adoption of the agenda was proposed by Mr S Mbuyane (ANC) and seconded by Ms P Mantashe (ANC).
 
The Chairperson reminded the Committee Secretary to write the letter to the Minister regarding the sugar industry.
 
The Chairperson thanked Ms Xolelwa Mlumbi-Peter, Deputy Director-General (DDG) for International Trade and Economic Development Division, for her work at DTI and invited her to make her presentation. She also welcomed the Acting Group Chief Operating Officer, Ms Nontombi Matomela.
 
Update on South Africa’s Trade Agreements - DTI
Ms Mlumbi-Peter thanked the Portfolio Committee for its support on the trade agreements. She explained that trade was an instrument of industrial policy. The policy was to adopt a strategic approach to tariff decisions. SA’s approach was informed by the investigations into industry and was determined on a case-by-case approach. The priority was to focus on African development, industrialisation and integration. Africa needed to shift its current consumption and commodity-driven growth path onto a more sustainable industrial development path. SA pursued a “development integration” approach in respect of African trade agreements. Other priorities were to maintain trade and investment relations with industrialised economies, to build industrial complementarities and to shift the structure of trade with dynamic economies of the South, e.g. BRICS and to ensure development outcomes at the World Trade Organisation (WTO).
 
Africa was the centrepiece of South Africa’s global economic strategy. As part of the strategy, SA had consistently championed the development integration agenda in the Southern African Customs Union (SACU), the Southern African Development Community (SADC), the Tripartite Free Trade Area (T-FTA) and the African Continental Free Trade Area (AfCFTA). The development integration agenda combined market integration, infrastructure development and industrialisation.
 
Ms Mlumbi-Peter provided details relating to South Africa’s trade deals.
 
Trade Agreements in Africa
The African Free Trade Agreement (AfCFTA) was an important tool in SA’s trade with Africa which had amounted to a total of R 421 billion in 2017 (exports: R 311 billion, imports: R 109 billion). SA had a trade surplus of R 202 billion in Africa. Manufactured goods amounted to 64% of SA exports to the continent. Benefits of AfCFTA included achieving larger economies of scale, a bigger market and improved prospects for the African continent to attract investment. Africa had a market of over 1 billion people with a combined GDP of US $3.3 trillion. Both the Southern African Customs Unions and the South African Development Community (SADC) Free Trade Area (FTA) were important for regional export. The FTA was conducting a study on the readiness of SADC to establish a Customs Union.
 
The Tripartite Free Trade Area (TFTA) would combine the markets of 26 African countries with a population of nearly 625 million and a combined GDP of US$ 1.6 trillion. The key focus was to unlock industrial development and to promote intra-regional investments. South Africa’s trade with TFTA countries represents about 16 % of SA’s trade with the world. The bulk of the trade was with SADC countries. After SADC, Egypt, Kenya, Ethiopia and Uganda featured as export destinations of potential.
Discussion
Ms Mantashe appreciated the presentation but noted that the export of raw material put SA at a disadvantage. People had been raising the issue for years, but SA continued to export raw material. When was that going to end?
 
The Chairperson had noted a reference to the harmonisation of standards which affected all of the regional trade, especially with increased trade, but SA was the major player. The idea was not to dwarf the regional players but to ensure that they were able to industrialise their own countries. What measures was SA taking, given that in many areas it was more developed, to give assistance across the board? Was the infrastructure developing and did it continue to be a regional arrangement? And who was paying for it?
 
Ms Mlumbi-Peter responded to Ms Mantashe. SA was making inroads in changing the structure of exports and that would become evident in her presentation. For example, the biggest export product to Europe was automobiles and then primary products. Much more could be done and that was why the trade policy supported industrialisation. The strategic objectives of the trade policy guided all trade agreements and whatever was done on tariffs was designed to support industrialisation. SA was aiming up the value-added chain.
 
In response to the Chairperson, Ms Mlumbi-Peter stated that in the regional FTA, SA was promoting complementarians in trade. DTI had ensured that all the trade agreements supported the development of all countries, especially industrial development. DTI had created a unit called Trade Invest Africa (TIA) which had adopted an outward-looking approach because the other countries had been unable to take advantage of the SA market because they were not sufficiently industrialised, had production capacity constraints and a lack of infrastructure. The plan was to promote outward investment into Africa, specifically into industrial development and manufacturing. SA was working hard to identify priority sectors and to mobilise SA investment. DTI had adopted the SA Good Business Practice Guidelines which identified key principles underpinning investments in Africa. The priority was industrial development, skills development, adherence to laws of the country, adherence to labour laws, etc., to ensure sustainable development. DTI was holding a signing ceremony for the liquor industry’s adoption of the SA Good Business Practice Guidelines that afternoon.
 
