Discussions

The final Trade Remedy Arrangement of the Tripartite Free Trade Area

The final Trade Remedy Arrangement of the Tripartite Free Trade Area

10 Aug 2017

Gerhard Erasmus, tralac Associate, comments on the recent conclusion of the TFTA legal arrangements on Trade Remedies*

The final legal arrangement for Trade Remedies (TRs) in the Tripartite Free Trade Area (TFTA) has just been concluded.[1] The TR Annex and the Guidelines on TRs were still outstanding when the Agreement was signed. They are now available. We take a look at what is provided for, how the arrangement will function, and to what degree “flexibilities” have been incorporated.

The negotiations for the Continental Free Trade Area (CFTA) are also under way. Provisions on the same disciplines must be adopted. What lessons can be learned from the TFTA?

Architecture of the TFTA Arrangement for Trade Remedies

The TR regime of the TFTA consists of three legal instruments, the TFTA Agreement’s provisions on TRs, the Annex on TRs, and the Guidelines.

The TFTA Agreement provides for interim as well as final TR provisions. This was necessary because the Annex and the Guidelines on TRs (as well as the Annex on rules of origin and the tariff schedules) could not be agreed in time for the launching and signing ceremony of June 2015. The outstanding TFTA instruments were negotiated and concluded as part of the subsequent process foreseen as part of the “built-in agenda” of the TFTA.[2] (The TFTA text was signed in June 2015. The TR Annex, TR Guidelines and the Annex on Rules of Origin have been finalized two years later.) The final arrangement will only apply once the TFTA Agreement is in force.

The TR clauses in the TFTA Agreement are the following:

Article 16 Transitional Arrangements:

  1. Where there is evidence of dumping, subsidisation or surge in imports into the territory of a Tripartite Member/Partner State, nothing in this Agreement shall prevent that Tripartite Member/Partner State from applying, in the interim, an anti-dumping, countervailing or safeguard measure governed by:

    1. REC provisions among the Member/Partner State of the same REC;

    2. The relevant WTO provisions across the RECs.

  2. The Tripartite guidelines on the implementation of trade remedies shall be drafted by a Tripartite Committee of Experts as part of the built in agenda and shall form an integral part of Annex II on Trade Remedies.

  3. Articles 17, 18 and 19 shall be suspended until Annex II on Trade Remedies is finalised and operational.

Article 17 Anti-dumping and Countervailing Measures:

  1. Subject to the provisions of this Agreement, nothing in this Agreement shall prevent Tripartite Member/Partner States from adopting anti-dumping and countervailing measures in accordance with the relevant WTO Agreements and Annex II on Trade Remedies.

  2. In applying this Article, Tripartite Member/Partner States shall be guided by provisions of the WTO Agreement on the Interpretation of Article VI of the GATT 1994; and the WTO Agreement on Subsidies and Countervailing Measures.

Article 18 Safeguard Measures:

  1. A Tripartite Member/Partner State may apply a safeguard measure to a product only after determining that such product is being imported into its territory:

    1. in such increased quantities, absolute or relative to domestic production; and

    2. under such conditions as to cause or threaten to cause serious injury to the domestic industry that produces like or directly competitive products.

  2. In applying this Article, Tripartite Member/Partner States shall be guided by the provisions of Article XIX of GATT 1994 WTO Agreement on Safeguard Measures and Annex II on Trade Remedies.

Article 19 Preferential Safeguards:

  1. Preferential safeguard measures may be applied by a Tripartite Member/Partner States under the provisions in Annex II on Trade Remedies, if as a result of the obligations undertaken by that Tripartite Member/Partner State goods are imported into the territory of a Tripartite Member/Partner State under such conditions as to cause or threaten to cause serious injury to the domestic industry.

  2. Preferential safeguard measures shall be applied only to the extent necessary to prevent or remedy serious injury.

Article 20 Cooperation on Trade Remedies:

Recognising that dumping, subsidisation and import surges, whether originating from the Region or a Third Country, can adversely affect more than one Tripartite Member/Partner State within the Region, Tripartite Member/Partner States shall co-operate in the detection and investigation of dumping or subsidisation or sudden imports urges and in the imposition of the appropriate measures to curb such practices.

During the interim phase, WTO and REC TR provisions apply. Once the TFTA is in force, the final and substantive TR provisions of the TFTA (the relevant Articles in the Agreement, the TR Annex and the Guidelines) apply to TRs implemented by the TFTA MS on goods traded amongst them. WTO provisions will not become irrelevant; to the (considerable) extent that the TFTA invokes WTO TR disciplines, they will remain applicable to intra TFTA trade in goods.

