The Committee met for a comprehensive briefing on South Africa’s trade negotiations by the International Trade and Economic Development Division of the Department of Trade and Industry.
South Africa’s share of world trade had grown from 0.45% in 2000 to 0.53% in 2018. However, in US dollar terms, South Africa’s trade had declined by 1.1% per annum since 2013, largely due to the dramatic decline in the demand for minerals. South Africa’s top trade partners were China, the United States, Germany, Japan and Namibia. Namibia was now in the top five trading partners, and 35% of SA’s exports went to members of the Southern African Development Community (SADC). Weak global demand and sluggish growth with downside risks was a concern. There had been a widespread backlash against international trade and consequently a spike in restrictive trade measures. The uncertainty impacted on investment in the country, but South Africa was well-positioned for growth in Africa.
The presentation addressed the crisis in the World Trade Organisation, beginning with the unilateral tariff increases on steel and aluminium imposed by the United States and the disabling of the appellate body. 54 African Union (AU) members had signed the African Continental Free Trade Agreement (AfCFTA) and 27 countries had ratified it. Rules of Origin relating to sugar, automobiles, textiles and clothing had to be finalised by February 2020. Tariff reductions covering 90% of lines would likely be in place by February 2020. The agreement had formally come into force on 30 May 2019. There were concerns about the commitment of various countries in that some countries in southern Africa blocked South African exports by raising tariffs. The SADC-European Union Economic Preference Association had entered into force in 2016, but the safeguard by the European Union against poultry could become an issue.
The United Kingdom (UK) was an important trading partner of SA. An agreement was being prepared to address the possibility of a hard Brexit. The chances of a hard Brexit appeared to have increased, but had then decreased in the face of the new deadline of 31 October 2019. The Minister would announce the status of the Southern African Customs Union plus Mozambique (SACUM) that afternoon.
The Unites States traded with South Africa under three different regimes. The most favoured nation status trade dealt mainly with mineral resources. The United States determined the Generalised System of Preferences tariff regime that provided duty free access for some auto and other value-added products, which represented 10.3% of South Africa’s exports. The lack of certainty -- in that the United States determined tariffs annually -- did not support investment in products for the American market. The African Growth and Opportunity Act, with a fixed position for 10 years, had improved trade with the United States, but South African exports to the US were declining. Uncertainty had led to a decline of 51% in the export of autos to the US in 2018.
Digital trade was very uneven and many developing countries lagged in the process. Technology had an impact on industrial production, trade and employment. A discussion would be held at the World Trade Organisation as to whether the current moratorium on digital technology would remain. South Africa needed to become innovators and producers of digital trade.
Members had more comment and advice for the Department than questions, but asked about the status of the discussions concerning the African Growth and Opportunity Act and South Africa’s continued ability to export autos to the United States. The deficit with China concerned Members, as there was an $80 billion deficit. Was the trade agreement beneficial to South Africa? What made China a ‘developing’ country in the World Trade Organisation? What plans were in place to diversify the South African economy and to move away from the export of raw minerals? As the International Monetary Fund was not intervening in unilateral agreements, was there any possibility that the rule of national security, as used to justify United States tariffs on steel and other products, could be put up for discussion at the World Trade Organisation?
Members asked about the risk of countries pulling out of the African Continental Free Trade Agreement when faced with such a choice when the United States offered trade agreements to individual countries only, and not the collective free trade agreement. How big was the risk? What about poultry imports from Brazil? If there were safeguards in South Africa, the poultry industry could create 100 000 jobs. Would the weakening of the rand cause Namibia to distance itself from the SA currency? If the United Kingdom left the European Union, how did that affect the Southern African Development Community-European Union agreement? Was South Africa negotiating to change that arrangement?
The Chairperson welcomed everyone, and said that Ambassador Xavier Carim, Deputy Director General (DDG): Department of Trade and Industry (dti), would present an overview of the key partners in SA’s trade negotiations. A further point on the agenda was Committee business relating to the third quarter Committee programme.
Ms J Hermans (ANC) asked for clarity on the full title of the Committee -- “Trade, Industry and Competition.” She was not sure where ‘Competition’ came into it.
The Chairperson said that it was the Portfolio Committee on Trade and Industry, and competition issues were part of the scope of work that it had to oversee.
The Secretary suggested that “and Competition” was part of the re-branding of the Committee.
