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Are Trade Remedies important for achieving the AfCFTA Goals?

By Gerhard Erasmus
23 Feb 2018
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Are Trade Remedies important for achieving the AfCFTA Goals?

Trade remedies (TR) are trade policy tools used by governments to take remedial action against imports which cause injury to domestic industries. TR consist of anti-dumping (AD), countervailing and safeguard measures.

TR do not feature in intra-African trade. Most African Governments do not have the required domestic arrangements to undertake TR investigations. They claim that these investigations are cumbersome, not a priority, or that they lack the technical capacity and resources. The consequence is that domestic industries are not protected in a rules-based manner. However, REC Member States (MS) often take unilateral action in violation of their obligations. Recent practices, for example, in Zimbabwe (imposing surcharges on imported goods in violation of COMESA and SADC trade rules) serve as an example of how regional trade arrangements are then undermined. This becomes worse when combined with the absence of effective inter-State dispute settlement mechanisms. Could this change under the AfCFTA?

The AfCFTA State Parties have agreed to allow anti-dumping, countervailing and safeguard measures. (As provided for in Annex 9 to the AfCFTA Protocol on Trade in Goods and the CFTA Guidelines on the Implementation of Trade Remedies in accordance with the relevant WTO Agreements.) Preferential Safeguards may be imposed on goods traded under the AfCFTA Agreement. The Parties shall cooperate with each other in TR investigations.

What benefits do TR bring? AD measures provide protection against dumped imports. Dumping involves the selling of goods below their “normal value”. When dumping causes or threatens to cause material injury to a domestic industry, AD duties may be imposed. (AD rules regulate anti-dumping measures, not the practice of dumping.) A domestic Investigating Authority must undertake a proper investigation prior to the adoption of anti-dumping measures. This procedure must be transparent and fair. Affected firms must be allowed to request local courts to review AD measures.

The WTO’s Subsidies Agreement disciplines the use of subsidies. A MS may remedy the trade effects of a subsidy through dispute-settlement procedures and seek the withdrawal of the subsidy or the removal of its adverse effects. Alternatively, a MS may unilaterally launch its own investigation and impose an extra duty (“countervailing duty”) on subsidized imports to offset the injury to domestic producers, or affected industries may lodge an application for the initiation of a countervailing investigation.

Safeguard action is “emergency action” and may be taken where a surge of imports causes or threatens to cause serious injury to domestic industries. Safeguard action may involve the restriction of imports of a product temporarily to help the domestic industry to adjust. A prior investigated must be undertaken. Safeguards usually consist of an extra duty, or a quota.

The AfCFTA regime on TR will co-exist with those of the RECs. REC agreements also contain provisions on trade remedies. Exactly how the different trade legal regimes will coexist depends on the application of the relevant TR rules for specific goods traded between the Parties. Overlapping and uncoordinated TR could, if actively applied, become trade barriers. The fact that this has not yet happened is a consequence of the non-application of TR in Africa; not the smooth coordination of different regimes.

The biggest problem regarding the protection of domestic industries against unfair trade practices and import surges is the non-availability of domestic Investigating Authorities. If they are serious about TR, the AfCFTA MS will have to develop national legislative and institutional frameworks on TR. Only a few AfCFTA Members already have the necessary domestic machinery in place. (Only Egypt and south Africa are active TR users.) The CFTA Agreement must be complemented by properly aligned domestic arrangements to implement TR. There should be legal certainty at all levels. Domestic TR institutions can, of course, undertake regional as well as global TR investigations.

The law of the land will also have to be developed and be reformed where necessary. TR measures are reviewable (as part of the due process requirement). National courts will undertake these reviews. Affected private parties will thus be able to apply for the national courts to set aside trade remedy measures imposed in an unlawful manner.

There can also be inter-state disputes about TR measures. (Most of the disputes decided under the dispute settlement system of the WTO are about TR issues.) The frequency of these international disputes is a consequence of the fact that TR measures are not discretionary or arbitrary in nature. They are exceptional measures and they are conditional. The applicable rules must be respected. Questions about compliance with the applicable rules and the procedures are justiciable.

The need in FTAs to counter unfair firm behaviour may, to a considerable degree, also be accommodated via competition rules. Competition law is not specifically regulated by the WTO. This makes it “easier” to design an appropriate AfCFTA Competition Agreement.

About the Author(s)

Gerhard Erasmus

Gerhard Erasmus

Gerhard Erasmus is a founder of tralac and Professor Emeritus (Law Faculty), University of Stellenbosch. He holds degrees from the University of the Free State, Bloemfontein (B.Iuris, LL.B), Leiden in the Netherlands (LLD) and a Master’s from the Fletcher School of Law and Diplomacy. He has consulted for governments, the private sector and regional organisations in southern Africa. He has also been involved in the drafting of the South African and Namibian constitutions. He grew up in Namibia.

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