Ms Mlumbi-Peter added that with regard to standards, regional standards bodies had been created to develop standards and SA institutions contributed expertise and tested products. SA and the regional countries contributed to the institutions to keep them running and to harmonise standards. Bilaterally, SA had mechanisms to cooperate with regional countries.
 
The Chairperson added that perhaps some Members had done some reading, and Mr G Cachalia (DA) would probably understand, but the majority of Members would not understand principles such as trade geometry. Could that be explained?
 
Mr D Macpherson (DA) asked where SA was in terms of the SACU review. When would it take place, what were the parameters for the discussion and who was leading the discussions? He raised the problem of goods being trans-shipped through SADC duty free. The Minister was aware of it and concerned about it. How was SA fitting in discussions about improving the mechanism around countries of origin? How did SA know whether products of origins other than from Southern Africa states were going through SADC countries?
 
Mr Mbuyane appreciated the presentation by the DDG. He asked about the mandate at the launching of the extraordinary summit to create a single market to integrate the export policies and to harmonise the region and to deal with dumping. How far was the agreement? How far could they be if there was talk of dumping? He was not sure about China as it was experiencing low-growth in the GDP. How was that going to affect SA?
 
Ms Mlumbi-Peter explained that variable geometry meant that different countries were at different levels of development, so countries were moving at different speeds. It was the way the agreements had been working in the Tripartite Agreement. Countries could move into an agreement as soon as a country was ready. The Agreement could be implemented without all countries having signed. That approach encouraged momentum because others would be encouraged by the progress of those who had signed.
 
Ms Mlumbi-Peter responded to Mr Macpherson, saying that slide 16 would provide answers to his questions. It was about reviewing the architecture on tariff setting and administration, exploring new ideas regarding the revenue sharing arrangement and assessing the feasibility of establishing a regional financing mechanism (RFM) for regional industrial and infrastructure projects. Who would lead? DTI would lead on the trade aspect, while the review of revenue sharing arrangements and financial mechanisms would be led by National Treasury. The review was being undertaken by two Ministerial Task Teams, one for Trade and Industry and one for Finance. They all reported to a Council of Ministers which included the two responsible Ministers who would check the review against the recommendations of the task team and the two Departments. The very ambitious timeframe was for two years, but that might not be sufficient time. A new programme would be developed and that would show if an extension were needed.
 
In terms of SADC and the rules of origin, the DDG said that it was important that benefits of the FTA accrued to the regional countries and supported the overall aims of industrialisation of the region. Sometimes there was a level of trans-shipment but that required monitoring of goods and enforcement by DTI and SARS which had picked up issues in textiles and clothing. The label might have been changed but it was sometimes evident that the region did not have the capacity to produce a certain product at a certain volume. However, expertise was needed in SARS. Those issues of trans-shipment undermined capacity in the region. SA usually took it up with the country and worked out a way of stopping it. There was a need to step out of trans-shipment as it collectively undermined the development of the region.
 
Ms Mlumbi-Peter said that legal arrangements for AfCFTA had been resolved and finalised. The summit of January 2019 had finalised the sensitive products by agreeing to 7% sensitivities and 3% exclusions. It was quite an ambitious outcome. Countries had to offer tariffs by June 2019 in line with those modalities. So far, there was a legal framework but, as yet, there was not a functional FTA.
 
In terms of the impact of China’s slowing growth, the DDG said that it had to be remembered that China was the largest trading partner of SA, especially of raw materials and primary products, so there could be a reduction in demand. That was the reason why it was important that SA diversify the export products and the trading partners.
 
Mr Radebe commented that inter-Africa trade was difficult because of the lack of infrastructure. It was known that everything had been designed to ship out raw materials as soon as possible. All roads led to the ports. He still saw that. He saw wood was shipped to the colonial masters and then the furniture was shipped back from the colonial masters. In the agreements, was there a master plan for infrastructure to integrate African countries? The issue of trade with Europe was undermining SA.
 
