The International Trade and Economic Development Division of the Department of Trade and Industry gave an extensive presentation on the trade negotiations conducted between South Africa, the Non-Agricultural Market Access (NAMA 11) developing countries and the European Union. The presentation covered the challenges facing the NAMA 11 countries, the pressures placed on them to agree to the Non Agricultural Market Access and the threats this posed to regional development and integration. The outcomes of the Doha Round of negotiations were summarised. The position of these countries and South Africa on issues such as tariff cuts and flexibility was outlined. It was stressed that although South Africa was committed to the Doha objectives, it was not prepared to compromise its broad developmental objectives. The briefing also touched on African development and regional integration, bilateral and multilateral negotiation, the problems facing Southern African Customs Union and Southern African Development Community, the Economic Partnership Agreement and the problems for Southern African regional development and integration. The IBSA trilateral agreement between India, Brazil and South Africa was also discussed.
Questions from Committee Members covered tariff cuts and co-efficients, the relationship between bilateral and multilateral lobbying and negotiations, and the threats posed to the Customs Union and SADC by the Economic Partnership Agreement. Some Members expressed concern about the imbalance between the aims and aspirations of the developed countries and the European Union on the one hand and the NAMA 11 countries on the other. The view was expressed that support for Organisation of Economic Cooperation and Development countries happened at the expense of developing countries. One Member suggested that there was a danger of the re-colonisation of
Trade Negotations Update by Department of Trade and Industry (dti)
Mr Xavier Carim, Deputy Director of International Trade and Economic Development (ITED) Division of the Department of Trade and Industry, thanked the Committee for their support during the negotiations, some of which he said were at a critical point. Although this was not the major focus of the presentation, nor included in the documents, he gave a background to the Economic Partnership Agreement (EPA), which he described as the biggest immediate threat to regional integration both in Southern African Development Community (SADC) and Southern African Customs Union (SACU).
Mr Carim noted that since the beginning of this year there had been an intensification of the negotiating process within the World Trade Organisation (WTO). It had been agreed that there was a need to reach agreement on key issues by June or July, before the
There was intensifying pressure for developing countries (called the NAMA 11 countries) to agree to an ambitious outcome in Non Agricultural Market Access (NAMA), together with other issues before clarity on concessions could be reached. This was complicated by the recent US Farm Bill, which, by providing increased support to US farmers at a critical point in the negotiations, further undermined the prospects of progress in agriculture.
High global food prices also raised questions about the new range of cuts in trade. This range would have to be substantially lowered to have any real effect and meet the
Other issues which remained unresolved included special safeguard mechanisms for developed and developing countries, preference erosion and tropical products. Mr Carim said there was intense pressure on the NAMA 11 to make significant cuts in NAMA. Although there was now a range of options for tariff cuts for developing countries, these options remained constrained and would still require disproportionate cuts for many developing countries, including
A revised NAMA text recognised, for the first time, the specific situation faced by
Mr Carim stressed that
New Economic Partnership For
Mr Carim then dealt with NEPAD, SADC and SACU agreements.
He pointed out that African development and integration was probably the most extensive single area of engagement. Over the past four to five years the Department had followed a methodology for engagement with bilateral partners. Priority countries in
The success registered in such bilateral co-operation in Southern Africa was being increasingly extended to the rest of Africa. At the multilateral level, South Africa had participated in continental processes, African Union (AU) ministerial meetings and NEPAD, and was trying to refine its objectives around African economic development and regional integration and to build an “Africa-wide” approach.
The other main component of multilateral work was the engagement by Africa with partners outside of the continent. The Africa-European Union (EU) summit last year was part of this engagement and there were also recent engagements between Africa and China, India, South America and most recently, Japan. At a regional level, SADC and SACU were the main instruments of co-operation.
SACU (the oldest customs union in the world) had two main items on its agenda. The first was revenue collection and distribution, and the second was the review of revenue-sharing formulae, which took up a lot of time. The Department’s main interest in this aspect of SACU’s work was its desire to shift the focus from a single-minded attention to revenue to a broader concern with balanced economic, industrial and agricultural development in SACU countries such as
SADC had shown progress in regional integration such as the Free Trade objectives set in the Maseru Protocols of 1996. At a summit planned for August this year, an announcement would be made on progress with regard to the FTA (Free Trade Areas). The real question facing SADC was where it would now start to focus, after the achievements of the Economic Partnership Agreement (EPA). Another core concern in SADC was the industrial and agricultural underdevelopment of the region, and
The Economic Partnership Agreement (EPA)
Mr Carim noted that all of the debates about developments both in SADC and SACU had been overtaken by what was happening in respect of the Economic Partnership Agreement with the EU. SACU was for the first time facing a serious threat to its existence, as a result of this agreement. Firstly, several provisions in the EPA would have a negative impact on
There were at present five such EPAs between SADC countries and the EU, which would make regional integration within SADC much more complicated. Some of the countries within SADC had been faced with a very difficult choice because if they had not signed these agreements in November last year, they would have lost their trade preferences to the European countries. Although
Mr Carim noted that IBSA was a broad engagement driven by the Minister of Foreign Affairs and it involved a great degree of political co-operation and engagement between the three countries. It also involved an economic component , which was led by the Department of Trade and Industry and conducted by the Trade and Investment Working Group.
