World Trade Organisation Negotiations; National Credit Bill: NCOP Amendments

Meeting report

TRADE AND INDUSTRY PORTFOLIO COMMITTEE
16 November 2005
WORLD TRADE ORGANISATION NEGOTIATIONS; NATIONAL CREDIT BILL: NCOP AMENDMENTS

Department Outcome Document
Presentation to African Group
National Credit Bill [B18D-2005]

SUMMARY
The Deputy Minister of Trade and Industry presented a background report on the latest developments in the World Trade Organisation negotiations to facilitate meaningful adjustments within the international trading system. Developing world needs and concerns had to be fundamental to any agreements and trade distorting subsidies in developed countries had to be curtailed for the sake of overall economic health. Market access for the developing world into the developed zone had to be increased. Adjustments should also be made to industrial tariffs to support industrialisation efforts. Two possible outcomes to the Hong Kong round were expected, namely, a collapse of talks and a reversal to bilateralism or progress could be achieved at the expense of developing world interests.

Members asked certain questions including the types of agricultural activity that received subsidies, the notion of smaller demands directed at the developed countries leading to greater benefits for the developing group, the imperative to maintain the developmental agenda within the negotiation process, the need to reduce excessive privatisation within service industries, whether a consensus position for Africa existed, weakness around the bilateral approach to negotiations and the difficulty in aligning the needs of variable economies into one consensus position.

The Committee also received a briefing from the Department of Trade and Industry on the latest proposed amendments to the National Credit Bill arising from deliberations within the National Council of Provinces Select Committee. The Committee accepted the amendments.

MINUTES
Deputy Minister of Trade and Industry Presentation
Dr R Davies provided background information on the upcoming 6^th Ministerial meeting of the World Trade Organisation (WTO) scheduled for Hong Kong. Recent negotiation rounds had revealed the marginalisation of developing world issues that subsequent meetings sought to address. Developing world needs and concerns had to become fundamental to the process and these sentiments were captured in the Doha declaration. The Doha Development Round encapsulated the current process. A Framework Agreement for Negotiations was established in Geneva in 2004. Hong Kong intended to create a detailed framework focused on agricultural trade, non-agricultural market access, trade facilitation and new generation issues such as competition and transparency. Agricultural subsidies within the developed world distorted trade relations in favour of the strong economies to the detriment of developing countries. The distribution of subsidies was also skewed within the developed world with a small percentage of rich farmers receiving half the annual subsidy. The Deputy Minister explained different types of subsidies in existence such as amber and blue boxes. Trade distorting payments had to be declared to the WTO and an agreement was in place to reduce amber and blue box subsidies. A proposal was in place to extend market access for the developing countries into the developed world. Inadequate proposals were currently on offer regarding subsidy reductions and further negotiations would follow.

Advanced developing countries directed demands at industrial tariffs and tariff cuts were needed across the board to promote trade. Industrial tariff peaks should be eliminated that served as impediments to free trade. Various proposals were on offer regarding tariff reductions. Time frames for the reduction of tariffs were required. Two possible risks arose out of Hong Kong namely that a complete breakdown could occur with a resumption of protectionism and bilateralism or progress could be achieved at the expense of concessions for the developing world. Hong Kong was likely to achieve a mid-point between a framework and full modalities. Development issues would be promoted such as duty-free, quota-free access for less-developed countries. The Aid for Trade package would remain a challenge. Sustained global growth would depend on addressing the needs and concerns of developing countries. Major adjustments to subsidies were needed within the developed countries. Trade adjustments would bring benefits in the medium term.

Discussion
Mr Rabie (DA) asked what types of agricultural activity within the United States were supported by subsidies.

Dr Nkem-Abonta (ANC) asked if the South African government would be satisfied with an international system without subsidies. Smaller cuts within the developed world would still result in significant gains for the developing countries and he asked whether reduced demands from the G20 would not be appropriate.

Prof B Turok (ANC) concurred that the developmental focus had to be maintained within the negotiation process. The terms of trade were weighted against the developing world as manufactured goods had greater value than primary products. Service industries within Africa had to remain state-controlled as employment and economic benefits accrued. Excessive privatisation within the developing world would prove counter-productive to trade reform objectives.

Dr Davies stated that the richest 7% of US farmers received 50% of the subsidy payments whereas the poorest 50% received 5% of the payments. A similar situation prevailed in the European Union. Some subsidies were required in all countries for basic agricultural services. The massive amounts of subsidies in the developed world distorted trade and prevented developing countries from accessing agricultural markets. Adherence to environmental standards also had to be considered and subsidies could support this. Compromises would have to be made by all countries in terms of trade negotiations. Key terms and concepts had to be maintained. South Africa believed that social services had to remain within the public sector and no major privatisation was advocated. Countries should not prevent entry of foreign firms into their economy but had to reserve the right to regulate economic activities.

Mr S Njikelana (ANC) asked whether a consensus existed within the G20 and Africa Group on the correct position for negotiation. He asked why bilaterals were viewed as less favorable than multilateral negotiations. The Department had to assist in the process to attain a common approach.

Ms Chen (DA) asked how the southern African region could be adequately incorporated within a common negotiating position due to variable national economic conditions. She asked if this dilemma was considered within the WTO talks.

Dr Davies stated that developing countries traded primary products and minerals and the value of these items had to be increased to promote industrialisation. An accepted position was that Africa required a common position to boost its chances of success in bargaining. Preference for certain products was no longer the objective and consensus was now the primary goal. Adequate sources of finance were needed to secure an Aid for Trade package. Some form of duty-free and quota-free access was required. A formula was needed so that least-developed countries could improve their conditions. Bilateral negotiations allowed for the powerful nation to influence proceedings in their favour and sectional interests could be imposed to the detriment of adjustments. The US wanted to protect intellectual property rights due to its strong entertainment industry. The multilateral approach created better opportunity for general adjustments although a strong united voice had to be ensured.

The Chairperson stated that the Committee would be more proactive next year in monitoring the negotiations and engaging the Department on crucial areas of interest. A Parliamentary delegation would be assembled to attend the next WTO meeting and Members would be informed of the arrangements.

Department of Trade and Industry presentation on the status of the National Credit Bill
Dr J Erasmus (Department Director) provided an informal brief on latest developments within the National Council of Provinces regarding amendments to the Bill. Detail on certain proposed amendments was provided. A key issue was that the Bill would recognise the jurisdiction of lower courts situated in close proximity to the party in a dispute case over the right of a higher court to hear a case. The use of the higher court could have significant cost implications for claimants. Access to the legal process would also be promoted. A trust comprising more than three people would not receive protection from the state.

The Chairperson proposed that Members accede to the suggested amendments. The Bill would be debated in the NCOP during the afternoon. Feedback from the debate would be conveyed to Members. A Committee delegation would undertake a fact-finding trip to China in the new year.

The meeting was adjourned