by Gerhard Erasmus, tralac Associate

The South African Minister of Trade has announced his intention to declare a formal dispute with the EU, under the Dispute Settlement Understanding of the WTO, about the EU’s ban of South African citrus. The ban follows the discovery of “black spot” on South African oranges exported to the EU. Black spot is a fungal disease which affects citrus plants throughout subtropical climates. Some claim that the main effect of the disease is cosmetic; others are of the view that healthy orchards can be infected and that the disease causes a reduction in both fruit quantity and quality.

This announcement by the Minister signifies an important development. At this stage it is too early to know whether an actual Panel Report and/or Appellate Body Decision will be delivered and will settle the dispute. That will require a ruling as to whether the EU can justify its ban as a lawful SPS (Sanitary and Phyto-Sanitary) measure. South Africa argues that there is no scientific consensus to support the EU’s claim that citrus black spot found on peels could infect European orchards. The EU stance, he claims, is ‘fundamentally driven by protectionist, rather than plant health concerns’. According to newspaper reports the Minister is of the view that the EU ban was aimed at restricting highly competitive citrus imports from SA to the benefit of citrus producers in the EU (Business Day, 17 October 2014).

Under the WTO’s dispute settlement mechanism the parties must first engage in formal consultations. It may be that the matter will be settled then, as happened recently in a dispute declared by Brazil against South Africa concerning anti-dumping duties imposed on chickens imported from Brazil. If the consultations fail to bring about a settlement the dispute will run its further course, starting with a Panel procedure. Than can be followed by an appeal to the Appellate Body.

This announcement also has important bigger picture implications. In terms of how trade is generally regulated; the rights of private traders, exporters and importers are protected; and how governments take responsibility for the interests of their nationals; this announcement by the Minister sets a precedent which will hopefully grow into a general practice. And this practice should become a basic feature of how we conduct trade among ourselves too.

This development, if a sign that Pretoria will in future employ formal dispute settlement as another arrow in its quiver of trade promotion measures, is to be welcomed. The first reason has to do with the fact that non-tariff measures have become a major concern for African exporters; both regionally and in trade with developed nations. South Africa will make history and set an example if it files a formal complaint against the EU and sees the dispute through to its final conclusion. There might be third parties who will join its application for setting aside the present ban.

Non-tariff measures (NTMs) are of particular concern to exporters from developing countries, as they can constitute a major impediment to trade. Exporting companies need to comply with a growing range of requirements which include technical regulations, product standards and customs procedures. These measures may be imposed for legitimate reasons but are often adopted to protect local producers or are simply unnecessary. The business sector, particularly in developing countries, often lacks the information, capabilities and facilities needed to meet complex requirements. Compliance with NTMs can also come at a considerable cost.

The answer with respect to how to deal with illegitimate NTMs include trade facilitation efforts*, more efficient and transparent customs procedures, as well as stricter control over the use of SPS and TBT measures. For the latter it may be necessary to “go to court”, as South Africa is now doing. Litigation is sometimes called for as a necessary procedure to clarify bona fide disagreements about the interpretation or application of international legal norms. There is nothing inherently suspect or offensive about it; not in the WTO context nor in intra African trade. Certainty about the meaning of the law allows business to continue; while future transactions will benefit.

African states do not participate in the dispute settlement system of the WTO and they do not litigate against each other under their own regional trade regimes. They do not, in other words, allow an important aspect of rules-based trade (to settle disputes in a certain and legally binding manner) to be an active element in how trade relations are conducted. The reasons generally offered are that technical capacity is lacking or that it would signal offensive behaviour to litigate against other sovereign governments.

Another, more fundamental explanation has to do with the fact that adherence to the rule of law (as a general criterion for the lawfulness of executive behaviour) is often absent when it comes to inter-governmental relations and domestic trade regulation. And then there is the frequently raised concern about loss of “sovereignty”. This last argument (that rulings by tribunals which settle trade disputes will encroach upon sovereignty) is difficult to grasp. It is an act of sovereignty to conclude international agreements, including trade agreements. The subsequent non-compliance with obligations in such agreements cannot be justified by invoking sovereignty or national laws or constitutions. If that were possible there will never be any rules-based trade or compliance with any international legal obligations. Power politics, unilateral retaliation, unpredictability and even the use of force will then be at the order of the day.

The argument that African states lack the technical capacity to apply and defend basic trade law norms cannot be true as a general statement. They certainly have experienced national lawyers who will be able to argue many of the legal issues which have to be decided in trade disputes. Since the establishment of the WTO almost 20 years ago there has been a major improvement in legal skills and technical capacity pertaining to international trade law in Africa.

It remains true that many African societies lack expertise and resources with regard to certain specialized areas of international trade law. There is still a lot of capacity building to be done and governmental reforms to be implemented. The absence of certain institutions is another concern. An example of the latter is the national Investigating Authorities required to investigate anti-dumping and countervailing complaints and implement trade remedies under the GATT. If they do not exist, the relevant trade remedies will not be available. Other examples are to be found in trade facilitation endeavours; which often suffer from lack of transparency, the absence of remedies and lack of clear procedures.

How can these problems be fixed and what can be done to enhance a general culture of respect for the rule of law in matters of international trade? In several instances it would be relatively easy to enforce and respect basic legal norms; provided the necessary will to do so and to implement the required legal reforms exists. This would often only require that administrative justice is available, that unfettered executive discretions are not allowed, that reasons for administrative rulings be provided, and that transparency and proportionality are ensured. These are basic good governance principles. If they become part of the daily administration of trade related laws and regulations it will follow that legal remedies will, where due, be granted to private parties. This will happen within and between states.

Justification for executive measures is vital. The fact that a Minister announces a sudden increase in duties on imported goods in violation of a binding Trade Protocol cannot then be sanctioned by invoking sovereignty. If such a step cannot be justified in terms of the exceptions provided for under the applicable trade instrument, the government of the affected private parties and traders should surely be entitled to invoke inter-state dispute settlement procedures; starting with consultations. Such consultations must be aimed at ensuring respect for the applicable law. Vague “consultations” which do not aim at restoring respect for rights and obligations are a waste of time.

This brings us back to the announcement by the South African Minister of Trade about the black spot dispute and his intention to make sure that the applicable law is respected. The same resolve is necessary in intra-African trade and should become the accepted practice in all our capitals. When member states can violate basic trade obligations with impunity we (traders, investors, consumers and governments) will forfeit all those benefits associated with legal certainty and predictability. A general culture of non-compliance with legal norms breeds other ills such as corruption and a lack of accountability. Unilateral retaliation will probably also follow; spelling the end to rules-based trade and other areas of inter-state relations.

Tell us what you think.

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