Could Safeguards be used to promote Industrialisation?
Industrialisation depends on many policy inputs. African countries face unique challenges and must develop industrialisation policies suitable for their conditions. Such polices must now prioritise regional integration, global value chains, services, technological developments, and digital trade. UNCTAD’s Economic Development in Africa Report 2022 argues that by neglecting knowledge-intensive services, such as information and communications technology and financial services, export diversification remains a challenge in Africa. The removal of barriers to services trade “will be key to unleashing the transformative role of services”. A recent World Bank study emphasises the importance of a competitive market environment and investments in infrastructure.
Trade remedies and safeguards are not widely used in Africa, but detailed trade remedy and safeguard clauses are included in regional trade agreements. The African Continental Free Trade Area (AfCFTA) Agreement is an example. It has a dedicated Annex on Trade Remedies and Safeguards and detailed Guidelines, while REC FTA Protocols also provide for trade remedies and safeguards. How could they become more widely used and how could they support national industrialisation plans?
The WTO Agreement on Safeguards sets forth the rules for applying safeguard measures. They are defined as “emergency” actions with respect to increased imports of particular products, where such imports have caused or threaten to cause serious injury to the importing Member’s domestic industry. Such measures, which take the form of suspension of concessions or obligations, can consist of quantitative import restrictions or duty increases to higher than bound rates. They can only be imposed when properly conducted investigations have taken place.
Safeguard measures must be temporary, they may be imposed only when imports are found to cause or threaten serious injury to a competing domestic industry, and they must be applied on a non-selective (i.e. most-favoured-nation, or “MFN”) basis. They should be progressively liberalised while in effect, and compensation might be due to the member states whose trade is affected. Thus, safeguard measures, unlike anti-dumping and countervailing measures, do not require a finding of an “unfair” trade practice.
Safeguard measures can only be imposed in order to protect existing industries. The WTO Agreement on Safeguards refers to a situation where a product is being imported into a country in such increased quantities that it causes, or threatens to cause, serious injury to the domestic industry that produces ”like or directly competitive” products.
Safeguard measures do not guarantee commercial success for local businesses. The basic benefit associated with safeguard measures is that they allow governments to take steps to protect domestic industries during a period when the volume of imports is unexpectedly high. A safeguard measure implemented in the prescribed manner mitigates the adverse consequences of an unexpected import surge.
With safeguards being possible, firms will be assisted and be able to cope with difficult circumstances. They will be better placed to adjust to commercial challenges. In this manner they can benefit from domestic governance arrangements to implement safeguard measures in the context of national development and industrialisation policies. In the absence of rules-based safeguard arrangements, legitimate responses are unlikely. What is more likely to happen is that ad hoc and arbitrary practices will follow. Safeguard measures provide for transparent, legally certain, and lawful assistance to domestic industries.
Properly designed trade remedy and safeguard measures will require deliberate effort and local capacity development but may bring important long-term benefits. These will come in the form of the development of technical skills within government structures as well as the private sector. It will also result in more legal certainty and predictability and fewer arbitrary practices. This trend should spill over into other areas of economic governance too. There will be a better investment climate, and certainty that safeguards (and other trade regulatory measures) are lawful and legally defensible.
Adoption of the necessary legislation and establishment of institutions to provide for safeguards investigations and measures should be considered as part of trade governance reforms. They will support the implementation of national industrialisation policies. On their own they cannot guarantee commercial success, but as part of a bigger strategy they can make an important contribution to better governance and will help domestic industries to adjust to unexpected negative trade-related developments and to survive commercially.
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