Topics publications: Trade law and regulation
Trade Reports
The Bali WTO Trade Facilitation Agreement: Implications for southern Africa
Trade facilitation referrs to the simplification, harmonisation, standardisation and modernisation of trade procedures. It encompasses policies designed to reduce trade transaction costs, at-the-border and behind-the-border policy reforms, customs and border procedures, and, more recently, border management improvement, institutional development, transit and regional facilitation, logistics services markets and gateway infrastructure, among other important elements.
In addition to its prominence on the multilateral trade front, trade facilitation has gained currency in all modern-day regional trading arrangements motivated by the pressing need to eliminate non-tariff barriers and unnecessary other non-tariff measures that impede trade growth.
Trade facilitation negotiations at the World Trade Organisation (WTO) began in 2004, the obvious aim being to conclude a multilateral agreement that would help ensure the smooth and unimpeded flow of goods trade among WTO members. The negotiations were protracted, culminating in the recent landndmark conclusion of the Trade Facilitation Agreement (TFA) at the Bali Ministerial Conference held in December 2013.
This was, no doubt, a huge milestone for the WTO. The Agreement is set to be put into proper legal text, and become the Trade Facilitation Agreement after its adoption at the forthcoming July 2014 General Council meeting. As claimed by the WTO, the Agreement will generate between $400 billion and $1 trillion in global trade.
For the southern African region, as is certainly the case with other developing and least developed regions, the question that now begs exploration is: What are the implications for the region of the newly adopted Agreement? This paper seeks to explore the implications to southern Africa of the conclusion of the Trade Facilitation Agreement, this also on the backdrop of the region’s current trade facilitation agenda. A few case studies will be used to highlight the nature and magnitude of some of the implications.
Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.
Trade Briefs
2014 SADC Summit – tralac submissions
As the region prepares for the 2014 SADC Summit to be held in August, tralac takes note of two articles from the SADC Treaty:
- Article 23 of the Treaty states that SADC “shall seek to involve fully the people of the Region and key stakeholders in the process of regional integration”.
- Article 5(2)(b) states that SADC shall, in order to achieve its objectives, “encourage the people of the Region and their institutions to take initiatives to develop economic, social and cultural ties across the Region, and to participate fully in the implementation of the programmes and projects of SADC”.
Supporting the full participation of the ‘people of the region and their institutions’ in the process of regional integration; tralac is pleased to submit two contributions to the preparatory process and to the deliberations at the SADC Summit.
The first submission deals with trade aspects of the review of the Regional Indicative Strategic Development Plan (RISDP); and the second focuses on dispute settlement matters.
You are welcome to disseminate these contributions and to use them to support informed debate on SADC’s regional integration process, provided the source is acknowledged.
Trade Reports
Industrial policy in Southern African regional integration and development
This paper builds on the theme of regional industrial policy addressed in a number of recent tralac Working Papers and Trade Briefs (McCarthy 2013; Sandrey 2012 and 2013; Woolfrey 2013; and Zarenda, 2012, 2013a and 2013b), and a paper in the Yearbook 2012 (Zarenda, 2013b). The intention is not to repeat what had been written in this spate of tralac documents or to present a summary review but to ask critical questions about what can realistically be expected of industrial policy in southern African integration and development. The paper is largely speculative, and to make it clear at the outset, it represents the views of a sceptic, someone who would like to be convinced that conventional industrial policy can work in the region’s integration arrangements.
The interest revealed in industrial policy reflects the priority attached in the region to microeconomic intervention to allocate resources in support of the faster growth of manufacturing as a driver of economic development. In South Africa, the dominant economy in the region, there is concern about the relative decline in the contribution of manufacturing to the Gross Domestic Product (GDP), seen as a problem of the deindustrialisation of a developing economy. This concern underlies a number of policy interventions and government initiatives, and, recently, an observable move towards a more protectionist stance in national policy.
Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.
Trade Reports
Export taxes in the South African context
Export taxes are increasingly becoming a focus of attention in South African trade policy, and the objective of this paper is to review the trade and economic issues associated with these taxes. While they are similar to import tariffs in their effects, export taxes remain very much the ‘poor cousins’ of import tariffs in trade policy circles. While attention is paid to them in many bilateral and regional agreements, the multilateral World Trade Organisation (WTO) has little to say about them other than an awakening to their importance when it comes to negotiating a new member’s accession to the world body.
South Africa currently levies an export tax on unpolished diamonds in an attempt to develop local skills and promote the domestic industry, and it is considering a recent department of trade and industry report that recommends that consideration be given to an export tax on iron ore and steel. South Africa has some of the prerequisite market power in the global iron ore trade but not enough to ensure an outcome entirely beneficial to its export trade.
The salutary example of South Africa’s competitor India is discussed, as India recently increased its export tax in this sector to 30% and has seen its global market shares plummet. The more interesting sector for South Africa is the ferrochrome and ferrochrome ore trade, as here South Africa does have significant market shares. South Africa has had about a 45% market share over the last three years in global exports, while China has imported around 70% to 85% of this global trade in recent years. Advocates argue that a tax on chromite ore exports will shift the relative economics back to empower South African producers of processed ferrochrome.