Mr Radebe noted that SA had agreements around goods and services, so what was happening about the Inga Dam Project? Had SA taken its share of the project? He was asking because the Inga Dam Project had been there for quite a long time. SA had taken up renewable energy but was not part of the Dam project. What was the problem? Was it still the colonial masters controlling SA? The renewables technology was coming from Europe. Was that why SA had not signed up for the Inger Dams Project which would help SA’s resources?
 
Mr Radebe was concerned about the cross-frontier parks. The rhinos were almost decimated. In co-operating with SADC, how did SA protect its resources? He gave an example of the President of Gambia who had been deposed because his country was working closely with China and not with France. How did the agreements protect the African government systems?
 
Ms Mlumbi-Peter said that she could not answer questions regarding the Inga Dam as that fell under the Department of Water and Sanitation, but she did know that it was a priority project in the region, and the continent, because it could assist agriculture and could power the whole of Africa. It was a critical project, but she did not have details.
 
Trans-frontier Parks fell within the ambit of the Department of Environmental Affairs. The mission and objectives of the trade agreements was to support inclusive growth and sustainable development. It was important to look at the measures of protection in the trans-frontier parks. There was no trade in rhino in trans-frontier parks, but it could be poaching that required monitoring and enforcement.
 
The infrastructure plan and the development integration agenda accepted that trade in Africa was not necessarily related to trade issues but to lack of infrastructure. The countries in Africa produced similar products and there was a lack of industrialisation which meant that African countries did not have much that they wanted to trade with one another. Industrialisation and value-add on raw materials would have to be at the core of development. Infrastructure was also important. Currently infrastructure was directed to ports, but SADC had an infrastructure master plan that identified corridors for trading. Eight key corridors had been identified by the Presidential initiative by looking at the industrial areas. A master plan existed to ensure that there was development in those corridors. The major challenge had been the lack of bankable projects to be able to deal with the infrastructure with speed.
 
Mr Radebe said that DTI knew that there could be no industrialisation without energy so the response that it was the responsibility of the Department of Water and Sanitation was not acceptable. DTI had to prioritise the dam as that would change industrialisation in the continent. If SA ran short of electricity, there would be no industrialisation. The trade agreements spoke about goods and services and that was where the Inga Dam Project should be prioritised.
 
The Chairperson said that the DDG emphasised that DTI’s policy was that trade agreements were instruments of the industrialisation policy. It was worth noting that the infrastructure plan was important and noting the role that the Inga Dam Project could play in providing clean energy and reducing SA’s carbon footprint while moving the region forward. But that was on the energy front. Mr Radebe had asked about the networking with regard to rail, road, etc. to integrate the continent. The issue often came up that it was cheaper to transport out of Africa than within Africa. DTI had to ensure more cross-pollination and cross-support.
 
The Chairperson very briefly handed over the chair to Mr Radebe, returning five minutes later.
 
Trade Agreements with countries in Europe
Ms Mlumbi-Peter continued with the presentation. A presentation had been given on Brexit the previous week and the Minister had responded to questions the previous day, so she would not discuss Brexit.
 
SA had joined the Economic Partnership Agreement (EPA) between the European Union (EU) and the SADC EPA group (Botswana, Lesotho, Namibia, Mozambique, South Africa and Eswatini) to establish a regional agreement with the EU and to secure further market access, especially in agriculture. SA had achieved its objectives and improved market access on fisheries products as well as 32 agricultural products, with a significant improvement in its access to the EU market for wine (110 million litres duty free), sugar (150 000 tons duty free) and ethanol (80 000 tons duty free) and improved access for the exports of flowers, some dairy, fruit and fruit products.
 
The EU, as a block, remained SA’s largest trading partner. Total trade between SA and EU had been consistently increasing over the past years; recording an increase from R 449 billion in 2013 to R 600 billion in 2017; an increase of 34%. The Trade Balance remained in favour of the EU, though it had been declining over the past five years. SA exports to the EU were led by vehicles which contributed 26% of total exports to the EU in 2017. The Joint Council had agreed to enhance dialogue and development co-operation to diversify the economy and export basket of the SADC EPA States.
 
The European Free Trade Association (EFTA) comprised Iceland, Liechtenstein, Norway and Switzerland and included bilateral agreements with individual EFTA States on basic agricultural products (excluding processed agricultural products). The Agreement had been due for review since 2013. The review had been launched in Geneva, Switzerland from 30 January to 02 February 2018. The fourth Joint SACU-EFTA Review meeting would take place in March 2019.
 