Ms Tsholofelo Mushi, Parliamentary Liaison Office, dti, explained that at the moment, the Minister was Minister of Trade and Industry and of Economic Development. A new Department of Trade, Industry and Competition had been created, but would only come into effect only once the two departments had merged in the course of the following year, 2020.
The Chairperson commented that he had been appointed as Chairperson of Trade and Industry, and that was all he could say. He could not amend the name until he was officially told to do so. He apologised to the Committee for working overtime the previous day, but he had not expected so much passion from the Minister and so much enthusiasm from the Members.
Status report on South Africa’s trade negotiations
Ambassador Xavier Carim, Deputy Director-General for International Trade and Economic Development at the dti, noted that it was a fairly lengthy presentation but he would focus on the trade agreements, especially in Africa, the European Union, Britain in terms of Brexit, and the United States.
Ambassador Carim said that SA’s share of world trade had grown from 0.45% in 2000 to 0.53% in 2018. However, in US$ terms, SA trade had declined by 1.1% per annum since 2013, largely due to the dramatic decline of minerals. SA’s top trade partners were China, the US, Germany, Japan and Namibia. It was a significant point that Namibia was now in the top five trading partners. The Ambassador was pleased to report that 35% of SA’s exports went to members of the Southern African Development Community. Weak global demand and sluggish growth with downside risks was a concern. There was a widespread backlash against international trade, and there had been a spike in restrictive trade measures. The uncertainty impacted on investment in the country. However, SA was well-positioned for growth in Africa.
The World Trade Organisation (WTO)
The WTO was facing a crisis because of the unbalanced rules and widening backlash against trade. SA recognised the imbalance and the need for space for national policies, but did support global rules. Recent developments had led to the crisis, beginning with the US-imposed unilateral tariff increases on steel and aluminium. Because the reason had been given as national security, it could not be challenged. Some members of the WTO were exempt from the US special tariffs which broke the cornerstone system of the WTO, which was the favoured nation principle, i.e. that all members be treated equally. The US had blocked the WTO appellate body, and there were only three members on it. At the end of the year, two would be resigning, effectively disabling the body. That would mean decisions would be made via negotiations which would favour the powerful nations.
Key reform issues included the undermining of consensus decisions by legitimising plurilateral agreements on issues not agreed upon by all countries. It fragmented the consensus of the WTO. Secondly, the special and differential treatment (SDT) was being narrowed so that it would not apply to countries such as SA, China, India and Brazil. Another set of proposals was to introduce new rules to narrow the scope of policies for industrial development, technology transfer and state-owned enterprises. Rules to conserve and sustain the use of the oceans and marine resources were being discussed, but there was little chance of a conclusion by the deadline of December 2019.
Ambassador Carim said that 54 African Union (AU) members (except Eritrea) had signed the African Continental Free Trade Agreement (AfCFTA), and 27 had ratified the agreement. Rules of Origin relating to sugar, automobiles, textiles and clothing had to be finalised by February 2020. Tariff reductions covering 90% of lines were currently due, but a February 2020 date was more likely. The agreement had formally entered into force on 30 May 2019.
There were concerns at the level of tariff liberalisation and the short time in which they were being implemented. Countries were ready to offer tariff liberalisation on just 86% of trade lines. There was a concern at the growing transhipment by African countries of goods from outside of Africa. There were also concerns about the commitment of various countries to the way that some countries in southern Africa blocked SA exports by raising tariffs.
The Tripartite Free Trade Agreement had advanced well before AfCFTA. It had been ratified by five countries, but another nine countries had to ratify it for the agreement to enter into force. The Southern African Customs Union (SACU)-Egypt tariff negotiations had to be concluded and there were concerns about the Rules of Origin.
SACU was under review. SA was proposing using funds to promote infrastructural development, but other countries were more concerned with tariffs. The status quo was likely to remain. The Southern African Development Community had established an FTA in 2000, but Zimbabwe was reversing commitments in order to protect many local products. The SADC-EU Economic Preference Association had entered into force in 2016, but the safeguard against poultry could be an issue.
The United Kingdom (UK) was an important trading partner of SA. An agreement was being prepared to address the possibility of a hard Brexit. The chances of a hard Brexit appeared to have increased, and had then decreased in the face of the new deadline of 31 October 2019. The UK-proposed trade agreement would impact negatively on 114 tariff lines, notably autos, textiles and clothing. Poultry safeguards would be another consideration. A remaining concern was that SACUM (SACU plus Mozambique) could not cumulate with the UK and still obtain preferential access to the EU.
