Discussions
ITAC’s agricultural safeguard investigation into chicken imports from the EU and the transition from the TDCA to the EU-SADC EPA
William Mwanza, tralac Researcher, discusses agricultural safeguards and South Africa’s impending transition from the TDCA to the EU-SADC Economic Partnership Agreement
The International Trade Administration Commission (ITAC) of South Africa has recently initiated agricultural safeguard investigations on bone-in chicken portion imports from the European Community (Government Gazette Notice Number 15 of 2016). This investigation will be undertaken on the basis of the Trade, Development and Cooperation Agreement (TDCA) between the two parties. It raises some important questions about the continuity in provisions and institutional processes as the parties transition from the TDCA to the EU-SADC Economic Partnership Agreement (EPA).
As alluded to in a previous discussion note, negotiations towards the EU-SADC EPA were concluded in 2014, and the legally scrubbed text is expected to be signed in May or June 2016, before ratification by respective parties and entry into force. Given that the ratification process may take a long time, the agreement presents the possibility for provisional application of upon ratification or notification of such provisional application by respective Partner States. Importantly, Protocol 4 of the EPA text provides that some provisions of the TDCA will be repealed upon entry into force or suspended upon provisional application of the agreement. These include inter alia Titles II and III on trade and trade-related issues, respectively. The Protocol also provides that upon entry into force or provisional application, the Cooperation Council (established under article 97 of the TDCA to manage implementation of the agreement and dialogue between the Parties) shall no longer have powers to take legally binding decisions; and the dispute settlement mechanism (established under article 104) shall no longer be available to the TDCA Parties for disputes relating to the repealed or suspended provisions. The function of facilitating implementation of the EPA agreement and of dialogue between the parties will then be performed by the Trade and Development Committee (established under article 103 of the EPA text).
There are a number of provisions in the TDCA relating to the implementation of safeguards. Article 16 – upon which the current ITAC investigation is based – provides for the implementation of agricultural safeguards if imports originating in one Party “cause or threaten to cause a serious disturbance to the markets in the other Party”. Article 24 then provides for safeguards more generally where any product is imported “in such increased quantities and under such conditions as to cause or threaten to cause serious injury to domestic producers of like or directly competitive products in the territory of one of the Contracting Parties, the Community, or South Africa”. Both articles provide for a consultative process within the Cooperation Council.
Articles 16 and 24 are contained in Chapter II of the TDCA, which is set to be repealed and replaced by a number of safeguard provisions in the EPA. Particularly important to note is that agricultural safeguards will then be governed in a new way by article 35 of the EPA. This latter article provides that a safeguard measure may be applied if the volume of the agricultural product imported into SACU exceeds the reference quantity for the product as indicated in Annex IV to the agreement. That annex then specifies a list of products namely edible offals, worked cereals, meat preparations, long-life milk, preserved cucumbers and olives, and chocolate to which the safeguards may apply.
It is not immediately clear how soon the ratification process of the EPA text will follow the signing envisaged in May or June. Suffice to say that the situation is particularly pertinent for Botswana and Namibia, who have to make sure that the ratification is done by 1 August, if they are to retain their interim EPA access after 1 October. Botswana and Namibia are recognised as middle income countries since 1 January and so if they were to lose their interim EPA access, they would export to the EU under MFN rates until such a time that the comprehensive EPA is provisionally applied. This provisional application would have to be done as the Southern African Customs Union (SACU) because of the operation of its common external tariff.
Regardless of the time at which the comprehensive EPA will start to be provisionally applied, the difference in provisions on agricultural safeguards in the TDCA and EPA, and the respective institutional processes has important implications on the investigation that has been initiated by ITAC. This is to the effect that the investigation and the follow up processes or indeed safeguard measures that may be imposed would become invalid at the time that the EPA starts to be (provisionally) implemented. This is because the article on which the investigation is based – namely article 16 of the TDCA – will have been repealed and replaced by article 35 of the EPA, which will then govern agricultural safeguards on the basis of reference quantities as opposed to the ‘threatening to cause a serious disturbance in the market’ criterion of the TDCA. Also, the process that might ensue within the Cooperation Council of the TDCA will be suspended along with the Council itself.
In that event, any process for agricultural safeguards would have to be instituted again, within the provisions and institutional processes of the EPA, including through consultations in the Trade and Development Committee. Even then, bone-in chicken portions are not listed as products to which agricultural safeguards can be applied. This implies that the investigations currently initiated are potentially limited in the extent to which safeguards can eventually apply.
An alternative that could remain is to initiate the investigations under the WTO safeguard provisions as in article 24 of the TDCA, which would be followed by the WTO safeguard provisions in article 33 of the EPA. However, the criterion for the investigations would have to be a noted cause or threat to cause injury in the domestic market as opposed to a cause or threat to cause a serious disturbance in the market. Also, such a route could need the political guidance of the EPA Joint Council to the effect that the Trade and Development Committee of the EPA can take over processes that the Cooperation Council of the TDCA will have thus far been engaged in. This aspect is not expressly provided for in the EPA agreement.
This scenario on the transition between the provisions and institutional processes of the TDCA to the EPA is not only relevant for the agricultural safeguards referred to in this notice, but also to other measures being implemented under the TDCA through its Cooperation Council. It makes clear the need to analyse all relevant provisions and measures to determine how best the overall transition should be managed.
Sources
Consolidated text of the Economic Partnership Agreement between the EU and SADC EPA States. [Online]. Available at: https://www.tralac.org/images/Resources/SADC/SADC-EU%20EPA%20consolidated%20text%20and%20annexes%20September%202016.pdf