Trade Agreements with BRICS countries
India was one of SA’s largest trade partners with trade in 2017 over R 107 billion but difficulties had been experienced in finalising a SACU-India Preferential Trade Agreement (PTA). Concerns had been raised about non-tariff barriers to trade in the Indian market and requests by India in sensitive sectors like textiles and clothing.
 
The SACU – MERCOSUR Preferential Trade Agreement (PTA) proposed to increase bilateral and regional trade between South Africa / SACU and Argentina, Brazil, Paraguay and Uruguay. Venezuela was a member of MERCOSUR but had been suspended since December 2016. South Africa had implemented the agreement on 10 October 2016 retrospectively to 1 April 2016.
 
World Trade Organisation (WTO)
The WTO was being reviewed with the aim of reforming the Agreement. The Appellate Board had been disabled when the terms of office of members of the Appellate Board had expired and had not been replaced. In the WTO, calls for WTO reform and modernisation had been mainly driven by the US but were currently supported by the EU and Japan. There was an aim to update the WTO rulebook to ‘fill in’ gaps to level the playing field. Africa’s position related to fisheries subsidies, and Special and Differential Treatment which needed to be addressed in terms of the methods used by African countries of implementing an agreement as soon as each country was ready. That meant that the principle of consensus agreements would have to be reviewed. Intellectual properties rights would have to be strengthened. Some of the WTO requirements were difficult for African countries to comply with as the proposals aimed to remove differentiation. The criteria for developing and developed countries were clear but WTO wanted to take away the self-determination of criteria.
 
SA-US Trade Relations
Trade was governed by the African Growth and Opportunity Act (AGOA) which was a unilateral preferential agreement. Total trade between SA and US had increased from R 129.9 billion in 2013 to R 161.4 billion in 2017. However, the US had imposed Section 232 measures on the basis of national security provisions on the General Agreement on Tariffs and Trade (GATT) which had no jurisprudence in the WTO. Section 232 duties affected SA exports of steel (25%), aluminium (10%), autos and components and were still subject to investigation. The poultry tariff rate quota of 65 000 tons as a condition to SA benefiting from AGOA was being tested in the SA Poultry Association’s court case and might give important leverage. The US-Mexico-Canada Agreement (USMCA) was an indication of a new trade agreement standard. USMCA was interested in a bilateral agreement with SA. However, SA could not negotiate with the US because of its agreement with SACU.
 
Discussion
Mr Macpherson asked about the breakdown between the quantities of bottled wine versus bulk wine SA could sell to Europe. In respect of the WTO and the ongoing debate about reform, he was most disappointed in SA’s position around eCommerce. SA’s position seemed to be intrinsically linked to that of India’s which was far more developed than SA’s eCommerce. He could not understand why SA was linked to India. The fact of the matter was that eCommerce was taking place, every single day, even in SA, but SA was falling further and further behind the curve. Without a developmental perspective on eCommerce, SA was going to lose out. India was competing with US and Europe to get markets. The Minister had spoken about the battle for the Fourth Industrial Revolution, but he thought it also applied to the eCommerce space and SA had picked the wrong partner in India in respect of driving development and trade in SA.
 
Mr Macpherson turned to AGOA and the immediate threat to AGOA, which was the SA Poultry Association’s court case. He understood that DTI was an interested party in that case. What was DTI’s role in the court case? Did DTI oppose it? If not, the Department should. The matters of trade agreements and tariffs were hugely technical and sometimes judges did not understand the full technical details of trade agreements. It was critically important that DTI supported the court in relation to that challenge.
 
With respect to SA’s ongoing participation in AGOA, Mr Macpherson reminded DTI that section 104 stated clearly that a threat to private property rights was an automatic exclusion. He asked if an amendment of section 25 of the Constitution could cause an automatic exclusion from AGOA? Countries had been excluded for less than that. How did DTI understand that, and had discussions been held with the US as to how things could play out it there were an amendment to section 25 to allow expropriation without compensation?
 
Mr Radebe said that the report was so extensive, that the Committee should have had three meetings: one for BRICS, one for Europe and one for Africa. There was not enough time to go in depth, but he understood the time constraints. The trade policy was determined by the industrial policy. What worried him was the issue of ethanol. The sugar industry was facing distress, but had not diversified and so SA had not taken its quota of ethanol. What had DTI done about that? What support was it giving the sugar industry? The sugar industry had to speed up the production of ethanol because there was already a market.
 
