Willemien Viljoen, tralac Researcher, discusses the launch of trade remedy investigations by Australia on South African peaches

South African producers and exporters of canned peaches may soon face some difficulty in exporting these products to Australia. The Australian authorities have launched, within a week of each other, safeguard as well as anti dumping investigations into the importation of peaches, including nectarines (tariff subheading 20087000). Australia is currently South Africa’s fourth largest export market for canned peaches, accounting for 8% of South Africa’s total exports of canned peaches in 2012. These products are currently also subject to anti-dumping duties imposed by New Zealand.

On 2 July 2013 Australia notified interested parties that the Productivity Commission (the national investigating authority dealing with safeguards investigations) will undertake a safeguard investigation involving certain processed fruits. The Commission has to provide an accelerated report within three months on whether a provisional safeguard measure (to apply for not longer than 200 days) is warranted and a final report on the justification of definitive safeguard measures by 21 December 2013. The processed fruit products under investigation correspond with the following tariff subheadings of the Australian Customs Tariff:

• Citrus fruit (20083000)
• Pears (20084000)
• Apricots (20085000)
• Peaches, including nectarines (20087000)
• Mixtures (20089700 – this code only became operational on 1 January 2012, replacing 20089200)
• Other (20089900)

The safeguard investigation was launched on the request of the Australian food Processor SPC Ardmona, based on various challenges:

• The appreciation of the Australian dollar has led to cheap imported food products becoming even cheaper with a severe impact on export markets.

• A gain in the market share of imported canned fruit in the Australian market, while the share of SPC Ardmona in the domestic market has declined significantly. There has also been a decrease in export volumes.

• A forecasting done for the coming season shows a decline in the demand for canning fruit which will lead to a decline in the fruits demanded by SPC Ardmona from domestic fruit growers.

On 10 July the new Australian Anti-Dumping Commission (the national investigating authority dealing with anti-dumping investigations) published a notice that an anti-dumping investigation will be launched on the imports of peaches from South Africa on the request of the domestic producer SPC Ardmona. According to the applicants South African canned peaches have been exported to Australia at a price less than the normal value, causing material injury to the Australian domestic industry through reduced market share, revenues, profits, profitability, return on investment, sales volumes and capacity utilisation, as well as price depression and suppression. The Commission is expected to deliver a report within the next two to six months.

This case raises two rather fundamental issues: The first is whether this particular complaint can be addressed by both anti-dumping as well as safeguards measures. The second concerns the lawfulness of the exclusion of the like products from the application of these safeguard measures if they are exempted in terms of specific bilateral or regional trade arrangements.

1)  Safeguards or an anti-dumping measure; which measure is more appropriate in the case of the South African peach exports?

It is not WTO-inconsistent to have anti-dumping and safeguard investigations running concurrently on the same product; provided that the substantive requirements are met in each separate investigation. It is theoretically possible to implement both anti-dumping duties and safeguard measures on the same product at the same time. However, given allegations made by SPC Ardmona, it seems that an anti-dumping might be more appropriate under the present circumstances. It goes without saying that all the applicable requirements have to be complied with. It will, e.g. be necessary to demonstrate that the South African imports (and not the decline in demand or appreciation of the Australian Dollar) have caused the material injury to the domestic industry.

In a press statement by SPC Ardmona, the Managing Director states that they had to wait for the Australian AD rules to be simplified prior to launching their application. If these laws were in place earlier, they would have brought their application earlier. The Managing Director also states that South African peach imports 65% of the problem currently experienced by the domestic industry. This seems to indicate that the anti-dumping investigation was the preferred trade remedy. Uncertainty regarding the timeframe for the implementation of the new Australian AD laws and the establishment of the Anti-Dumping Commission resulted in peaches being incorporated into the safeguard investigation; which also included numerous other processed fruit products.

2)  Can products covered by bilateral or regional trade arrangements be excluded from the application of safeguard measures?

The notice by the Australian Productivity Commission, states that imports of processed fruits from New Zealand and Singapore have been excluded from the safeguards investigation due to provisions in the Australia New Zealand Closer Economic Relations Trade Agreement (ANZCERTA) and the Singapore Australia Free Trade Agreement (SAFTA), respectively. Both these agreements preclude any safeguard action against the imports of these countries. However, New Zealand is the fourth largest exporter of the processed fruit products under investigation, accounting for 9.7% of Australia’s world imports in 2012, while Singapore only exports a minimal volume of processed fruits to Australia.

WTO jurisprudence has not solved the issue of how WTO members that are part of a regional or bilateral trade agreement should conduct and apply safeguard investigations. This particular issue has been raised in a number of WTO Appellate Body proceedings but there has not been a definitive finding on the matter. The only decision dealing with this issue was the Appellate Body finding in the Argentina – Safeguards (EC) case. In this case Argentina made its injury determination during the safeguards investigation based on imports from all sources, including imports from other Mercosur (Southern Common Market) countries (Brazil, Paraguay and Uruguay). However, Annex IV to the Mercosur Agreement prohibits Mercosur members from applying safeguards on imports from other member countries. This resulted in imports from other Mercosur countries being excluded from the application of the safeguard measure. In its findings the Panel (decision was later confirmed by the Appellate Body) established to resolve the dispute introduced the concept of parallelism as a substantive requirement in safeguard investigations. Parallelism in this context means that if the imports from a particular country, which happens to be a party to a joint preferential trade arrangement, are included in the injury determination they should also be subject to the application of the safeguard measure. The Appellate Body found that the injury investigation by Argentina which included injury caused by all sources of imports could only lead to an imposition of a safeguard measure on imports from all sources.

However, the Argentina – Safeguards (EC) findings did not clarify the role a regional or bilateral trade agreement should or could play in conducting and applying safeguard investigations. This has left the issue open with commentators expressing contrasting views on a number of unanswered questions:

• In terms of Article XXIV:8 (a) and (b) of the GATT 1994 ‘duties and other restrictive regulations of commerce’ need to be eliminated with respect to ‘substantially all trade’ within a customs union and free trade area. Thus are safeguards not ‘other restrictive regulations of commerce’ which must be eliminated from intra-regional trade? Do the requirements in Article XXIV:8(a) and (b) create an obligation on trading partners to exclude goods covered by regional or bilateral trade agreements from the safeguard investigations?

• Can or must countries a party to a bilateral or regional trade agreement apply safeguard measures only to third party imports?

• Should safeguard measures be applied on a non-discriminatory (MFN) basis, irrespective of whether countries are a party to bilateral and regional trade agreements?

• Would South Africa be able to object to this Australian safeguard measure on the basis of the discriminatory effect of the measure due to imports from New Zealand and Singapore being excluded from the investigation?

• Can preferential trade arrangements between selected WTO member countries suspend the recourse of a WTO member to WTO law vis-à-vis other WTO members a party to the preferential trade agreement?

Tell us what you think.

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Sources:

www.wto.org

TradeMap (www.trademap.org)

Productivity Commission (www.pc.gov.au)

Anti-Dumping Commission (www.adcommission.gov.au)

Pauwelyn, J. (2004) The Puzzle of WTO Safeguards and Regional Trade Agreements. Journal of International Economic Law 7(1): 109-142.