Willemien Viljoen, tralac Researcher, discusses how the Continental FTA negotiations could build flexibility into safeguard measures

Regional integration amongst countries of unequal size and levels of development requires means to address potential adverse effects, like trade diversion and polarization of industrial development. One way countries can mitigate potential harm to domestic industries due to the liberalisation process is through the utilization of safeguard measures. A safeguard measure is a ‘safety valve’ which gives countries rules-based measures to protect their domestic industries against harm due to increased imports resulting from trade liberalisation. The aim of a safeguard is to give a country access to various measures (including tariff increases and quantitative restrictions) to implement when a surge in imports due to trade liberalisation causes harm to domestic industries. These measures allow for the temporary negation of trade liberalisation commitments in a manner which is consistent with the rules of the World Trade Organization (WTO). On the multilateral level the use of these measures is governed by Article XIX of the General Agreement on Tariffs and Trade (GATT) and the WTO Agreement on Safeguards. In the majority of regional trade agreements member countries retain these rights and obligations to utilize safeguard measures once the substantive and procedural requirements are met. However, in recent years there has been an increasing trend to include bilateral or regional safeguard measures in regional trade agreements; WTO compatible measures which are only applicable among the countries which are parties to the specific regional trade arrangement. These regional or bilateral measures are seen as a way of building flexibility into safeguard measures; often setting out specific conditions, prerequisites and processes for implementation to ensure developing and least developed countries have access to this trade defense instrument.

The majority of African countries are not frequent users of multilateral safeguard measures and the explanation usually given is that these countries lack the expertise, technical capacity and resources to do so. This has resulted in African countries calling for the inclusion of regional safeguard measures in regional trade agreements to allow for asymmetry in the application of safeguard measures to enable developing and least developed countries to clearly identify developmental objectives and ensure liberalisation (with checks and balances) in accordance with these goals. This also enables developing and least developed economies to pay special attention to their sensitive sectors, most notably agriculture, in drafting special safeguards to help stabilize domestic prices in the face of short-term price swings. The need for flexibility in safeguard measures and special safeguards to assist less developed economies when domestic sensitive sectors face challenges due to trade liberalisation, is something that will need special attention under the negotiations of the Continental Free Trade Area (CFTA).

This ambitious integration effort aims to integrate 54 African economies all at different levels of development – a mix of developing and least developed countries at different levels of industrial development; with different industrialization goals and ongoing efforts; and reliance on similar agricultural production to attain export earnings and to meet economic growth expectations. However, the question which has thus far gone unanswered in African integration initiatives is how to build flexibility into safeguard measures which will enable less developed economies to address challenges to their domestic industries in an effective, efficient and manageable way. Can the Transpacific Partnership Agreement (TPP) and the Economic Partnership Agreements (EPAs) offer some guidance in this regard?

Both these agreements have been successful in building in true safeguard flexibility not before seen in regional agreements. These agreements allow for the use of regional measures which are product and country specific with unique requirements and processes for implementation. This promotes certainty and transparency in the use of specific measures by certain countries under precise conditions and makes the protection of sensitive sectors accessible and manageable. The Economic Partnership Agreement (EPA) between the countries of the Southern African Development Community (SADC) and the European Union (EU) includes a list of 60 specific products (varying from agricultural products, to chicken meat, honey and mushrooms to food and beverages, to beer and equipment and different type of fasteners) on which Botswana, Lesotho, Namibia and Swaziland can implement transitional safeguard measures on imports from the EU if imported in such quantities as to cause harm to the domestic industries of these countries. Furthermore, a regional Committee is provided for, for the evaluation and monitoring of the implementation of these measures. The TPP goes even further by detailing country-specific, product-specific safeguards which can be implemented by certain countries on certain products (for instance milk powder from Australia, condensed and evaporated milk from Peru and forestry products from New Zealand and Chile) for a specific period of time; allowing for a certain duty once a prescribed trigger level is reached. Both these agreements also allow for consultation processes to address challenges which arise from the utilization of these specific measures. Although these measures are detailed and may come across as being complex these provisions provide an option for drafting safeguard measures under the CFTA which truly reflects flexibility in a transparent, effective, accessible, manageable and rules-based manner.

However, for such measures to be included in the CFTA preparedness and careful drafting will be key to their success. Countries need to determine clear developmental benchmarks and strategies prior to trade negotiations taking place. Countries should then negotiate these special flexibilities to protect sectors in relation to these goals to maintain a balance between allowing countries to apply safeguards to prevent serious economic disruptions to vital domestic industries and the assurance that these measures will not defeat the purpose of trade liberalisation and regional integration. These country-specific, product-specific measures need to be clear and transparent. The agreement must clearly identify the necessary procedures for implementing, the type of measures that can be implemented, the requirements for investigation an alleged surge in imports, the notification of an investigation and preliminary and final findings to interested parties, the required consultation process and the available dispute resolution process. Simplification will be key – allowing for the utilization of specific measures by certain countries on particular products within a framework which allows for simplified required conditions, prerequisites and processes can reduce the cost of implementation and increase accessibility and ease of use.

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Sources:

Trans-Pacific Partnership Agreement

European Union – Southern African Development Community Economic Partnership Agreement

Denner, W. 2009. Ensuring flexibility: A survey of safeguard measures in regional and bilateral trade agreements. Trade Negotiations Insight Volume 8 Number 9. [Online]. Available: http://www.ictsd.org/bridges-news/trade-negotiations-insights/news/ensuring-flexibility-a-survey-of-safeguard-measures-in

Erasmus, G. 2015. Safeguard measures in African Regional Economic Communities: Zambia’s provisional safeguard measures on flat-rolled products of iron, non-alloy steel, trailers and semi-trailers. Stellenbosch: tralac