There were two main areas of work; the first was a collaborative work programme with
The next step was a Trilateral Trade Arrangement (TTA) between SACU, MERCOSUR and
Trade Policy Review
Mr Carim described the Trade Policy Review as an important project, which had never previously been conducted by the Government, and had been initiated in November 2007. Its aim was to review key elements of
Mr L Labuschagne (DA) asked Mr Carim to explain the concept of the co-efficient in layperson’s terms.
Mr Carim replied that the level at which the co-efficient was set became the ceiling for the tariff. If the developed countries adopted a co-efficient of 7 to 9, this would mean that they would not have a tariff beyond 7 or 9. If developing countries adopted a co-efficient range of 19 to 26, then no tariffs would be higher than that. When a country agreed to a co-efficient, it also indicated the depth of tariff cut it could take on its highest tariff. The formula for cuts was that the highest tariff took the deepest cuts.
Mr Labuschagne asked about
Mr Carim replied that
Mr Labuschagne asked whether, in
Mr Carim replied that
He said it was important to put as much pressure on different parts of the EU system around these issues, because it was clear that the direction in which the Commission was going would divide and weaken the region. He said that it was clear, from the way in which the EU’s integration had happened over the past 40 or 50 years, that they had never faced an external threat in the way that the African region had.
Mr S Rasmeni (ANC) said he was worried that the negotiations on tariff cuts would have a negative impact on the country’s industrial policy. However, Mr Carim’s presentation had allayed his fears in emphasising that
Mr Carim said that the perception of the re-colonisation of
Mr Carim agreed that the prioritisation of South-South co-operation was very important. It was clear that the major gains in the next period from trade and investment would be more likely to arise by opening up trade with other countries of the South. The economies of
Dr P Rabie (DA) noted that Treasury had expressed concern about the future existence of SACU. In his opinion, countries like
Mr Carim replied that National Treasury had raised questions about the sustainability of the current revenue-sharing formulae. Under these formulae there had been a year-on-year trend of more funds being disbursed to the “BLNS countries” (
Mr Carim said that the threats to the existence of SACU and SADC had to be understood as part of the region’s developmental unevenness. As long as the countries in SADC were uneven, they would be vulnerable and therefore there was a need to promote a more even development as part of future strategy. He said that the EU had faced a similar challenge in the past and had deliberately sought to overcome this. It had succeeded by creating a convergence in levels of economic development in EU countries. He said there seemed to be a better chance of using SACU rather than SADC as an instrument to achieve this aim.
Mr Carim said that ITED would be guided by the Minister on the matter of any request by Parliament for an observer role.
Mr S Njikelana (ANC) said that international trade was crucial to
Mr Carim replied that dti was trying to procure the highest co-efficient possible, so as to protect sensitive sectors of the market. The suggested range between 19 and 26 was still too low and dti was pushing for higher tariffs as well increased flexibilities. As things stood, about 20 % of tariff lines would be cut and dti was trying to secure a regime in terms of which fewer tariff lines were subject to cuts.
Mr Njikelana referred to Mr Carim’s comment that
Mr Carim replied that these were bureaucratic processes, which always tended to “get stuck” in certain channels. The multilateral track had been separate from the bilateral track despite having common overall strategic objectives. The Department had been trying to strengthen those linkages so that
Common Market for Eastern and Southern Africa (COMESA), SACU and SADC
Mr Carim then went on to discuss the Common Market for Eastern and Southern Africa. He noted that the EU had for some time adopted the stance, during negotiations, that it was not the EPA that had caused divisions in the region, but that these divisions had been in existence for some time, between SADC, SACU and COMESA. He said it was true that there were problems which had complicated decision-making on trade and political alignment, since what made sense politically did not always make sense economically. However, the EU was using such divisions and their problems to permanently divide the region.
Mr Njikelana asked why, in the context of IBSA, which involved multilateral negotiations, there had not been a trilateral arrangement between
Mr Njikelana further asked whether there was still a reluctance on the part of the three partners to IBSA to bring on board countries like
Mr Carim replied that the decision to have a trilateral trade agreement (TTA) between
As for Parliament’s role, Mr Carim said there had been some attempt to have Parliamentarians participating in IBSA processes. He suggested that it might be necessary to look at IBSA in a broader context. This would involve adopting a strategic perspective on South-South relations, and then see where IBSA fitted into that.