This sets the stage for an interesting battle between South Africa and China, and one set against the background of South Africa’s recent admission to the BRICS club. If such an export tax is invoked, South Africa needs to be conscious that it at best provides a window of opportunity for the domestic sector to improve its technological efficiency and that it is not a long- or even medium-term solution.
Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.
Trade Reports
The Consequences of Retaliation in Southern African Trade Relations
There are sound reasons why African Regional Economic Communities (RECs) have been designed as rules-based trade arrangements. Firstly, they have to function in terms of the GATT rules applicable to Regional Trade Arrangements (RTAs). Practically all African states are WTO members, or are in the process of acceding. Secondly, rules-based trade secures the benefits of trade (and development generally) more optimally, by providing a transparent and predictable environment for producers, traders and consumers.
The REC instruments enshrine the guarantees associated with certainty, predictability and formal dispute settlement; as opposed to the machinations of power politics and unilateralism.
The SADC Protocol on Trade is one example of a rules-based African Free Trade Area (FTA). Its general architecture confirms the intention of the Parties to provide for a system based on legal obligations which the Members States (MS) have to respect and comply with. It contains all the typical provisions necessary for conducting trade among them in a rules-based manner.
Typical rules-based features are further to be found in SADC’s provisions on trade remedies and safeguards. They are modelled on WTO disciplines. However, formal dispute settlement has never become part of intra-SADC practice.
Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.
Trade Briefs
High Court of Botswana steps into void left by SADC Tribunal
The suspension in 2010 of the SADC Tribunal has left a serious gap in the functioning of the Organization. The integrity and operations of SADC are affected if it is impossible for the judicial organ of the Organization to adjudicate the various types of disputes which can arise under SADC law. An example of the detrimental consequences is already available. The High Court of Botswana (where the SADC Secretariat is housed) made an unusual ruling and decided that it has jurisdiction over a dispute between an official of the SADC Secretariat and the Organization.
The Summit decision to disband the Tribunal was adopted by consensus. The basic rule is that SADC institutions take decisions on the basis of consensus. This must give rise to the question whether the Member States are committed to honouring their obligations under the SADC Treaty. It has been argued that it was never intended that the SADC Tribunal should exercise human rights jurisdiction.
That might be true, but this raises familiar debates about the careful drafting of legal instruments. Articles 4 and 6 of the SADC Treaty contain undertakings to protect and promote democracy and human rights. Courts of law have to interpret international agreements by giving effect to the words in light of their ordinary meaning in the context in which they have been used. If this is the problem which the Member States want to address now they should limit their drafting of the new protocol for the Tribunal to this aspect.
Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.
Books
Cape to Cairo: Exploring the Tripartite FTA Agenda
On 22 October 2008 in Kampala, Uganda, the Heads of State and Government of the Member States of the Common Market for Eastern and Southern Africa (COMESA), the East African Community (EAC), and the Southern African Development Community (SADC) agreed to establish a grand Free Trade Area, which is now referred to as the Tripartite FTA (T-FTA). This is supposed to encompass all 26 Member States of the three Regional Economic Communities (RECs). Apart from the economic imperative arising from such an enlarged regional market, the T-FTA initiative has received wide support as it was expected to address the problem of conflicting trade regimes due to overlapping memberships of most members in the three RECs.
The Trade Law Centre (tralac) has been following this development with keen interest through the publication of three books focusing on the T-FTA process.
The first book presented an economic impact assessment of the T-FTA, with particular focus on agriculture and agri-business development. The second book, published in 2011, delved more deeply into a range of issues relevant to making the T-FTA work, drawing from Africa’s experience of grand schemes, weak legal and institutional foundations for a rules-based dispensation of regional integration, and an implementation record that demonstrates very little serious commitment. The third book, published in 2012 and influenced by an explicit decision by Member States to include the infrastructure and industrial development pillars, aimed at encouraging an enquiry and new thinking about the African paradigm of regional integration, specifically about the nature, design and architecture of a T-FTA to address the region’s fundamental development challenge, i.e., the inadequate capacity to produce goods and services competitively.
This fourth book presents a collection of papers that explore a range of issues that are shaping important debates about the T-FTA in particular and the African regional integration agenda more generally. During the past five years there has been a sea change from the vision of the T-FTA as a grand FTA integrating the 26 Member States of COMESA, EAC and SADC, to a much less ambitious plan for only those Member States that are not parties to FTAs to engage in negotiations. This book includes an analysis of the implications of the ‘clarification’ of the T-FTA Negotiating Principles. It is now clear that the T-FTA will not address the problem of overlapping membership. What would happen if a smaller group of ‘willing participants’ decided to integrate at a faster pace? Two country case studies (Malawi and Rwanda) are also included; they provide insight into the important questions that Member States are engaging to assess what’s in the T-FTA for them.
