Building capacity to help Africa trade better

Trade Remedies in the African Trade Governance Context


Trade Remedies in the African Trade Governance Context

Trade Remedies in the African Trade Governance Context

Trade remedies and safeguards are used by governments to deal with unfair trade practices and unforeseen consequences when trade in goods is liberalised. However, they must comply with specific requirements and must be justified. African countries seldom use them.

Several explanations for Africa’s limited use of anti-dumping, countervailing and safeguard measures have been offered. One of them is that African States lack the required technical capacity. Trade remedy investigations are said to be cumbersome and costly. Another one is that most African States do not have the national legislation and institutions to undertake investigations and implement trade remedies and safeguard measures.

It is true that the necessary national legislation and investigating authorities must exist in order to investigate applications for trade remedies and safeguards and to impose the permissible measures. But this does not require costly and sophisticated structures. The laws of several African States already provide for these investigations and for imposing anti-dumping duties. National laws on customs and excise are examples. They often contain provisions for undertaking anti-dumping investigations and for levying anti-dumping duties. Competition commissions may, in some cases, investigate anti-dumping practices as predatory pricing cases but do not have jurisdiction over trade issues. Their ability to undertake investigations related to unfair practices of firms can, however, serve as a starting point for developing capacity involving investigations about unfair trade practices.

Trade data, which must support applications, might be a bigger challenge. The capacity to capture and analyse trade data is a vital and general trade governance tool and should be a priority. But there are examples of poorer African States having developed the required ability. When Zambia in 2015 initiated a safeguard investigation in respect of “Flat-Rolled Products of Iron, Non-Alloy Steel, Trailers and Semi-Trailers” and imposed a provisional safeguard measure,[1] it used global safeguards. In 2019 Madagascar imposed global safeguard measures on imported blankets.[2] Both countries duly notified their measures to the World Trade Organisation (WTO).

When the African Continental free Trade Area (AfCFTA) is properly implemented there will be an opportunity to undertake concrete steps to assist the State Parties in addressing domestic needs in respect of trade remedy governance. Article 11 of Annex 9 calls on the AfCFTA Secretariat to assist State Parties with the establishment of Investigating Authorities and the adoption of the necessary legislation. But drafting new laws for AfCFTA State Parties will not be enough. The State Parties and REC structures should also be supported in respect of trade data collection. Stakeholders such as private firms must be included in developing the required initiatives. The private sector is responsible for submitting requests for trade remedy investigations.

The fact that a large number of African countries trade with external parties under non-reciprocal arrangements is another relevant factor. In the case of the EU, they do so under Everything But Arms (EBA), the EU’s Generalised Scheme of Preferences (GSP) or its Generalised Scheme of Preferences Plus (GSP+).[3] These trade arrangements allow for quota-free and duty-free access to EU markets are not geared for applying trade remedies and safeguards.

The African Growth and Opportunity Act (AGOA) of the United States is another example. It also grants quota-free and duty-free access to goods from eligible African nations.[4] Only Sub-Saharan African countries are considered for eligibility, with AGOA beneficiary status having been awarded to approximately 39 countries (this number changes from time to time). It is the United States which determines, annually, whether countries have met the eligibility requirements. Beneficiary status may therefore be granted, or withdrawn, at the discretion of the US President. These countries have no recourse to dispute settlement in this regard. This is one aspect that differentiates AGOA’s non-reciprocal preferences from those contained in reciprocal trade agreements.[5]

Trade governance practices offer a further explanation for the limited use of trade remedies and safeguards. When alternative “remedies” in the form of tariff increases and import restrictions (usually suspect) are frequently used, private firms will rather request these softer options. But this is not a sound long-term policy. These responses often come in the form of blunt protectionist measures that are difficult to justify under trade liberalisation commitments and domestic due process requirements. Transparency and consistency are lacking. Remedies such as safeguards are then not even considered. The result is that a country’s national trade policy remains locked into a protectionist mode, actively pursued and perpetuated by certain domestic interests. For trade remedies to become part and parcel of the trade governance of states, governments should promote them, they should available, and firms should know how to apply for them. Awareness and training must be undertaken.

There are also factors that point to the nature of intra-African trade arrangements. Overlapping Regional Economic Community (REC) membership is widespread. This makes the application of trade remedies more complicated. It also brings other disadvantages such as conflicting rules of origin, different procedures for customs, transport, and standards. Overlapping REC membership adds costs to commerce across borders and constitutes a trade barrier in its own right. One of the general objectives of the AfCFTA is to “resolve the challenges of multiple and overlapping memberships”.[6]

RECs often pursue deeper integration agendas. In a Customs Union (CU) the implementation of trade remedies becomes complicated, especially when the member states are at different levels of economic development. The member states must act jointly when it comes to anti-dumping investigations and imposing anti-dumping duties against third parties. Trade amongst the members of a CU takes place in terms of a single customs territory arrangement; anti-dumping duties cannot be used against each other. Anti-competitive firm behaviour within a CU must be tackled through competition policies and related instruments. SACU has, through the South African International Trade Administration Commission (ITAC) a well-established mechanism for undertaking trade remedy and safeguard investigations.[7] However, the SACU Tariff Board, provided for in Article 11 of the 2002 SACU Agreement, is not operational.