Ambassador Carim explained that SA traded with the USA under three different regimes. The most favoured nation (MFN) regime dealt mainly with mineral resources. The US determined, on an annual basis, the Generalised System of Preferences (GSP) preferential treatment tariff regime that provided duty free access for some auto and other value-added products, which equalled10.3% of SA’s exports. The lack of certainty over tariffs that were decided annually did not support investment in products for the American market. The African Growth and Opportunity Act (AGOA), with a fixed position for 10 years, had improved trade with the US, but SA exports to the US were declining. Uncertainty had led to a decline of 51% in the export of autos to the USA in 2018. AGOA was set to end in 2025, but Africa had not been able to take full advantage of the trade concessions due to its lack of capacity. The New Build Act would mobilise the US private sector for investment and trade in Africa. That was an ongoing matter.
Digital trade was very uneven, and many developing countries lagged in the process. It would have an impact on industrial production, trade and employment. Issues raised repeatedly included the persistent digital divide, the lack of adequate and affordable digital infrastructure, and a weak skills base. There had been a rise in anti-competitive practices, as well as tax erosion and avoidance of custom duties on electronic transmissions. The impact was great, and a discussion would be held at the WTO as to whether the current moratorium on technological transfers would remain. Issues of privacy and other societal values had to be considered. Data for development had to be harnessed. SA needed to become innovators and producers of digital trade.
The Chairperson commented that the presentation had reflected on some of the issues on the continent. Countries would have to look at African integration. The issues were more socio-economic. Different products could be developed in countries in Africa. Countries in Africa could not talk business because they would be accused of collusion, but they could agree on the socio-economic level. He observed that the motor car was the best value-added export, and more could be done in that area of manufacturing. SA could do better through beneficiation. Quotas and standards were important topics in which to see growth and to see how other countries would add value to SA. Non-tariff barriers were important. An interesting point was that the UK could cumulate with the EU, but the EU could not cumulate with the UK. He needed clarity as to what was meant by ‘cumulate’.
Mr D Macpherson (DA) welcomed Ambassador Carim back from Geneva. He thought it was important for the Minister to table an executive statement to the House that would allow Members to debate on Brexit and to present their parties’ views on a post-Brexit deal. He hoped that the Ambassador would encourage the Minister to do so, because he would need the buy-in of Parliament to ratify any proposed deal.
He said that in the Fifth Parliament, the Committee had spoken with Ms Xolelwa Mlumbi-Peter, Deputy Director General (DDG) at the dti, who had talked about the concerns of Mozambique regarding the deal with the UK. He was concerned that SA could miss out on securing, at the very least, a rollover of the UK Economic Partnership Agreement (EPA). There was too much at stake for other countries in SACUM to drag their feet. SA had to state that it would negotiate its own position if other countries dragged their feet. He believed that far more opportunities existed in the EPA, particularly in the agricultural sector, especially meat and poultry. SA had failed dismally in export promotion and that was why its share of exports had declined. The good news of SA’s share in the global orange market was positive. That industry had driven export promotion so that one in every 10 oranges in the world was South African. The Department had not taken the lead and not put enough money and strategy behind export promotion. He was convinced that things would improve with Ambassador Carim at the helm.
He believed that there was a lot to discuss with SADC partners who traded into SA, but blocked SA goods from entering into their countries. It was an unhealthy situation when other countries could send goods duty-free into SA, but could not reciprocate themselves.
Mr Macpherson said that the out-of-cycle review that SA was in as far as AGOA was concerned, was of SA’s own doing, as it had run down the clock until the very last hour during the last set of negotiations. That had really irritated the US trading partners. Policy discussions around section 25 would lead to an automatic exclusion from AGOA. SA had to start looking to the future and understand that great ideological discussions impacted negatively on trade. People became wary of doing business with SA. What was the status of the discussion in the context of AGOA and SA’s continued ability to export autos to US? That was one of the reasons for auto manufacturers to remain in SA.
He stated that the Committee should be kept up to date at all times on the negotiations regarding Brexit, as no Minister should take the support of Members for granted.
