Report on South Africa’s Trade Portfolio

NCOP Trade & Industry, Economic Development, Small Business, Tourism, Employment & Labour

29 November 2022
Chairperson: Mr M Rayi (ANC, Eastern Cape)
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Meeting Summary


The Committee was briefed on the status of the country's trade with the European Union (EU), its largest overseas trading partner, the United States, and the United Kingdom, which was no longer part of the EU. The implications of trade protocols such as the African Growth and Opportunity Act (AGOA) and the Trade-Related Aspects of Intellectual Property Rights (TRIPS) were spelt out, as were the opportunities for possible improvements that could be negotiated or advocated for. Members were also advised of the environmental benefits of the Fisheries Subsidies Agreement, and in the area of agricultural agreements, were told that the key issues for most developing countries were permanent solutions for public stockholding for food security purposes, disciplines on trade-distorting domestic support (agriculture subsidies), whilst other countries advocated further trade liberalisation.

Of South Africa’s total global exports between 2018 and 2020, 25.5% went to Africa, of which 64.3% were manufactured products, in comparison to 43.9% in its global export basket. The SADC trade played a big role in SA’s total trade, as 87% of its total exports to Africa went to the SADC

Members were concerned about the impact of EU restrictions on the import of South African citrus and sought assurance that the matter was being addressed and that the local farming community would be protected from any adverse outcomes.

Meeting report

South Africa's trade performance

Amb Xavier Carim, Deputy DG: Trade Policy, dtic, said African integration was very important for African countries to overcome the limits of small, fragmented economies. For the period 2018 to 2020, intra-Africa exports stood at 16.3%. African markets were vital to African exporters, and the majority of the products were value-added manufactured products. In terms of South Africa’s total global exports between 2018 and 2020, 25.5% went to Africa. South Africa’s exports to Africa consisted of 64.3% manufactured products, in comparison to 43.9% in its global export basket. This was mainly value-adding trade, not commodities. Because of its huge percentage of oil imports, SA’s trade balance with Africa -- excluding the Southern African Development Community (SADC) -- fluctuated between surplus and deficit.

It had been established that common policies and institutions were needed to advance integration in Southern African trade. In 2002, the Southern African Customs Union (SACU) agreement established common external tariffs and revenue-sharing formulas. SACU negotiated as a bloc around common positions, informed by common approaches to policy and trade-related rules. The Department of Trade, Industry and Competition (DTIC) oversaw matters related to tariffs, rebates and trade remedies for SA. They participated in processes to develop common SACU positions. Since August 2020, a new work programme, prioritising regional industrial cooperation and investment and export promotion had been embarked on.

The SADC trade played a big role in SA’s total trade, as 87% of its total exports to Africa went to the SADC. The SADC protocol on trade was implemented in 2000, and 98% of tariff lines had been fully liberalised since 2012. Only Angola, the Democratic Republic of Congo (DRC) and the Comoros had been excluded from the trade protocol, and Angola was seeking accession. Enforcement of non-compliance was hampered by the absence of an effective dispute settlement mechanism after the suspension of the SADC Tribunal. The protocol on trade in services included communication, construction, energy, financial services, tourism and transport.

African Continental Free Trade Area (AfCFTA) negotiations were launched in June 2015. Of the 55 African Union (AU) members, 54 had signed to date and 43 had ratified the agreement. AfCFTA would consist of two phases, with phase one covering trade in goods and services, and phase two dealing with investments, intellectual property rights and competition.

In December 2020, the AU Summit created the basis for initiating preferential trade from 1 January 2021. Preferential trade may begin in products where tariff offers were verified, rules of origin (RoO) were agreed upon, and relevant domestic legislation was in place. SA sought to ensure that RoO support resulted in increased African content in intra-African trade. Effective customs control was essential to avoid transhipment in order for the benefits of preferential trade to accrue to African producers.

As a bloc, the European Union (EU) was SA’s largest trading partner. In September 2018, SACU imposed a safeguard measure against EU poultry imports and in April 2020, the EU initiated an arbitration process to challenge the measure. The outcome had largely favoured SACU by rejecting the EU's request to remove the safeguard measures and to refund duties. The review of the SADC-EU Economic Partnership Agreement (EPA) was underway, and the parties had exchanged indicative lists of issues of interest.SA was seeking improvements on the RoO, export tax provisions and market access. The EU’s interests were rule-making in areas such as investment, competition and sustainable development. Ongoing areas of bilateral engagement with the EU include citrus exports, game meat, aquaculture, horses, steel and poultry.

