Gerhard Erasmus, tralac Associate, discusses the international legal framework governing South African trade remedy investigations with respect to imports from the EU

South African trade authorities have been investigating several complaints about the alleged dumping of chicken in the local market. These investigations have focussed on chicken imported from the USA, Brazil and now the European Union (EU). South African newspapers recently reported that a preliminary finding of dumping against bone-in chicken portions from Germany, the Netherlands and the UK has been made by South Africa’s trade watchdog, the International Trade Administration Commission (ITAC).[1]

The South African Poultry Association, which represents local chicken producers, has asked for an anti-dumping duty of 91% on imports from Germany and the Netherlands and a duty of 58% on British chicken products. Cheap chicken imports have been a source of concern for the association, which has previously approached ITAC for protective measures against chicken products from especially Brazil.[2] Imports of chicken products from Germany, the Netherlands and the UK amounted to 101,581 tonnes in 2012.

This Discussion Note examines the international legal framework governing the South African trade remedy investigations with respect to imports from the EU. Which international legal instrument applies? Which forum will have jurisdiction over subsequent disputes? What procedures should be followed?

South Africa is a WTO member. On the multilateral level the trade remedy disciplines of the GATT govern anti-dumping investigations and measures of South African authorities. In the case of Brazil and the USA the relevant GATT provisions are the applicable law.[3] Disputes about the validity of trade remedy measures are governed by the Dispute Settlement Understanding (DSU) of the WTO. The investigation involving imports from EU member states is more complicated. The European Commission (EC) as well as the member states of the EU are all WTO members but a bilateral Free Trade Agreement, the Trade, Development and Cooperation Agreement (TDCA) was concluded with South Africa in 2000.[4] It contains its own trade remedy and dispute settlement provisions. How does the TDCA impact on South African anti-dumping investigations which target European chicken?

Article 23 of the TDCA deals with anti-dumping and countervailing measures and provides as follows:

1. Nothing in this Agreement shall prejudice or affect in any way the taking, by either Party, of anti-dumping or countervailing measures in accordance with Article VI of the GATT 1994, the Agreement on Implementation of Article VI of the GATT 1994, the Agreement on Subsidies and Countervailing Measures, annexed to the Marrakech Agreement establishing the WTO.

2. Before definitive anti-dumping and countervailing duties are imposed in respect of products imported from South Africa, the Parties may consider the possibility of constructive remedies as provided for in the Agreement on Implementation of Article VI of the GATT 1994 and the Agreement on Subsidies and Countervailing Measures. (Emphasis added)

WTO rules govern anti-dumping investigations and measures which are undertaken or imposed on goods traded between the Parties. Article VI of the GATT 1994, the Agreement on Implementation of Article VI of the GATT 1994 and the Agreement on Subsidies and Countervailing Measures are the only substantive law to be applied in respect of anti-dumping or countervailing measures involving their inter partes trade in goods.[5] The TCDA confirms the exclusive application of the multilateral rules.

Does the language of Article 23 suggest that WTO disciplines should also cover disputes regarding the correctness of trade remedy measures? It does not expressly mention dispute settlement. However, the wording may imply that since the applicable substantive law is, without qualification, the relevant WTO rules, disputes involving the application of these rules should be heard by WTO panels and the Appellate Body. If this is not the case, then the forum responsible for deciding disputes under Article 23 will have to apply WTO law.

Does the text indicate that the integrity of the WTO law and jurisprudence was a concern for the Parties, and that the DSU should therefore govern disputes involving actions under Article 23 of the TDCA? FTAs are exceptions to the MFN rule and have to comply with Article XXIV GATT. What guidance do the TDCA dispute settlement provisions provide?

Article 3 of the TDCA deals with “Non-execution” but does not answer the question posed here. It says that if a Party considers that the other has failed to fulfil an obligation under this Agreement, it may take appropriate measures. Before doing so it shall, within 30 days, supply the other Party with all relevant information required for a thorough examination of the situation, with a view to seeking a solution acceptable to the Parties. In urgent cases[6] appropriate measures may be taken without prior consultations. These measures shall be immediately notified to the other Party.

Article 104 is the dispute settlement clause of the TDCA. It begins by indicating that “any dispute relating to the application or interpretation of this Agreement “may be referred to the Cooperation Council which “may settle any dispute by means of a decision”. However, this institution is not a court of law. To the extent that the Cooperation Council may settle disputes it will fulfil a consultative role; not adjudication.

The Cooperation Council is established in terms of Article 97. Its composition, the frequency of its meetings, agenda and venue of meetings shall be decided through consultation between the Parties. Its basic functions are to “ensure the proper functioning and implementation of the Agreement” and to promote dialogue, cooperation and trade between the Parties. This includes appropriate methods of “forestalling problems which might arise in areas covered by the Agreement”. This is not a dispute settlement body. It is a specially created institution with the power to take decisions in respect of matters “covered by this Agreement”. The Parties will develop rules on its decision making and procedures.

The Cooperation Council has not been designed as the forum which can ultimately rule on the correct application of Article VI of the GATT 1994, the Agreement on Implementation of Article VI of the GATT 1994 and the Agreement on Subsidies and Countervailing Measures.

The relationship between WTO law and the TDCA is not explained in the context of the application of trade remedies. Article 104 of the TDCA goes on to say that in the event of it not being possible to settle a dispute through the Cooperation Council, arbitration has to be pursued. Each Party will appoint an arbitrator; while the Cooperation Council shall appoint a third arbitrator within six months of the appointment of the second arbitrator. The arbitrators' decisions shall be taken by majority vote within 12 months. Each Party to the dispute must take the steps required to implement the decision of the arbitrators. The Cooperation Council shall establish the working procedures for arbitration.

In the case of disputes arising under Titles II and III of this Agreement, Article 104 provides for more detailed arbitration procedures. Title II is the trade liberalization chapter of this agreement and deals with the tariff elimination aspects of the TDCA. Title III covers “trade related issues” such as customs; and includes anti-dumping and countervailing measures, as well as safeguards.

Article 104 finally contains the following important provision:

Without prejudice to their right to have recourse to WTO dispute settlement procedures, the Community and South Africa shall endeavour to settle disputes relating to specific obligations arising under Titles II and III of this Agreement through recourse to the specific dispute settlement provisions of this Agreement. Arbitration proceedings established under this Agreement will not consider issues relating to each Party's WTO rights and obligations, unless the Parties agree to refer any such issues to the arbitration.

The Parties therefore retain their right to refer disputes about the correctness of anti-dumping measures to the dispute settlement mechanism of the WTO. Good faith requires that they should first exhaust the arbitration procedures of the TDCA. The quoted part of Article 104 does, however, not exclude the possibility “to have recourse to WTO dispute settlement procedures” in the first instance.

If ITAC does impose anti-dumping measures on chicken imported from EU member states a dispute is very likely to be declared. The choice made by the EC as to where and how to litigate will provide an important indication of the role of the Cooperation Council. It will also provide an important reminder as to how to formulate dispute settlement clauses in FTAs.

Under WTO law third parties enjoy specific rights and are entitled to join dispute settlement proceedings if they can demonstrate sufficient interest in the matter. This is an important element in securing consistency in DSU jurisprudence. It may be a consideration in this instance too and may have an influence on the decision as to where to institute proceedings for ensuring anti-dumping measures on chicken are GATT compatible; even if taken in the context of an FTA. ITAC’s measures might give rise to concern beyond the corridors of the EC in Brussels.

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