Mr M Cuthbert (DA) commented that SA’s current account balance had gone into the negative by some R60 billion -- R143.5 billion had increased to R204.1 billion after seven consecutive quarters of current account deficits. The deficit with China concerned him, as there was an $80 billion deficit. Was the trade agreement beneficial to SA? He accepted that China was the largest taker of SA goods, but it was also the largest giver of goods to SA, and that concerned him. He had some questions as to whether SA was actually benefiting from BRICS, or whether it was giving itself over to a new hegemonic elite.
Mr Cuthbert asked what metric unit was given to developing countries at the WTO, because if one looked at overall nominal GDP, China was in the top three. Was it the per capita income? What made China a developing country? He referred to the digital trade discussions, and said it was interesting to note how far behind SA was. Looking at Amazon in the US and Alibaba in China, and other e-commerce merchants, SA’s only “competition” was Takealot, so it could not compete in the digital market. The transactions in e-commerce happened instantaneously and SA had no way of measuring the flows of capital in and out of the country. SA had particular difficulty in competing with the information communication technology (ICT) and online infrastructure that other nations had.
He suggested that the Committee should discuss the digital economy and where SA could harness that potential, as SA was going to be left even further behind if it did not take steps to deal with it. He did not believe that tablets constituted the Fourth Industrial Revolution, and SA should look to use the internet as a potential market into other countries.
Mr W Thring (ACDP) said that, looking at SA’s average annual growth, its exports had been dominated by minerals, and there had been the challenge of the economic slowdown, the reliance on minerals and the depreciation of the sale of minerals over the years. There should have been diversification of the economy and a moving away from the country’s dependence on the export of minerals. What plans were in place to diversify the economy?
With regard to the WTO, he was not surprised that there was an imbalance as the superpowers could probably outnumber and outgun the developing countries, but how were the WTO rules imbalanced, besides the superpower aspect?
The presentation had referred to the US, EU and Japanese proposal to narrow the scope on policies for industrial development, technology transfer and state-owned enterprises. Were there any negotiations or plans to mitigate the impact of the policies of those three blocs?
There had also been a point about developmental integration in Africa. One of the challenges was the development of cross-border infrastructure linkages. He recalled that when he was a Member of the Committee in 2013, the then Minister Rob Davies had bemoaned the poor infrastructure in the negotiations and discussions. How were the infrastructure challenges being addressed to facilitate a smooth flow of trade? China would come in and put in roads and railways to get their goods out. Minister Davies had also complained about agreements that SA had with African countries, and then a European or developed country would tell the African country to pull out of SA, or another African country with which it had a particular trade agreement, or it would withdraw developmental aid. The risk of the African Continental Free Trade Agreement was the risk of countries pulling out when faced with such a situation. How big was the risk? It had been a big risk in 2013.
Mr Thring noted that the presentation had dealt with the fact that the EU imposed safeguards on poultry. What about poultry imports from Brazil? If there were safeguards in SA, the poultry industry could create 100 000 jobs. No one was speaking to the poultry producers, and the poultry imports seemed to be hurting the economy.
He asked if SA preparing for an exit from AGOA in 2025. Was the one African country model not a divisive strategy?
Mr F Mulder (FF+) asked about the exchange rate. The rand’s average growth between 2013 and 2018 had declined by 2%, and there had been reference to a period when the value of the rand had declined between 2002 to 2018. Taking into account the value of the rand over those periods, would the trade decline have been worse if the rate had not decreased? Namibia had kept its currency on a one-to-one basis with the rand. Would the weakening of the rand not cause Namibia to distance itself from the SA currency?
Mr Mulder had political question. He noted that it was not addressed in the presentation, but the appropriation without compensation would have a direct impact on intellectual property rights, and that would have a direct impact on the trade situation.
Mr S Mbuyane (ANC) said that trade relations were necessary because the country had to sell to the world what it produced and buy from the world what the country consumed. There were multi-lateral, bilateral and regional trade agreements. If someone came with a unilateral agreement, was the country still negotiating in good faith? The current situation prevailing in Brexit had left other countries as low value-added producers and industry promotion, or trade liberalisation, that undermined the cost to workers. Could the Ambassador clarify the current situation on Brexit? Were they rebelling against the free trade agreement? Was it a populist protectionism that prevailed? There was a narrative of narrowing the flexibility that would make the process more difficult.