The EPA with the United Kingdom (UK) had “rolled over” the SADC-EU EPA commitments into a new agreement to avoid trade disruption, as the UK exited the AU on 1 January 2021. The agreement included a list of follow-up issues under a built-in agenda that included the sanitary and phytosanitary categories, and technical barriers to trade matters. South Africa would also seek improvements on quota limits, export tax provisions and market access.

The United States (US) was SA’s second-largest trading partner in 2021. The African Growth and Opportunity Act (AGOA) granted preferences for higher value-added products. SA exports under the AGOA peaked at 30% of its US exports in 2013, declining to 12% in 2021. In 2021, minerals and metals accounted for 72% of SA’s total exports to the US, signalling a return to pre-AGOA patterns, where SA exports were dominated by minerals. The decline had largely been due to poor economic conditions and measures restricting manufactured exports. AGOA was set to expire in 2025.

Sub-Saharan countries had a common position on AGOA -- that it should be extended beyond 2025, for it to improve product and country coverage, and to remove US non-tariff barriers. They were also opposed to the exclusion of some sub-Saharan countries from AGOA. The US had considered comprehensive reciprocal market opening and rules through free trade agreements (FTAs) with individual African countries. FTAs with individual countries would undermine Africa’s integration agenda. The US FTAs involved extensive tariff liberalisation in agriculture and industry access to government procurement, and legally binding commitments in services, digital trade, intellectual property and investment. These could close off space for economic development policy, not compatible with an economic development and transformation agenda.

SA would host the AGOA Forum in 2023, and sub-Saharan Africa (SSA) would seek to influence the future direction and content of SSA-US trade and investment.

The WTO had indicated that multiple crises had necessitated a re-think on trade liberalisation and globalisation. This included Covid-19, rising inequality, growing poverty, inflation and climate change. This resulted in the growing recognition of the importance of policy space and industrialisation. Increases in subsidies, unilateral measures and re-shoring also had to be looked at to address supply disruptions. There were also calls for greater inclusivity and diversification of production in light of the lessons learnt from the pandemic and food crisis. The Twelfth Ministerial Conference (MC12) had agreed on partial waivers of patent protection under the Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement, partial fisheries agreements, some minimal rules and export restrictions to address food insecurity, extension of the e-commerce moratorium and e-commerce work programmes, and a commitment to WTO reform.

The TRIPS decision had reaffirmed the members’ right to authorise production and supply of patented Covid-19 vaccines, including ingredients and processes, without intellectual property (IP) holders' consent. Members could use any legal instrument to authorise such production and supply. The waiver was limited to compulsory licences for vaccines, and did not cover therapeutics or diagnostics. Negotiations were under way to extend the decision and cover therapeutics and diagnostics that were also essential medical tools to address the pandemic. To be effective, the TRIPS decision required domestic implementation.

The Fisheries Subsidies Agreement was the first WTO agreement seeking to protect the environment. This agreement prohibited WTO members from providing subsidies to vessels or operators engaged in illegal, unreported and unregulated fishing, fishing of over-fished stock, unless they aimed to rebuild the stock to sustainable levels, and fishing in unregulated high seas. Two-thirds of the membership must ratify the agreement to bring it into force.

Agriculture negotiations remained deeply contested, and MC12 resolved to continue engagement. For most developing countries, the key issues were permanent solutions for public stockholding for food security purposes, disciplines on trade-distorting domestic support (agriculture subsidies), whilst other members advocated further trade liberalisation. MC12 had adopted a declaration on the emergency response to food insecurity, and members agreed to avoid imposing WTO-inconsistent export prohibitions or restrictions on food trade. They also agreed that any emergency measures should minimise trade distortions and be temporary, targeted, transparent and proportionate.

Ministers had agreed to reinvigorate the work under the Work Programme on Electronic Commerce (WPEC), in line with its development dimension. Ministers agreed that the e-commerce moratorium would end at MC13.

Members agreed to work towards the necessary reform of the WTO. The process had to be member-driven, open, transparent and inclusive and must address the interests of all members. For SA, WTO reform should rebalance the trade rules from the Uruguay Round to facilitate Africa’s industrialisation and preserve the core principles of the WTO. There were some risks around the reform of the WTO.