Mr Radebe asked what DTI was doing to enhance the relationship between EU and SA? Certain countries in the EU had created a system of alternate finance. SA had to learn from that because one country could not dominate the world. No one could wake up in the morning and decide not to trade with a particular country! No one had the right to undermine the sovereignty of another country.
 
On the WTO, Mr Radebe said that SA had its work cut out. What about the Doha agreement? SA should not accept elitism where people made decisions in a corner and came back and imposed agreements on people. In general, he was happy with South Africa’s trade agreements.
 
The Chairperson commented that there appeared to be a shift from multi-lateralism to bi-lateralism. One needed to negotiate and review trade agreements regularly, but the motivation towards multi-lateralism had been that it would assist both developed and developing countries. That was changing. The President of US was very vocal and sensational, but going back to the WTO and the US, President Trump’s position was not far different from that of his predecessors. The consensus form of decision-making was not going to hold because the bigger boys would always hold the more desperate countries back and impose their views.
 
The Chairperson stated that the Committee legacy report had to suggest looking how such a change in trade agreements would impact not only on SA, but on world peace. Three or four years previously the WTO had said that trade could foster peace but, if there was going to be a new approach, the Committee had to look at that. The new approach could have an impact on SA and Africa in general.
 
Noting the challenge of trans-shipments, the Chairperson agreed that one would not know whose goods were coming in and that would result in a collapse of integrity. With respect to the SA Poultry Association, the Chairperson thought that the DDG had spoken about it. She agreed with Mr Macpherson’s point about the complexity of the trade agreements and tariff arrangements. The DDG had said that SA was benefitting indirectly because other states dealing in poultry were trying to get the US to review its position on other things, such as cars, aluminium etc. She was interested in that one.
 
In respect of the Brexit, the Chairperson noted there had been some indication that there would be a further meeting, she was not sure between whom, but would it take place that week or the following week? Exactly where was SA in respect of the trading arrangements?
 
Mr Cachalia asked how the implementation of non-trade barriers locally impacted SA’s position in the multi-lateral trade system of the WTO and other agreements? What would be the impacts be, positive and negative, and how should SA deal with it?
 
Ms Mlumbi-Peter informed Mr Macpherson that 70% of wine had to be bottled and 30% was bulk supply but, in September each year, the quota was combined. There had been some confusion in SA about how to use the combined quota, but that had been resolved.
 
Ms Mumbi-Peter explained that SA saw the benefits of eCommerce. It could not be wished away, but SA was engaging from a low base, i.e. 1% of retail in SA in 2016. A number of issues had to be addressed. There were a number of countries, including India, that were raising the question as to whether it was the right time to come up with eCommerce agreements because all countries were using eCommerce to leverage it for the country’s own benefit. SA’s eCommerce fell under the Department of Communications that was responsible for the digital economy issues. It was looking at a strategy to develop eCommerce for SA’s own development. SA was advocating that any agreement had to have a very strong development component. As eCommerce took off, SA had to be one of beneficiaries.
 
The Fourth Industrial Revolution, and how data was valued and treated, would drive economies in the future. There were different approaches to treating data. The US was the first mover and had supported the internet. China had taken a different approach and had protected the industry to the point of full development before opening up and participating. The DDG added that policy had been shifting towards deregulation but now the EU was speaking about security issues such as consumer protection and using data for other purposes, plus the issue of VAT had to be resolved. Rwanda and India both had their own digital policies as countries were looking at appropriate ways to address eCommerce, including competition and the various platforms that would be used and other issues that accompanied eCommerce. It required that SA consider all those issues. The development of multi-lateral rules when countries were not even sure where it was going was difficult. But, ultimately, SA wanted to use the digital economy strategically to drive the country’s goals.
 
Concerning the SA Poultry Association (SAPA), the DDG explained that AGOA had annual reviews but any country could request a review, annual or out-of-cycle. Immediately after the AGOA Extension and Enhancement Act of 2015, SA had had to go through a review. The 2019 annual review had taken place and SA continued to participate in AGOA, but one could not tell when out of cycle review might be held. The US saw value in the tariff rate quota of 65 000 chicken portions to SA. The SAPA case had not progressed in the court roll but DTI would assist the court by explaining the value of AGOA to SA and the implications of any cancellation of AGOA, as well as the reason that the chicken quota had come about. Section 232 could reduce benefits to SA, especially if SAPA was successful.
 