Mr Carim said that as far as he was aware,
Professor B Turok (ANC) said the Committee should indicate its strong support for the dti in their endeavours in this regard.
Prof Turok said he was a little surprised that the tariff cuts
Prof Turok also commented on the expansion of so-called new generation issues into
Prof Turok commented that the African development programme seemed to be somewhat fragmented. Rather than talking of meetings and agreements, he suggested that there be more discussion on quantification and hard results and of the outcomes in practical terms for negotiations and agreements for African development.
Prof Turok said that there was a lack of leadership in NEPAD and that NEPAD should not be the shared responsibility of the dti and Department of Foreign Affairs, but rather the responsibility of the former alone because it was about economic development and not about foreign diplomacy.
Prof Turok commented that with regard to the regions, he endorsed the dti’s view that supply-side measures to boost production, rather than customs unions, were the right way to go. Governments were looking for revenue, and the imposition of duties was an easy way of providing this, but in fact the productive side of the economy was more important. He thought that an approach was needed that looked at production relations and concrete economic advances, rather than who belonged to what. Such issues were peripheral. There should rather be a focus on developing socio-economic production plans.
Mr Carim replied that he agreed with Professor Turok that there was a need for better quantification on the outcomes of the African development programmes. He stressed however that the work of ITED was about policy development rather than promoting investment and exports. It was more about shaping discussion and the frameworks within which one could advance such programmes.
With regard to the importance of maintaining the space for the industrial policy framework, Mr Carim said it was clear that dti wanted to retain as much industrial policy space as possible to use tariffs to protect the country’s industries, within the rules of the World Trade Organisation (WTO). If the Doha Round was concluded, there would be tariff cuts imposed on
Mr Carim said that Parliamentarians should perhaps also be engaging and issuing statements around the SADC/SACU division.
Structure of Negotiations
Mr Carim noted that within Government, the dti and ITED were the two bodies responsible for
ITED also did not work alone. For example, when it negotiated on the EPA, the Department of Agriculture was part of the negotiating team. The idea was not to see these negotiations as separate and discreet processes but processes that were interrelated and interdependent. What happened in the WTO affected what happened in SACU and so on. The Department had therefore tried to have a much more integrated approach to negotiations and had made some progress in this regard, although ITED remained the most important negotiator on trade and investment.
Mr Rasmeni asked whether, as it went about negotiating internationally, the region consolidated itself and different bodies such as SADC, in the same way as the EU had done.
Mr Carim replied that this was indeed the case
Professor E Chang (IFP) asked for clarification on the USA Farm Bill, which had recently been passed. She asked, why, if the spirit within the WTO had been to scrap tariff barriers, they had not seen this happening. She asked what would happen if all tariffs were scrapped, given that tariffs were Government’s biggest source of income, and what would replace them.
Mr Carim replied that a central objective of the negotiations on agriculture since 2001 had been to ensure that the support that the developed countries gave to their farmers, amounting to $1 billion a day, was significantly reduced. This was because that $1 billion, when given to a few relatively small populations in the
The reason such support was provided to OECD countries was because they were no longer agriculturally competitive. Clearly there was a contradiction between such practices and the principle of free trade espoused within the WTO.
With regard to the US Farm Bill, the proposal of the Chair had been not to eliminate support to farmers but to reduce such support to a range between $13 billion and $16.5 billion per year. The Farm Bill, however, foresaw increased support for farmers in the
Mr Carim agreed with Mr Njikelana that the bottom line for
Mr Carim mentioned that the EPA strategy had been to force the region to choose between access to their markets and regional integration. This, he said, was a false choice, but the manner in which they had negotiated had forced countries like
The Chairperson told Mr Carim that the Portfolio Committee would do whatever it could to support the dti and ITED in its negotiations and endeavours. The Committee had earlier this year expressed appreciation for the work that was being done but also expressed the need for realism with regard to progress on issues such as SADC and SACU. There was an appreciation of the fact that some countries had had little choice but to sign with the EU and of the role that
Mr Carim replied that he had the sense that sometimes these countries failed to realise what they would risk by indeed signing. They knew what they were gaining but not what they were placing at risk.
The Chairperson also said that it was important that the Committee see financial statements so as to see how funds were disbursed and utilised by a specific department.
Mr Carim assured the Chairperson that there would be a budget attached to the presentation in future.
Mr D Olifant (ANC) commented that, with due respect to Mr Carim and dti, the Committee had for a long time been talking about being party to the negotiating process and it should pursue this through Parliament.
Adoption of Minutes
The Committee adopted the Minutes of the last meeting.
The meeting was adjourned.
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