If one looked at the development of the General Agreement on Tariffs and Trade (GATT) which had been established in 1994, one saw that the World Bank, the International Monetary Fund (IMF) and the International Trade Organisation (ITO) were not intervening in unilateral agreements. Was there any possibility that the rule of national security could be put to the WTO? It was not currently there.
Ms R Moatshe (ANC) asked whether EPAs had affected the economic integration of Africa.
Ms T Mantashe (ANC) said that Members were worried that states would come with unilateral arrangements, and she wanted to discourage the dti from engaging in such arrangements. The SADC-EU agreement had been negotiated, including the UK. If the UK left the EU, how did that affect the SADC-EU agreement? Was SA negotiating to change the SADC arrangement with the EU?
In the AfCFTA, SA was one of the largest countries. Given that the focus of AfCFTA was on the smaller, poorer nations, how did SA ensure that it benefited fully? How did the AfCFTA work with the movement of people? It had been a resolution since 2012 that SA should open its lines of communication to Africa. The Members would back the Ambassador should it happen. They wanted to trade with foreign markets, but South Africa had to protect its own markets first.
Ms Mantashe smiled, because she thought that Members should be patriotic, but in one edition of Business Day, Mr Macpherson had said that he would campaign for SA to be excluded from AGOA if the country signed the Copyright Bill. What did he stand for? Was he not patriotic? Could all Members not speak with one voice?
Ms I Hermans (ANC) asked about the successes with the orange promotion measures, and commented that Mr MacPherson had said that SA had failed in promoting exports. If SA had failed, there must have been a plan, and a reason for the failure. What were the Department’s plans for maximising exports? She asked the DDG to explain the effect of non-tariff measures on import and export trade.
Ambassador Carim responded to Members’ questions about trade agreements, and said there were three steps. The first was the official level, where the countries tried to conclude the negotiations. The concerns about Mozambique were no longer evident. Once the negotiations had been concluded, the Minister would be requested to sign the agreement. That was an executive action. Once Cabinet had a view of a final agreement, and if it was concluded, Parliament would be required to ratify it.
There were different divisions in the dti. One division dealt directly with promoting SA’s exports, with a DDG in charge who was probably best placed to answer the questions on how export promotions were designed and what countries and products the Department was looking at. He was certain that they were defined on industrial policies, export profiles and export priorities, and then promoted in different countries around the world. His division was concerned with negotiating agreements that required preferential treatment. Questions about export promotions should be directed to the Minister and the relevant DDG.
Concerning the current account balance and the deficit of payments, Ambassador Carim said he had not looked at that lately, but the current account balance was only one measure. One would have to look at the trade balance and the various components of the current account. He had been looking at the balance of trade from a specific perspective, but one would have to note that the current account was a broader measure than the balance of payments, and some of which was not the responsibility of the Department.
Brexit was not a preferential trade arrangement. It was about a group of countries coming together to work on a number of fronts, trade being one. SA often argued with China that it ran at a significant trade deficit with China. However, SA for example recorded an export to Hong Kong, whereas it was actually sent via Hong Kong to China, and China counted such exports in the balance of trade. The same argument applied with Turkey. It was a question of how the trade was recorded. However, it was less important than what SA traded. SA traded mostly mineral products, but struggled to export value-added products, so it was the contents of the basket of trade that needed to change. Some Chinese people had come to SA to look for products and had also invested in SA, including in the manufacturing sector.
In responding to the question on SA’s position on the proposal to narrow flexibilities, Ambassador Carim said that the rule in the WTO was that a developing country’s standing was self-decided. The convention was that members of the Organisation for Economic Cooperation and Development (OECD) had proclaimed themselves as developed countries. During the Uruguay round, SA had been treated as a developed country but after 1994, SA wanted to be treated as a developing country, and some of the difficulties faced post-1994 had been because SA had not been afforded the benefits of developing countries.
Questions about the mineral exports touched at the heart of the dti’s industrial strategy and the industrial action plan. Even while SA was doing relatively well during the commodities boom from 2002, the analysis in the Department had shown that SA was over-dependent on commodities, and that if the commodities cycle were to come to an end, some of the commodities of that growth path would be exposed, and that had happened. The Department had been aware that the good years would not be sustainable. It had continued to push its manufacturing policy and the Industrial Development Plan.