Content of the TR Annex and Guidelines

The detailed TR provisions appear in the Annex and the Guidelines. These provisions cover anti-dumping and countervailing measures, as well as global and preferential safeguards. They do not contain an explicit acceptance of the notion of flexibilities for TR measures adopted by MS. The Annex provides that in the event of a conflict between the Annex and the Agreement, the latter shall prevail.[3]

On global safeguards the Tripartite Member/Partner States confirm their rights and obligations under Article XIX of the GATT 1994 and the WTO Agreement on Safeguards.[4]

The TFTA’s preferential safeguards may turn out to be of special and more immediate concern to several TFTA MS. Article 4 of the Annex contains a detailed provision on preferential safeguards, which apply to products originating in a Tripartite Member/ Partner State and when they are “imported into the territory of another Tripartite Member/Partner State in such increased quantities, absolute or relative to domestic production of the importing Tripartite Member/Partner State, and under such conditions as to cause serious injury or threat thereof to the domestic industry of like or directly competitive products in the territory of that Tripartite Member/Partner State.”

This provision is carefully drafted to ensure compliance. Preferential safeguards shall not exceed a period of four years and shall contain clear indications of their progressive elimination at the end of the set period. This period may be extended for another four years, subject to justification by the Investigating Authority.

An important implication must be noted: The application of preferential safeguards is dependent on the existence of national Investigation Authorities. They are defined (in the Annex) to mean institutions “designated with the responsibility of conducting trade remedies investigations in a Tripartite Member/Partner State”. Other provisions (e.g. Articles 6 and 7) also refer to functions to be carried out by national Investigating Authorities.

The Annex provides for transparency and related matters. Article 8 provides:

All Interested Parties within the Tripartite Member/Partner States shall have an opportunity to defend their interests throughout the investigation.

For subsidies and countervailing investigations “there shall be an invitation to consultations prior to initiation and notification in accordance with the WTO Agreement on Subsidies and Countervailing Measures, this Annex and the Guidelines. In safeguard investigations a Tripartite Member/Partner State shall immediately notify such initiation of the safeguard investigation in accordance with the WTO Agreement on Safeguards, this Annex and the Guidelines.”[5]

Interested parties are defined to include “an exporter or foreign producer or the importer of a product subject to investigation, or a trade or business association a majority of the members of which are producers, exporters or importers of such product; a producer of the like product in the importing Tripartite Member/Partner State or a trade and business association a majority of the Tripartite Member/Partner States of which produce the like product in the territory of the importing Tripartite Member/Partner State; the governments of the third countries of origin and of the exporting Tripartite Member/Partner States of the product under investigation; and any other domestic or foreign parties determined by the Investigating Authority.” 

Legal Remedies and Dispute Settlement

TRs involve justiciable due process and substantive requirements. It a proper TR regime does not allow for unfettered discretionary powers. It must be possible to take TR measures on review in order to ensure compliance with the applicable norms, and to protect the rights of affected parties, including private parties.

Judicial remedies must be available through domestic tribunals (where private parties can bring their applications) as well as through inter-state dispute settlement mechanisms, under the terms of the trade agreement in question. Disputes about the correct application of TR rules constitute the majority of WTO disputes; where the Members act on behalf of national firms or on their own initiative and invoke WTO treaty obligations.

It is, of course, possible (and even preferable) that regional Tribunals/Courts established as part of REC regimes, can entertain applications (by Governments as well as private parties) to decide whether trade remedy measures comply with the applicable rules. REC Courts/Tribunals have never decided TR disputes. (There has been one case in COMESA where a tariff imposed by a MS has been declared invalid.[6] The ruling was complied with.) This matter (the availability of judicial review of trade remedy measures as well as dispute settlement generally) has wider implications for intra-African trade. It touches upon the fact that African Governments never litigate against each other about compliance with obligations in trade agreements. This casts doubt over their commitment to rules-based trade.

Trade remedy regimes without judicial review is a contradiction. If judicial review is absent, unjustifiable protectionist measures are likely. The suspicion (or evidence) that such measures are ultra vires the applicable rules cannot be dispelled in a manner which provides certainty and predictability for firms and investors. And if TR measures are to be guided by WTO disciplines, the question arises why inter-state dispute settlement is tolerable as part of the multilateral obligations of Member States but unacceptable within the REC or TFTA context.