Section 104 of AGOA had a number of criteria and requirements and it was the first thing that the US looked at in assessing whether to continue with the agreement. The issue of land reform had come up in most discussions with trading partners. The President had had a roadshow to discuss the issue of land reform in the US, with Britain and other countries. He had explained that the process was transparent, so it was too early to make decisions based on possible amendments to the Constitution. The President had said that everyone had to allow the process to take place. The land reform process was attempting not to impact on other sectors of the economy, but it was difficult to pre-judge the response.
 
Ms Mlumbi-Peter turned to sugar and ethanol. DTI was concerned that SA had not taken up its quota for ethanol and was engaging the sugar industry. The DTI offered agro-processing support if agricultural industries required support for issues such as finance. There were capacity issues in the industry.
 
In response to Mr Radebe’s question about sanctions, the DDG said that DTI was studying the EU regulations because other countries might also be subject to review and sanctions. The UK agreement in response to the Brexit issue was quite close to concluding. The previous day DTI had submitted proposals on two remaining issues. The UK had to submit two proposals and there would be another teleconference that afternoon. The process then was to initial the agreement, if not the coming weekend, then the following week. That would be followed by the legal scrubbing process. DTI hoped that the agreement would be signed by the Ministers on 8 March 2018. The only differences were nuanced differences about accumulation and the roll-over of existing permits for agriculture. They were only small issues, and everything should be concluded by 29 March 2019 regardless of what the UK did.
 
Ms Mlumbi-Peter stated that the implications of the increase in non-tariff barriers, mainly for sanitary and non-sanitary measures had been discussed because in some cases, SA could not make use of opportunities because it did or could not comply with sanitary measures, or compliance came with a huge cost, e.g. black spot on oranges. Eliminating black spot cost the industry R 1.8 billion per annum. The biggest cost was that it closed off room for transformation because the cost to comply was too high. Every country had a right to regulate but was the measure commensurate with the risk? When the cost overcame the risk, it was seen as a barrier. However, SA did want to promote safe trade and did not want to expose consumers to unsafe produce.
 
The Chairperson noted that Mr Radebe had said that there was sufficient material for two or three days, but the programme had come to an end and at least the presentation had updated the Committee.
 
The Chairperson assumed that the Brexit presentation would be the week after next because the House was rising on 20 March 2019. She asked the DDG to keep in touch with her office in that regard. It was one issue that should be concluded before the end of the term.
 
She thanked the DDG for the marathon presentation.
 
Trade and Industry Third Quarter Report
The Trade and Industry Third Quarter Report was made available to Members to study, read and to come back with conclusions and recommendations. 5 March 2019 was the deadline for submissions as the report would be discussed on Wednesday 6 March 2019.
 
On 12 March 2019 the first draft of the Industrialisation and Localisation Report would be discussed. Space had to be allocated for Brexit as 12 March 2019 was the last possible date for the Committee to receive the agreement. She would like it earlier, if possible, but definitely not after that date as it would be extremely difficult to get it to the House.
 
The Chairperson asked Members if the minutes of 19 February 2019 could be added to the agenda. The addition to the agenda was proposed by Mr Radebe and seconded Ms Mantashe.
 
The Committee agreed, although Ms Mantashe said that it should not set a precedent for the way the Committee managed its meetings.
 
Minutes
Minutes of 19 February 2019: Mr Radebe had been marked present, but he had been absent. Ms Mantashe had been present but was not marked present. The Chairperson asked the relevant Secretary to rewrite the minutes.
 
Committee business
Mr Macpherson asked that the National Regulator for Compulsory Specifications (NRCS) Reports be submitted to the Committee in the next meeting.
 
The Chairperson agreed and said that she would make space at the next meeting.
 
Mr Radebe asked when NRCS could be slotted in.
 
The Chairperson agreed to slot the NCRS in on either 12 or 13 March 2019.
 
Mr Macpherson agreed with Mr Radebe that a meeting would be good, but he wanted the reports beforehand to prepare for the meeting.
 
The Chairperson agreed to request the NCRS reports by Monday 4 March 2019.
 
Closing remarks
The Chairperson announced that she was adjourning the meeting as she had to attend a Committee of Chairs meeting immediately.
 
The meeting was adjourned.

 

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