Discussions

Brazil files WTO dispute against South Africa

Brazil files WTO dispute against South Africa

27 Jun 2012

JB Cronjé, tralac Researcher, discusses Brazil’s filing of a WTO dispute against South Africa

On 21 June 2012 Brazil requested consultations with South Africa on South Africa’s imposition of anti-dumping duties on frozen meat of fowls from Brazil. The request for consultations formally initiates a dispute under the World Trade Organization’s (WTO’s) dispute settlement system. This gives the parties an opportunity to find a solution to the matter without proceeding with litigation. If theparties fail to resolve the matter within 60 days, the complainant (Brazil) may request adjudication by a panel. This dispute would be the fourth brought against South Africa at the WTO. All three previous disputes were initiated by developing countries (India, Indonesia, and Turkey) and concerned South Africa’s application of anti-dumping measures. None of them advanced to the panel stage.

In June 2011, South Africa’s International Trade Administration Commission (ITAC) initiated an investigation into the alleged dumping of frozen chicken (whole bird and boneless cuts) originating in or imported from Brazil (read an earlier Discussion here). On 12 February 2012, following ITAC’s preliminary determination, provisional anti-dumping duties of 62.93% on whole bird, 46.59%  on boneless cuts excluding that produced or exported by Coperativa Central Oeste Catarinense – Aurora Alimentos and 6.26% on boneless cuts produced and exported by Coperativa Central Oeste Catarinense – Aurora Alimentos were imposed by the South African Revenue Service (Government Gazette No 35030) on the products for the period up to and including 10 August 2012.

Brazil argues the preliminary determination and the imposition of provisional anti-dumping duties, as well as the initiation and conduct of the investigation, are inconsistent with South Africa’s obligations under the General Agreement on Tariffs and Trade (GATT 1994) and the Anti-Dumping Agreement. The main points of argument relate to the determination of dumping, the determination of injury, South Africa’s definition of domestic industry, the initiation of an application and subsequent investigation, and the evidence used. Read Brazil’s Request for Consultations here.

In particular, Brazil argues that South Africa “did not make a fair comparison between the export price and normal value of exporters, including the establishment of the residual dumping margin.” South Africa also failed to compare the normal value with a weighted average of all prices of all comparable export transactions.

Brazil further argues that South Africa has failed to make an objective examination, based on positive evidence, of the volume of dumped imports and the effect on prices in the domestic market, as well as, the impact of the alleged dumped imports on domestic producers. In addition, that South Africa failed to examine all relevant evidence before it in determining a causal relationship between the dumped imports and the injury to the domestic industry. Furthermore, South Africa is said to have failed to examine the accuracy of the evidence provided in the application. It is also argued that South Africa did not give notice of the information required and as a result failed to provide ample opportunity for exporters to present the required evidence.  Further, South Africa failed to follow proper procedures regarding the handling, submission, disregard and verification of information.  Brazil also argues that South Africa did not determine an individual margin of dumping for each known exporter and that the provisional measures were applied even though the investigation was not properly initiated. Finally, the public notice of imposition of provisional measures did not sufficiently provide detailed explanations for the preliminary determinations on dumping, injury and causal link, and did not refer to matters of fact or law which led to the acceptance or rejection of arguments. The notice did not contain a full explanation of the reasons for the methodology used; considerations relevant to injury determination; and, the main reasons leading to the determination.

South Africa is required to enter into consultations with Brazil within 30 days from the request for consultations. If they fail to settle the matter after 60 days from the request for consultations, the complaining party may request the establishment of a panel. Where consultations are denied by South Africa, the complaining party may move directly to request a panel. South Africa and Brazil may also voluntarily agree to follow alternative means of dispute settlement, including good offices, conciliation, mediation and arbitration.

These developments are, on one level, a confirmation of how the rules-base system of the WTO serves the interests of member states and the private sector. South Africa and Brazil are close political allies; as demonstrated by the fact that both countries are BRICS members. The neutral and objective application of the rules of the WTO should not impact negatively on their political relationship. It should in fact add a new dimension to it when they both adhere to these rules and the dispute settlement system underpinning it.

Hopefully African governments will also start to accept these advantages of a rules-based approach to trade; such as the certainty and predictability which will follow. It will also make it easier for governments to explain certain domestic policies and procedures; if put in the broader context of the rule of law. It will certainly serve the interests of the private sector more directly.

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