The principle point about the rules-based system was that one would prefer to know what the rules were, and it was preferential that everyone operated in the same way and knew what to expect. However, stronger and weaker parties influenced the outcomes of negotiations. The outcomes of the Uruguay talks had favoured stronger countries rather than smaller ones. SA had participated marginally in those negotiations. The negotiations were driven by the bigger players, and the WTO agreement in agriculture showed that developed countries supported the protection of agriculture in their countries. It was also evident in manufacturing, where countries had previously supported local production measures to build up their capabilities. The agreement had forbidden localisation measures and so those countries that were still in the catch-up phase were prohibited from developing their own industrial strength, as they could not implement those policies or even pay subsidies to support localisation. Technology transfer was another area under the Uruguay agreements. It had been much more difficult for developing countries to access technologies needed for development. There were many areas of concern for developing countries.
The latest US-Japan proposals would also impact negatively on SA, but it was much more aware of the negative side of such proposals. The proposals had not yet been put on the table.
African integration and infrastructure requirements was a broader item on the AU agenda, as it cut across many departments. The African Union had a continent-wide initiative to build infrastructure. There were various programmes across the continent to link up roads. In southern Africa, work was being done on spatial initiatives to link up road and rail. One success was the road from Johannesburg to Maputo, and another was the northern road from Durban all the way up to Tanzania. A lot of work had gone into upgrading roads, railways and facilitating border crossings. That did not fall directly under the dti, but the Department received updates from time to time.
He did not know what Minister Davies would have been talking about, pulling out of agreements, but members of the SADC had a free trade area and 98% of goods were supposed to move freely. However, some countries set up non-tariff barriers against SA goods from time to time, which was an impediment to trade. The non-tariff barriers were new requirements which were not clearly identified, or required new documentation which was not available. Often it was not clear what a new standard was and SA could not get the documentation, but SA was one of the biggest beneficiaries of trade in the area and it was becoming a more and more important market. SA had gained from the SADC agreement despite the problems. One had to look at it in a balanced way. The benefits had to be shared equitably. Where problems arise, SA tried to resolve the problem.
Ambassador Carim commented that several Members had raised concerns about the proposal from the US to negotiate with one African country, as it was a divisive mechanism. Many of the Ministers in Abidjan had felt strongly that any US negotiating had to be with the African continent on the whole. The position was that it was not Africa’s preference, but it remained to be seen if some African countries linked up with the US.
He explained that parts of his presentation had been in US dollars, so that the amounts remained more constant rather than presenting rates in rand. The rand was volatile, so one did not get a real sense of the trade numbers in a more constant manner. He agreed that the way to gain advantage was to pursue a strong industrial policy.
The idea with Brexit was to reach an agreement in the negotiations to simply continue with those conditions SA had had while the UK was part of the EU. The Minister would give more information very soon. The Bretton Woods institutions, such as the World Bank and the International Monetary Fund, were different from the WTO, which was the one organisation where decisions were made by consensus. However, if African countries stood together, they could block certain agreements, such as those on data and on digital trade, investment conditions and so on. There had been an attempt to push those issues on to the ministerial agenda in 2015, but developing countries had stood together, refusing to negotiate. They had been effective.
Ambassador Carim asserted that things were different and were changing on a daily basis, and big players had a lot of instruments. The WTO had a measure regarding the security of a country, but it referred to security in a defence-related and security-related way -- it was not trade-related. When additional barriers had been added by the US for security reasons, it was the first time such a provision had been used. The use of national security as a reason for tariffs had resulted in a debate about whether that was a self-judging issue, or whether the WTO or its members could dispute it.
Ambassador Carim responded to the questions on the EU. Before the negotiations for AfCFTA had begun, the EU had negotiated economic partnerships with countries in the region, so in a sense those partnerships had helped to fragment the region. To mitigate the impact of such agreements, SA had tried to negotiate that the rules of origin should allow SA to use other countries’ components in products for export to the EU. There had been an agreement in principle, but that had to be followed up. The question, also for the Committee, was whether there should be a review of economic partnerships now that the AfCFTA was in place. With the US, the same principle regarding rules of origin could be applied. Some in the EU were willing to look at that principle. In the WTO, flexible and differential treatment was a principle and part of the agreements and SA would want to preserve and use flexible differential treatments, if needed.
