Southern African Customs Union Agreement and Annexes: hearings

Meeting report

TRADE AND INDUSTRY PORTFOLIO COMMITTEE
19 November 2003
SOUTHERN AFRICAN CUSTOMS UNION AGREEMENT AND ANNEXES: HEARINGS

Chairperson:

Tralac Submission to the Trade and Industry Portfolio Committee: The new SACU agreement
Agri SA Submission to the Trade and Industry Portfolio Committee: SACU agreement
Submission from Prof McCarthy
NEDLAC Report on the SACU Annexes B and C
SACU Revenue-Sharing Arrangements (New Agreement)
COSATU submission

SUMMARY
The meeting was convened to enable the Trade Law Centre (Tralac) and the South African Chamber of Business (SACOB) to present their submissions to the Committee on the SACU Agreement. SACOB and Tralac appeared to be supportive of the SACU Agreement. Written submissions from Agri-SA, NEDLAC and Prof McCarthy were also considered. Their concerns were addressed by the Committee. COSATU failed to make a submission timeously and therefore the Committee was unable to address its concerns.

The Committee, after considering the concerns, agreed to recommend to Parliament to ratify the SACU Agreement.

MINUTES
Dr Davies welcomed everyone to the public hearings on the Southern African Customs Union Agreement. He noted that previous week there had been some discussion about the costs and benefits of the agreement and that he had hoped to produce the required documentation at this meeting but he apologised for his inability to do so. He did stress however, that South Africa would be receiving more under the new Agreement than it does at present.

Dr Davies observed that the Committee had received a number of written submissions on the Agreement but COSATU had as yet not made their submission. NEDLAC had provided a written submission on the annexes but the labour convenor had not given his formal support to the Agreement as he was in Geneva.

Dr Davies said this meeting was to hear submissions from the Trade Law Centre for Southern Africa (Tralac) and from the South African Chamber of Business (SACOB). Additionally, he said he hoped the Committee could recommend to Parliament that Parliament ratify the Agreement after the submissions had been heard.

Tralac submission
Prof Gerhard Erasmus said he had three main points to raise. Firstly, the Agreement is a framework document and its successful implementation will depend on the enactment of annexes to deal with the technical detail necessary to support the framework. He stressed that the Agreement should be ratified as soon as possible to take the region forward in terms of regional co-operation and the establishment of regional capacity.

Prof Erasmus was however concerned because the Agreement does not stipulate how the annexes will become part of our law. He mentioned that Article 42 of the Agreement says that the annexes shall become part of our law but it is not clear whether the annexes will need to be ratified by Parliament. Section 231 of our Constitution requires certain annexes to be ratified but it is not clear whether these annexes are such annexes.

Secondly, Prof Erasmus wanted it to be noted that the success of the Agreement will depend upon the degree of harmonisation between member states but that not all of the details pertaining to the harmonisation could be foreseen and incorporated into the agreement at this stage.

Thirdly, Prof Erasmus said it is important to remember that the SACU member states are part of the global community and that there must be scope in the Agreement to take account of the negotiations of member states that have been ongoing prior to its ratification.

Prof Erasmus concluded that the success of the Agreement will depend upon having clear lines of communication between national bodies and SACU bodies, facilitating the enhancement of the capacity of member states and the functioning of Parliament's oversight role in terms of Section 55 of our Constitution.

Discussion
Dr Davies asked Prof Erasmus whether Tralac were suggesting that every time the Committee proposes an annex to the Agreement, the annex would have to be ratified by Parliament.

Prof Erasmus said he was not entirely sure.

Ms September (ANC) asked whether Prof Erasmus thought the annexes were necessary and whether they should be incorporated into the body of the Agreement.

Prof Erasmus said the annexes are necessary as the Agreement is merely a framework agreement. Prof Erasmus mentioned that as all annexes would have to be agreed upon by consensus by the Council, member states will have adequate opportunity to ensure the SACU agenda will be carried out through the annexes.

Dr Davies asked whether it was possible to ratify the annexes prior to the ratification of the Agreement as it is the annexes that serve the interests of the stakeholders.

Prof Erasmus said this was not possible.

Prof Ripinga (ANC) asked if it is possible to revisit the framework agreement to the extent that it is amended by any annexes.

Prof Erasmus said it is possible to amend the Agreement but it is usually only done if the Agreement needs to be altered. He said the annexes however provide the necessary development of the Agreement without it having to be amended.