Two chapters focus on industrial development issues. The industrial development pillar of the T-FTA requires innovative approaches to addressing the region’s competitiveness challenges. What are the options to support regional industrial development? Energy sector development and climate change issues, both integral to the development of the region’s integration plan, are also addressed in the book.
T-FTA developments are important not only for the eastern and southern African region; they also provide a reality check on the feasibility of establishing a Continental Free Trade Area by (indicative date) 2017.
© 2013 Trade Law Centre and the Swedish Embassy, Nairobi.
Publication of this book was made possible by the support of the Trade Law Centre (tralac) and the Swedish Embassy, Nairobi. The views expressed by the authors are not necessarily the view of any of these institutions.
Readers are encouraged to quote and reproduce the material contained in these books for educational, non-profit purposes, provided the source is acknowledged. Please contact us to obtain authorisation for reproducing this material.
Trade Briefs
Polytol Paints v Mauritius: Evidence of the existence and direct effect of community law in COMESA?
In a landmark case involving Polytol Paints and Mauritius, the Common Market for Eastern and Southern Africa (COMESA) Court of Justice First Instance Division made a ruling that suggests that regional integration within COMESA is pursued within a framework of community law, and that this system is fairly effective. It is understood that a notice of appeal has since been filed by the Mauritius Government. As consideration of this case continues, the current ruling of the COMESA Court brings to the fore a number of issues that are worth discussing.
This paper reviews the concept of community law and the extent to which COMESA is indeed a form of it, based on the aforementioned case. The origins of the concept of community law are first explored, followed by the background of the Polytol Paints v Mauritius case and the ruling of the COMESA Court. The existence of community law and its legal effect in COMESA are also explored.
Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.
Trade Briefs
The COMESA Court of Justice: Regional agreements do protect private parties
States are the parties to international agreements; only they derive rights from such agreements and only they can litigate before international courts when violations occur. Natural or legal persons do not enjoy rights under international agreements and they cannot bring claims to international courts. Their states of nationality have to act on their behalf but this does not amount to a legal entitlement.
This is the traditional approach. However, in the context of Regional Economic Communities (RECs) it is ineffectual and has to be modified. Regional integration arrangements are about more than inter-state obligations; they establish a sui generis legal regime which has to provide for the protection of private parties too. Regional integration promotes and extends trade and commerce (involving mostly private entities) across borders and into other national jurisdictions. These activities need the protection of appropriate legal instruments and procedures and should accommodate the reality of an enlarged market arrangement.
Effective regional integration has to accommodate private parties in order to achieve the very objective behind the exercise and to prevent the uncertainty and costs which will result from fragmented and ad hoc national actions. This requires the enforcement of rights where needed; which happens typically via the establishment of regional courts and the uniform domestic application of regional legal instruments.
Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.
Books
Monitoring Regional Integration in Southern Africa Yearbook 2012
The Monitoring Regional Integration Yearbook has become a household name in the SADC region, when it comes to monitoring the progress or non-progress of integration within the southern Africa region.
Celebrating its 12th edition in the current year it has proven to be a platform of scientific discussion and exchange of political views. A closer look at the 2012 issue sheds some light on the variety of subjects that drive or hinder regional integration. They range from the influence of emerging powers like China on the SADC region to the cooperation between MERCUSOR and SACU to the role of legislature in the process of integration. It also reaches beyond the SADC region to take a closer look at developments in Eastern Africa. The thematic approach spans from trade to transport, from energy to the judiciary.
With major elections just lying ahead or just having passed (Angola, Zimbabwe, South Africa, Namibia), with the issue of the SADC tribunal still unsolved, with critical challenges such as the sustainable energy supply not finally addressed, the region once again seems to have arrived at a watershed moment:
What good can the process of regional integration do to provide solutions for the challenges the region is facing? How can Southern Africa arrive at a stage, where the ideas of a common market, free trade, stability, security and sustainability are implemented successfully?
From the standpoint of many western analysts, Africa seems to be the rising continent, full of opportunities and no longer just challenges. But in order to grasp these opportunities Southern Africa needs to have the proper mechanisms in place to facilitate investments and to ensure prosperity for larger parts of its population. These mechanisms are also needed to let the region emerge as one of the new global players, especially when it comes to economic development.
It is against this background that the 12th edition of the Monitoring Regional Integration in Southern Africa Yearbook should be seen as contribution to further drive the process of integration and to address critical development, challenges, but also successes.
© 2013 Trade Law Centre and the Konrad-Adenauer-Stiftung
Publication of this book was made possible by the support of the Trade Law Centre (tralac) and the Konrad Adenauer Foundation. The views expressed by the authors are not necessarily the view of any of these institutions.
Readers are encouraged to quote and reproduce the material contained in these books for educational, non-profit purposes, provided the source is acknowledged. Please contact us to obtain authorisation for reproducing this material.