SA had initiated WTO consultations with the EU to address concerns about the new regulations imposed to address the risks associated with the False Codling Moth (FCM) on citrus. In June 2022, the AU published new regulations amending requirements that would introduce significant new barriers to SA citrus exports to the EU, especially oranges. The new requirements focused primarily on cooling before and during shipment, which would have significant cost implications for SA, especially emerging farmers. SA believed fewer trade restrictive and less costly responses were available to manage the risks associated with FCM. Consultations with the EU were ongoing and aimed to find a mutually acceptable solution.

The DTIC’s trade policy work was primarily about negotiating and managing trade rules at the bilateral, regional and multilateral levels. Negotiations aimed to enhance market access for SA exports without unduly undermining the domestic industry and employment, and preserving development policy options.

SA’s trade policy aimed to support industrial development, sustainable economic growth, decent well- paying jobs and economic inclusion. It seeks to improve our trade policy by increasing exports of higher value-added manufactured goods. Multilaterally, SA adopts a development approach and seeks to address existing imbalances in the rules by securing policy space to pursue industrialisation and ensure new challenges were addressed fairly and equitably.

The trade policy statement of May 2021 framed the SA trade policy and its international trade engagements on SA's industrial policy objectives. It aimed to build industrial capacity, support workers, women and communities, unlock development access to Africa, drive manufacturing exports and open markets for SA goods, enhance SA’s role at the WTO and the future multilateral trade system, and ensure resilience and to 'build back better.'

SA’s share of world merchandise (goods) trade had grown from 0.45% in 2000, to 0.55% in 2021. The value of manufactured exports had increased. However, the value of minerals and metals exported had grown much faster. This resulted in this sector growing to a disproportionate share of SA’s export basket.

(See Presentation)


Mr M Dangor (ANC, Gauteng) asked if SA intended to re-negotiate the AGOA in relation to the dumping of chicken stock.

Ms S Boshoff (DA, Mpumalanga) asked what the government’s plan was to deal with the complaint lodged at the WTO regarding the FCM regulations, and the risk it had for the citrus industry. What would the SA government do if the decision was not in its favour -- what plan was in place if the exports were stopped?

The Chairperson asked to what extent the EPA could be undermined by African economic integration. As much as the AGOA was a carrot, what was the stick? Why did the General Council not get involved in the negotiations around the WTO reform?

He asked if SA could get involved in agriculture stockholding. In light of the increased levels of poverty, would stockholding not be a possible consideration?

He also wanted to know how long the discussions around the citrus exports would take.

Amb Carim indicated that SA was the number one citrus exporter to the EU, although there were smaller producers such as Spain in Europe. SA was concerned that the measures were not dealing with the risk, but that there were also protectionist elements included – first it had been the 'black spot' concern, and now FCM. They needed to make sure that measures were proportionate to the risk, and keep SA in the market by keeping costs at bay. They were trying to resolve the matter as soon as possible. If it was not resolved, the government would give support to producers to strengthen measures and minimise the risk. If the outcome was not scientific and was disproportionate to the risk, it could be challenged under the WTO rules. There was also a dispute settlement provision in the EPA. They had lodged a dispute with the WTO, and this would be discussed at the first bi-lateral with the EU.

There had been negotiations with the US around quotas, and the anti-dumping policy remained in place and in every country’s policy. There was a quota increase annually. If there was a transgression, the industry could lodge a complaint, and anti-dumping duties could be applied.

The EPAs separate the different types of agreements with the EU per region. These agreements were complex and required ongoing attention.

AGOA’s “stick” was to put pressure on non-trade requirements, such as good governance. This was only applicable to sub-Saharan Africa and could mean access was denied to their markets. Some requirements and limitations could also be removed from competitive countries as a pressure application. The US administration was very important, but the final decision was left to the US Congress. AGOA would run out in 2025, which would be after the next US election. Success would not be through negotiations but through more advocacy.

Amb Carim said that for a WTO agreement to take effect, it needed to be endorsed by either the Ministerial Committee or the General Council. It was very difficult for all members to agree on such matters, and may fragment the organisation.

Finally, he said that SA did not have any public stock holdings, but it may decide in future that it was required. That would be determined only by the sector, in consultation with the government. There was space at the WTO to discuss such policy issues before it was taken further.

Committee minutes

The minutes of the meeting on 22 November was adopted.

The meeting was adjourned.                                                                      

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