Concluding Observations

The CFTA negotiations are underway. The development of its own TR regime (which will be a continent-wide arrangement) poses a major challenge to the participating Governments. Will they be constrained by what the TFTA has just produced, or would they find space for some “flexibilities” for those MS that regard them as necessary. What lessons can be learned from TFTA experience?

The TFTA TR instruments do not expressly provide for special flexibilities. Article 6 of the TFTA Agreement contains the TFTA Principles; which include variable geometry as well as flexibility and special and differential treatment. However, reciprocity is also one of these Principles.

The manner in which the TFTA TR instruments have been adopted is unusual and risky. How would States that have signed an incomplete text be guaranteed that the final outcome of the negotiations will be acceptable to them? The TFTA provides a sui generis answer in Article 40 of the Agreement, containing the Obligation not to Defeat the Object and Purpose of this Agreement Prior to its Entry into Force.[7]

The full spectrum of the TFTA TR regime is not yet complete. Article 12 of the Annex provides:

  1. Where any parties to the Agreement fail to agree on implementation of any of the provisions of this Annex and a dispute arises, the matter shall be addressed in accordance with Article 30 of the Agreement, taking into account the special nature of trade remedies disputes.

  2. Pursuant to Article 9 of Annex X on Dispute Settlement Mechanism, special and additional terms of reference for the resolution of disputes arising under this Annex shall be appended as an integral part of Annex X on Dispute Settlement Mechanism.

How does the TFTA deal with the fact that COMESA and the EAC have accepted obligations for establishing CUs, while the SADC MS have not and that these RECs have their own TR rules? The Guidelines foresee the following:

The Guidelines are to be applied in conjunction with the existing national legislation for conducting trade remedy investigations and reviews in the individual Tripartite Member/Partner States.

The Tripartite Member/Partner States recognize that most of the Tripartite Member/Partner States are WTO members who are bound by the provisions of the WTO Trade Remedy Agreements and may have national legislation, which is consistent with these Agreements. All Tripartite Member/Partner States recognize that these Tripartite Member/Partner States have the right to apply their national legislation.[8]

One of the most important lessons is about the importance of domestic TR arrangements. The TFTA TR regime cannot, in fact, be implemented without domestic TR arrangements. Several provisions expressly provide for tasks to be performed by national Investigating Authorities. This suggests an important shift; the RECs do not contain a similar requirement. In this sense the TFTA has brought about a tighter approach to the use of derogations and TRs.

The TFTA MS can only avail themselves of the benefits involved, if the required national legal and institutional building blocks are in place. The protection of private firms operating on their soil depends on the same logic. National laws and institutions can also be used for implementing TR in trade with non-TFTA states; under global or other FTA rules. The TFTA does not contain provisions about assistance to MS that do not have national TR arrangements in place.

This re-opens a longstanding debate about trade remedies in Africa. Only Egypt and South Africa have fully operational TR systems and only they are active users of TRs. They have also been involved in international disputes about the application of TRs. Part of the explanation for this state of affairs has to do with the fact that these two countries have, for a long time, had domestic industries and policies for protecting them. For the remainder of the AU membership TRs have not, till now, been a sufficiently important priority. The TFTA and CFTA negotiations indicate that this picture may be changing. TRs are increasingly recognized as important and necessary. However, dispute settlement (domestically as well as between states) and due process form part of an overall TR package. If this logic is accepted and the required institutions are established and given the necessary powers, we may be witnessing an important change in the African trade discourse.

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* Read more in the related tralac Trade Brief, available to download here.


[1] They were finally adopted by the 6th TSMC on 7 July 2017 in Kampala.

[2] For the built-in agenda, see Article 44 of the TFTA Agreement.

[3] Article 11, Annex.

[4] Article 3 Annex.

[5] Article 6 Annex.

[6] Polytol Paints & Adhesives Manufacturers Co. Ltd (Applicant) versus The Republic of Mauritius (Respondent). Reference Number 1 of 2012.

[7] A Tripartite Member/Partner State shall refrain from acts which would defeat the object and purpose of this Agreement when it has:

  1. signed the Agreement or has exchanged instruments constituting the Agreement subject to ratification until it has have made its intention clear not to become a party to the Agreement; or

  2. expressed its consent to be bound by the Agreement, pending the entry into force of the Agreement, provided that such entry into force is not unduly delayed.

[8] Guideline 4.