Traditional trade remedy instruments are not a final panacea and a comprehensive answer for trade governance needs in respect of trade defence instruments. They are part of the domestic trade governance toolkit and should be used together with other instruments, such as general exception clauses, that are typical of trade agreements.[8] General exceptions are key provisions of the GATT 1994 and the GATS allowing WTO Members to justify, on a number of non-trade policy grounds, measures that would otherwise be inconsistent with the WTO Agreement. These grounds include protecting the environment, public health and public morals, and preventing deceptive practices. The general exceptions provide a mechanism for balancing trade liberalisation with other important policy objectives of States.

When new trade agreements are negotiated, custom made remedies should be developed. The EU-SADC Economic Partnership Agreement (EPA) contains several trade defence instruments.[9] Some of them are only available to developing State Parties.[10]

The different options in new generation trade agreements such as the EPAs and the AfCFTA should be studied and used. The willingness to declare disputes also belong in the national trade governance toolkit. The first dispute between SACU and the EU (about the importation of poultry from the EU) has already been declared and will be resolved under the rules of this EPA. The EU recently declared a dispute against SACU under the EU-SADC EPA involving a bilateral safeguard measure against poultry imported from the EU.[11] In April 2021 SACU imposed anti-dumping duties on pasta imported from Egypt, Latvia, Lithuania, and Turkey.[12] Namibian pasta producers were among the applicants requesting these measures.

The multilateral trade context in which trade remedy measures are used, is changing. It has been observed that in some instances anti-dumping has become a “blunt instrument”. It is not particularly useful against, for example, Chinese imports. Calculating the dumping margin in respect of Chinese imports can be difficult. China’s competitiveness is such that Chinese firms do not need to dump. The result is that other types of protective measures and policies are used. The South African Government recently announced, as part of its “localisation programme”, a ban on the use of imported cement for state infrastructure projects.[13] The local cement industry has been lobbying for state protection against cheaper imported cement for several years. Other such initiatives have been launched as sector specific “Master Plans”. One recently announced such plan deals with the local steel sector.[14]

These policies should be developed with care since unforeseen cost increases could follow. When used in the African trade context there should be a careful weighing of other joint policy needs such as the development of regional value chains and industrialisation. Exceptions for other African producers should be considered.

The inclusion of trade remedy and safeguard provisions in the AfCFTA Agreement signals an important message. When governments employ these measures, they must comply with the applicable rules and procedures. Private firms can apply for them. The inclusion of detailed trade remedy and safeguard provisions in the AfCFTA Agreement could result, over time, in domestic trade regulatory measures becoming more transparent, rules-based, and justiciable. Arbitrary and discretionary actions will become less frequent and due process compliance will increase. Disguised “emergency measures” could be contested in local (and regional) courts.

[1] tralac. 2015. Zambia’s Provisional Safeguard Measures on Flat-Rolled Products of Iron, Non-Alloy Steel, Trailers and Semi-Trailers. Discussion note. https://www.tralac.org/discussions/article/8331-zambia-s-provisional-safeguard-measures-on-flat-rolled-products-of-iron-non-alloy-steel-trailers-and-semi-trailers.html

[2] Global Trade Alert. 2018. Madagascar: Provisional safeguard duty on imports of blankets. https://www.globaltradealert.org/state-act/33672/madagascar-initiation-of-safeguard-investigation-on-imports-of-blankets

[3] European Commission. 2017. EU trade policy and Africa's exports. https://www.tralac.org/documents/resources/external-relations/eu/4428-eu-trade-policy-and-africa-s-exports-european-commission-2017.html

[4] AGOA eligibility requirements are set out in Section 104 of the AGOA legislation, Public Law 106/200. https://agoa.info/downloads/legal/2385.html

[5] AGOA Country Eligibility. https://agoa.info/about-agoa/country-eligibility.html

[6] Art 3(h) AfCFTA Agreement.

[7] The SACU Council adopted decisions to this effect in 2005 and 2006.

[8] Of which art XX GATT is the typical example.

[9] Arts 32 to 38 of this Agreement.

[10] Agricultural safeguards, food security safeguards, transitional safeguards and infant industry protection safeguards are examples from the EU-SADC EPA.

[11] EPA Monitoring. 2019. EU Formally Challenges Application of SACU Safeguard Duties in the Poultry Sector. https://epamonitoring.net/eu-formally-challenges-application-of-sacu-safeguard-duties-in-the-poultry-sector/

[12] Trade Solutions. 2021. Provisional anti-dumping duties imposed on pasta imported from Egypt, Latvia, Lithuania and Turkey. https://tradesolutions.co.za/2021/04/05/provisional-anti-dumping-duties-imposed-on-pasta-imported-from-egypt-latvia-lithuania-and-turkey/

[13] Business Day, 17 Oct 2021.

[14] The Department of Trade, Industry and Competition. 2021. The South African Steel and Metal Fabrication Master Plan 1.0: Support for the steel value chain. https://www.tralac.org/documents/resources/by-country/south-africa/4427-the-south-african-steel-and-metal-fabrication-master-plan-1-0-the-dtic-2021.html

About the Author(s)

Gerhard Erasmus

Gerhard Erasmus is a founder of tralac and Professor Emeritus (Law Faculty), University of Stellenbosch. He holds degrees from the University of the Free State, Bloemfontein (B.Iuris, LL.B), Leiden in the Netherlands (LLD) and a Master’s from the Fletcher School of Law and Diplomacy. He has consulted for governments, the private sector and regional organisations in southern Africa. He has also been involved in the drafting of the South African and Namibian constitutions. He grew up in Namibia.

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