Concerning the movement of people, there was a protocol at the AU level. SA had not signed it, as it had not confirmed that it had the capacity to manage the movement of people effectively. It was a matter for the Department of Home Affairs, but it had come up in relation to trade.
Regarding the benefits of the AfCFTA, the DDG assured the Committee that SA was benefiting from the agreements. It was already exporting into Africa and wanted to expand those exports into West Africa, but Members had be aware that for agreements to be sustainable in the long-term, benefits should be shared or be seen to be shared.
The question regarding expropriation without compensation would probably not fall under the property rights protocol, but would fall under the investment protocol and would be discussed later once there was clarity on national legislation. The process would start in the AU only in the following year.
The Chairperson said that it was an ongoing discussion. The point was, how should the Committee play its part in the situation that the country was in, with its socio-economic challenges? What was the role of SA and all the other national groups in the country, to make sure that everyone was accounted for, so that the country could grow in the context of the continent? Economies of scale were important, but SA needed to develop its own skills to compete in the trade and industry space.
Mr Mbuyane recalled that the Chairperson had said that there was no right and no wrong answer when Members were engaging. He wanted to follow-up on the rules of unfair trade and the question of dumping and countervailing duties. Did that not hamper trade? How did the question of protecting and blocking the market relate to unfair trade? He was interested in the US desire to come into Africa through agreements with individual countries.
Ms Herman referred to the possible review of economic trade agreements. She was not sure how such things were processed, but could she ask for a proposition to the Committee on possible trade reviews that would benefit SA?
The Chairperson told the Ambassador that there were a lot of issues, but there would be follow-ups. He advised Ms Herman that the dti was a partner of the Committee, and Ambassador Carim would come up with the necessary proposals. There were many issues to be raised but in that meeting, the Committee had just wanted to get the scope and picture of international trade agreements. He commented that although SA exported many oranges, there were concerns over Citrus Black Spot (CBS) as if there was already something wrong with a product that SA had in abundance. Something had been picked up to disadvantage SA. Why would one pick up black spots as an issue, and then have a big agreement to deal with that issue? It was a double-edged sword because exporting good quality products opened up a country for attacks. Perhaps the Ambassador could respond to the CBS issue.
The Ambassador said that unfair trade was dealt with by anti-dumping measures, but there were also other safeguards. A WTO agreement determined how such things had to be addressed, and dumping was dealt with by the International Trade Administration Commission of South Africa (ITAC) which could impose a duty to offset dumping prices. If a government provided support, then there was another way of dealing that. Where the increase in imports was significant as a result of firms undercutting prices, there was a way of dealing with it. Where the increase was sufficient to injure the local market, there was a specific way of dealing with it.
Regarding why SA had safeguards against the EU and not Brazil, Ambassador Carim explained that there was a preferential agreement with the EU, with a tariff of zero. With Brazil, the normal tariff was in place. Brazil’s EU exports were being constrained, so Brazil was coming to SA. Poultry was a problem. He distinguished the AGOA programme from other agreements with the US. The AGOA programme had been developed in the US via US legislation. Those benefits had not been negotiated by SA, unlike other agreements with the US that had been negotiated and were binding on both sides.
The DDG explained that Citrus Black Spot was one type of measure under the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS) that could hamper trade. SA said that the black spot was not a serious matter and science suggested that it was not serious, but the EU said it was problematic as once a tree had been infected, there was no known cure. Some non-tariff measures were correct and regulations were necessary, but it was easy to move to a protectionist position.
Regarding fragmentation, SA had argued for many years that EPAs fragmented the continent, so now that the AfCTA was in place, it might be time to look at it again.
The Chair said that he had heard about bi-lateral and multi-lateral, but he had learnt a new word ‘plurilateral’, which he understood was not a good agreement. He urged the Ambassador to stay with bi-lateral and multi-lateral agreements.
The Chairperson explained that Members had agreed to the Committee Programme, but it had to go to the Programme Committee and the Minister, and also certain reports might not be ready in time, in which case the programme would have to change. Members had the current Committee Programme before them. He pointed out that Prof Black from the University of Cape Town would be undertaking training on Friday 11 October 2019, as indicated in the programme, and he requested that all Members attend the training.
The Secretary said that the meeting scheduled for 17 September 2019 would not be held in the Parliamentary precincts. The Committee would meet at InvestSA in St George’s Mall, and would visit a One-Stop Shop in Cape Town.
The meeting was adjourned
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