Prof Ripinga (ANC) asked whether Parliament will have a role in the amendment of the Agreement.

Prof Erasmus said amendments do not happen frequently but he foresees the Council rather than Parliament playing a role in the amendment of the Agreement.

Ms Hajig (ANC) asked whether our existing protocol and the SACU Agreement could exist together.

Prof Erasmus said our existing protocol and the Agreement can exist together. He said the Agreement states clearly that negotiations with third parties after the ratification of the SACU Agreement will be undertaken by SACU as a legal persona and not by independent member states.

Prof Turok (ANC) asked whether the Agreement recognizes the AU and NEPAD. He suggested recognising the existence of the AU and NEPAD as these organs seek the same harmonisation that the SACU Agreement proposes.

Ms Hajiag (ANC) supported Prof Turok (ANC) by saying that certain member states of NEPAD feel sore about South Africa's role in SACU. She said she feels it would be strategic to issue a statement as to South Africa's continued commitment to NEPAD. Dr Davies agreed with Prof Turok (ANC) and Ms Hajiag (ANC).

South African Chamber of Business (SACOB) submission
Mr Warren said that he had hoped to have a specialist address the Committee but he called upon Prof Erasmus to answer any questions of a technical nature on his behalf.

Mr Warren said that SACOB sees the overall flexibility of the Agreement as relying upon the achievement of common policies across member states. He said this common policy would avoid the duplication of the necessary regulatory systems that will ensure the aims of SACU are furthered. He said that the achievement of common policy regimes would depend largely on the manner in which the annexes to the Agreement are carried out.

Mr Warren said SACOB's main concern is the lack of official response to their submission prior to the signing the New SACU Agreement. No explanation had been given why the concerns of business would not be accommodated in the Agreement. He said that SACOB is uncomfortable pronouncing on the desirability of the SACOB Agreement until these issues have been addressed.

Dr Davies said that unfortunately the Committee was not able to address their concerns at this meeting as the scope of the discussion is bound by parliamentary procedure. Dr Davies therefore asked whether SACOB would agree to ratify the Agreement.

Mr Warren said that he had not been given a mandate to agree to its ratification and was merely present to present SACOB's submission. However, Mr Warren said it is likely that SACOB would agree its ratification if there is sufficient flexibility to accommodate their concerns at a later stage.

Dr Davies said that the process of ratification is clear. He said first the Agreement had to be ratified to bring the Council into existence and then the Council would have the power to adopt any annexes that will appease SACOB's concerns.

Dr Davies thanked SACOB for their submission.

He noted that unfortunately the Committee had not yet received COSATU's submission after extending the due date to that morning to give afford them extra time to make their submission. Dr Davies said the Committee would have to continue without their submission.

Department's response to submissions
Mr Xavier Carim (Department of Trade and Industry Chief Director of Multilateral Trade Negotiations) said that all of the submissions appeared to be supportive of ratification. He said it was important to remember that the Agreement is the product of seven year's of negotiations and it is an attempt to reconfigure colonial and Apartheid approaches to decision-making. He noted that it is also important to remember that the Agreement is a framework agreement and it is therefore largely non-prescriptive. He said the agreement sets out a means whereby the region can progress and he said that South Africa, as the largest economy in the region, has a great role to play in the implementation of the Agreement.

Mr Carim turned to the Tralac submission and mentioned that their most important point was their support for the ratification of the Agreement.

In response to point two of their written submission, Mr Carim said that ratification will set in motion the process for establishing institutions to give meaning to the agreement. He said there are already programmes underway intra-SACU to address the capacity implications of the Agreement. Mr Carim said that these programmes will not be developed at the same level in each member state as the differing levels of development across the member states will be taken account of. Mr Carim said that there have already been a number of initiatives by ITAC in member countries to replicate the role they play in South Africa. He said the same can be said of SARS and our Competition Commission. Mr Carim said that a lot remains to be done and he said Tralac's point is therefore an important one.

In response to point three of Tralac's written submission surrounding Parliament's role in approving and implementing the SACU Agreement, Mr Carim said that Parliament will have to be guided by Section 231 of our Constitution. Mr Carim said that as he understands it, annexes will not have to be ratified by Parliament but Parliament would retain their oversight role in terms of Section 55 of our Constitution. He said legal advice would be sought if an annex would require a change to South Africa's law.

On the whole, Mr Carim stated that Tralac moves to ratify the Agreement.

