Committee Annual Report; Department Annual Report; WTO Negotiations Update

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Trade and Industry

31 January 2006
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Meeting report

TRADE AND INDUSTRY PORTFOLIO COMMITTEE
1 February 2006
COMMITTEE ANNUAL REPORT; DEPARTMENT ANNUAL REPORT; WTO NEGOTIATIONS UPDATE

Chairperson:

Mr B Martins (ANC)

Documents handed out:
Department of Trade and Industry 2005 Annual Report (available at

www.dti.gov.za)
Report on WTO Ministerial Conference in Hong-Kong, 13-18 December 2005
An Assessment on 6th WTO Ministerial Conference in Hong Kong. 13th-18th December 2005
Ministerial Conference Sixth Session: Hong Kong, 13 - 18 December 2005

SUMMARY
The Committee discussed and adopted its 2005 Annual Report, adopted the Department of Trade and Industry’s 2005 Annual Report and discussed its 2006/07 Business Plan. The Deputy Minister of Trade and Industry briefed the Committee on his trip to a World Trade Organisation meeting in Hong Kong in December 2005. Members queried their role in international trade negotiations and the impact of bilateral negotiations by the European Union on the position of South Africa’s main alliance partners.

MINUTES
Adoption of the Committee’s 2005 Annual Report
Prof B Turok (ANC) suggested that it would be useful to place a section in the report that outlined the Committee’s future plans.

The Chairperson saw no harm in considering this idea.

Prof Turok continued and said that he had been in contact with a number of agencies that the Committee dealt with such as the Industrial Development Corporation (IDC), and was struck by the lack of co-ordination among them or any direct policy co-operation. The Committee had the power to call in all the Chief Executive Officers of these agencies to try and initiate some form of co-operation among them, especially as many of their functions and roles were related.

Mr L Labuschagne (DA) wanted the Committee to consider having hearings on matters that affected old-age villages, such as the confusion created by a number of Acts that regulated them, and how they were being exploited by certain brokers and developers of these villages. He had brought this issue to the attention of the Department of Trade and Industry and they were aware of the problem. It may be necessary to amend some of the legislation.

The Chairperson asked Mr Labuschagne to consolidate all of his research and pass it on to the Committee which would discuss the matter fully along with the Department.

The Chairperson said that since the budget had not been prepared yet, the Committee Programme would have to be adopted at another meeting. But as the report only required minor changes and additions, it could be adopted now subject to those corrections. The Members agreed and the report was adopted.

Adoption of the Committee’s Report on Department’s Annual Report
The Chairperson reminded the Committee that they had discussed the Department’s Annual Report last year and all that remained was to adopt the report of that discussion. The Committee adopted the report.

Adoption of the 2006/07 Committee Business Plan
The Chairperson said that the Committee had to think of ways to improve its oversight role, and to join the ‘first’ and ’second’ economies. The Business Plan had to incorporate things like what Prof Turok mentioned about helping institutions with their policy formulation.

Mr Labuschagne said that the Committee had to improve its ability to follow-up on promises made by the Department and other agencies or companies when they came before the Committee.

The Chairperson agreed that the ‘institutional memory’ of the Committee had to be improved by keeping a record of exactly what was said in the meetings and what was promised.

Prof Turok complained that the Parliamentary catering division was charging exorbitant prices for the food for the Committee. Other Committees had also been complaining. He suggested that the Chairperson ask for a monthly account of the Committee’s finances from the finance section. This would help the Committee to plan better for trips and food and so forth.

The Chairperson agreed that the Committee had to start noting where its money was really going. The food provided was usually double that required.

Briefing on outcomes of World Trade Organisation (WTO) negotiations
Dr R Davies, the Deputy Minister of Trade and Industry, said that it was accepted by the South African delegation that the Hong Kong meeting was not going to meet its objectives according to the timetable of the Doha Round. According to the timetable, the sixth ministerial round was supposed to set ‘full-modalities,’ or the shape or structure of any agreements. The objectives were not met as a result of issues in agriculture, which was unfortunate as the most disadvantages and distortions were in agriculture.

However, a few months before the Hong Kong meeting, America surprised everyone by announcing that it would reduce domestic support to its farmers. In effect, this was misleading as the reforms did not go as far as everyone had hoped. The European Union (EU) was the main stumbling block as its proposals did not give developing countries any further advantages. This was the situation going into the meeting; knowing that these issues were not going to be resolved. To achieve something, the developing countries wanted to secure some agreements to get the process moving towards full modalities. The EU and America’s offers were wholly inadequate, but they had excessively ambitious demands on non-agricultural market access and service negotiations especially on the ‘bigger’ developing nations such as Brazil and India.

At Hong Kong, South Africa was part of the G20 group, but created another coalition called the ‘NAMA 11’ which included Venezuela, Brazil, Argentina and India. NAMA declared that they were not going to achieve consensus about which policy formula to use on the question of agriculture. They were also concerned that the package offered to the less developed countries was inadequate. At the end of the conference, a Ministerial Declaration was drafted. On agriculture, the G20 agreed that there would be no substantive changes regarding market access or on the issue of domestic support reduction. Some progress was possible on the issue of export subsidies. On services, not all developing countries were united. India for example, had great ambitions for services, and was happy to spur the talks on with tight bench-marking. The end-date for achieving full-modalities for services is the same as that for agriculture: 30 April 2006.

Following the Hong Kong meeting, a number of serious issues needed to be sorted out. How was the political will that dogged the negotiations going to be overcome? This was fundamental. The EU claimed that it was misunderstood and that its proposals were very fair. They claimed that it was the larger developing countries (including South Africa) that were delaying and blocking the process. This was not true. The EU had announced that it was going to have a number of bilateral negotiations. This would test the unity of the developing countries. The worst-case scenario would be that these countries were cajoled into agreements that went against what was agreed upon in Hong Kong by the G20.

In conclusion, he said that there were many major challenges in this ongoing process. As Government, they were discussing how they were going to strengthen their position in Geneva and were following through on their involvement with NAMA which South Africa was currently chairing. Unless the level and tone of the discourse could be changed fundamentally, not a lot of progress was possible. The struggle continued.

Discussion
Prof Turok asked who the leaders of the G20 were. Why was there a need to form the NAMA 11? He said that he had been made to believe that the WTO operated according to a rule-based system. This did not seem to be really the case.

Dr Davies replied that proposals were likely to be considered more seriously if they were made by a group of countries rather than just by one. The G20 at Hong Kong was a totally different group from the International Monetary Fund (IMF) group. The co-ordinator of this group was Brazil and was formed at the Cancun negotiations to take forward a developmental agenda. The G20 had transformed the landscape at the WTO and had a recognisable, respected voice there. The WTO did have a rules-based system. For example, it had a judicial system and had enforceable rules that could result in the imposition of sanctions for instance.

Dr M Sefularo (ANC) asked how the Committee could increase its role in the process. What could the G20 do to pre-empt disintegration of their alliance ahead of the EU’s bilateral meetings?

Dr Davies said that it was important to strengthen the role of legislatures in trade negotiations. Committees needed to be involved in many forums to create the climate in which favourable negotiations could occur. The bilaterals were attempts to try and change the climate within the WTO and this had to be watched. A lot of "games" were used to achieve things that could not be achieved in official WTO meetings.

The meeting was adjourned.

 

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