Mr Carim responded to the SACOB submission by saying that although Mr Warren expressed doubt as to their satisfaction with the Agreement, SACOB sought the advice of Prof Erasmus who supports ratification. He said it therefore appears that if SACOB sought Prof Erasmus's advice, they would agree to ratify.

He said that SACOB's primary concern is that the Agreement would create a bureaucracy that would hinder decision-making. He said that on the contrary the aim of the Agreement is to facilitate decision-making.

Mr Carim stated he was surprised that SACOB were not satisfied with the annexes as an attempt was made to address their concerns by way of the annexes. Mr Carim asked whether it could be said that SACOB supports the annexes.

Mr Warren said that SACOB does support the annexes.

In response to point 2.1 of SACOB's written submission, Mr Carim said the South African Department of Trade and Industry is aware of the impact of the Agreement on agreements entered into by South Africa prior to its ratification and he said the annexes exist to harmonise these negotiations. He said these annexes will serve to avoid the contractual crisis that SACOB fears may arise.

In point 2.3.4 of SACOB's written submission, Mr Carim said that SACOB was concerned that South Africa was excluded from having protected industries. Mr Carim said a distinction has to be made between negotiations conducted intra-SACU and extra-SACU. Mr Carim said that because of South Africa's relative size, its industries need not be protected in intra-SACU negotiations. In extra-SACU negotiations, Mr Carim stated that there are other mechanisms whereby South Africa's industries will be protected from unfair competition.

Mr Carim said Agri-SA raised a number of similar points as Tralac and SACOB. Mr Carim welcomed Agri-SA's concurrence with the objectives of the Agreement but as to their misgivings about the effectiveness of the envisaged system, Mr Carim said it is the aim of the Agreement to reduce the "bureaucratic burden" that Agri-SA believe will result from the ratification of the Agreement.

Mr Carim said that Agri-SA suggest that some timeframe should be built into the system. He said that this will be done in the annexes. Mr Carim said it had already been done for tariff applications where the SACU Secretariat on receipt of a tariff application would pass the application to member states within two days. He said the member states will then have fourteen days to respond to the application.

Mr Carim said the point raised by Agri-SA pertaining to Article 21(2) and 20(3) will be dealt with at a high level during SACU negotiations. He said prior to the SACU Agreement there was less scope for such negotiation.

In response to Prof McCarthy's submission, Mr Carim acknowledged his concern pertaining to the common policies of member states as required by Article 38 and said that the SACU Agreement forms a framework which will provide the basis for dealing with the differences in industrial development across member states. He said discussions would be ongoing and that it is impossible to address all of the disparities at this stage.

Mr Carim said Prof McCarthy is also concerned about the BLNS countries positioning themselves as lower cost labour alternatives to South Africa's high cost labour which would lead disinvestment in South Africa and regional confrontation that will test the consensus-based decision-making of SACU.

Mr Carim said that as the price of labour is not the only determinant of investment in South Africa it is unlikely that this disinvestment will occur.

Mr Carim said that Prof McCarthy is concerned that BLNS countries emphasise the role of tariffs as a source of revenue while South Africa view them rather as an instrument of industrial policy. In response to this, Mr Carim said that there is a growing understanding amongst the BLNS countries that dependence upon tariff revenue is not sustainable. He said this implies that they are moving towards establishing a broader base of revenue collection which serves to align the interests of the BLNS countries and South Africa.
Mr Carim noted that Prof McCarthy is supportive of ratifying the agreement on the whole.

Mr Cariem supported the point Prof Turok (ANC) made and he said the Minister could make a statement confirming South Africa's commitment to the AU and NEPAD.

Dr Davies said that Prof McCarthy has highlighted some of the challenges facing SACU.

Prof Turok (ANC) said that the region's experience could provide a useful case study for the rest of the continent. He also asked that Mr Carim keep the Committee informed of the policy developments following the SACU Agreement.

Dr Davies said that labour's sign off is missing from the NEDLAC submission but that there submission concerned the desirability of the annexes rather than whether they support ratification.

Mr Carim said that in the meetings with NEDLAC, the annexes were signed off by labour and they appeared to be happy with the process.

Prof Turok (ANC) suggested the Committee should therefore go ahead with agreeing to recommend to Parliament to ratify the Agreement.

The Committee thereafter agreed to recommend that Parliament should ratify the Agreement.

The meeting was adjourned.