Topics publications: Trade law and regulation
Trade Reports
The impact of WTO law on foreign investment: the Walmart/Massmart merger
The relevance of international commitments made by South Africa at the multilateral level became prevalent during the recent merger between Walmart and Massmart. What is the role, in a merger review process, of international law in domestic proceedings and to what extent should South African Competition Authorities consider the country’s obligations made at the multilateral level?
This Working Paper aims to answer this question against the backdrop of the Walmart/Massmart merger approval process and the facts applicable in the case. The emphasis is on three pieces of multilateral legislation: the General Agreement on Tariffs and Trade (GATT), the Agreement on Trade-Related Investment Measures (TRIMs) and the General Agreement on Trade in Services (GATS).
The paper examines the purpose and objectives of the multilateral WTO negotiations and highlights the role of the South African government in the merger review process. It specifically considers investment related obligations and how they relate to the access and treatment of foreign investors and companies. As the merging parties of Walmart and Massmart operate in the wholesale and retail sectors, the relationship between the distribution sector and multilateral agreements is also analysed.
The paper also considers the extent to which international agreements are part of the domestic regulatory framework in South Africa and how international legislation is domestically incorporated. Specific emphasis is placed on non-discrimination in the context of the multilateral agreements and the behaviour of the host state towards the foreign supplier.
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
Monetary Union: the Experience of the Euro and the Lessons to be learned for the African (SADC) Monetary Union
In June 2004, Professor Colin McCarthy presented a paper at a conference, entitled On the euro outside the euro-zone: the South African perspective. The paper addressed the lessons that southern Africa could learn from European Union (EU) monetary integration and specifically whether the region can take their cue from the euro. The backdrop to the paper was the apparent success at the time of EU monetary integration, on the one hand, and on the other, the declared intention of the African Union (AU) and other regional integration arrangements such as the Southern African Development Community (SADC) to evolve into monetary union in the final stages of linear regional integration. In the latter regard the eurozone was widely considered to be a role model of monetary integration and an exercise that could and should be replicated in Africa.
The sceptical views expressed in the paper were not based on inherent weaknesses of the euro as regional currency. The euro was accepted to be a stellar phenomenon in European integration. The argument was that conditions in Southern Africa and Africa as a continent did not meet the requisite conditions for successful monetary integration such as macroeconomic convergence, which was a fundamental building block of the eurozone, and furthermore, that in regions of disparate economies exposed to diverse external shocks a loss of policy space in exchange and interest rate determination would be inappropriate.
Recent developments in the eurozone, however, have revealed that the euro construct has fundamental weaknesses which strengthen the argument that monetary union is a step in the process of regional integration that calls for extreme caution. Hence, this paper extends the argument in support of caution in deciding on monetary union by emphasising certain conditions that the euro crisis has revealed as crucial for monetary union to work. The role model, which started out with acclaim, has in its operation exposed certain structural weaknesses in design. These weaknesses and the conditions for successful union that they imply add more stumbling blocks in the way of achieving monetary union in an African setting.
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
What has happened to the protection of rights in SADC?
For about the last year and a half a vital aspect of the Southern African Development Community (SADC) legal regime, the ability to enforce the rights and obligations in the legal instruments of this regional arrangement, has been suspended. The terms of the Judges (Members) of the Tribunal have also not been renewed. There are no indications yet as to when and how the judicial function in the organization will be restored or what new arrangement might be put in place. And there is no public debate about the issues at stake.
Since the Windhoek meeting of the SADC Summit in August 2010, the SADC Tribunal has not been allowed to hear any new cases. This is a consequence of decisions taken by the SADC Summit at is Windhoek Summit. At this meeting it discussed, amongst other matters, the recent rulings by the SADC Tribunal against Zimbabwe. Those judgments were not implemented. It was, instead, decided to commission a new study on the role, responsibilities and terms of reference of the SADC Tribunal. This development was triggered by the rulings by the Tribunal that provisions in the SADC Treaty had been breached by the actions of the government of Zimbabwe.
The SADC Summit decisions give rise to serious concerns about the rule of law in this organization and about the protection of rights. The decision to suspend the functioning of the Tribunal has resulted in the de facto amendment of the Treaty and Protocol on the Tribunal, but involving what is prima facie an ultra vires action on the part of the Summit. It does not have the power to suspend the judicial arm of SADC or any part of the Treaty. If changes to existing legal instruments become necessary they should be brought about by giving effect to the amendment provisions in the applicable 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.
Trade Briefs
Empowerment policies in SADC and their effect on agreement design
Empowerment policies may give rise to discrimination when local suppliers are treated more favourably than foreign ones, and can even limit market access opportunities for foreign suppliers, when, for example, the equity share of the foreign partner is limited. However, the flexible rules incorporated in services agreements provide countries with the ability to schedule empowerment policies in order to legally maintain restrictions against foreign services providers and investors.
SADC member states are in the early stages of negotiations on trade in services and certain member states are currently applying empowerment policies that are in danger of contravening the rules of the anticipated services agreement. It is necessary that these measures are clearly identified and accurately recorded in the schedules of the respective countries.
This brief considers the effect of earlier GATS commitments on scheduling empowerment restrictions in the regional context and the challenges posed by the SADC standstill clause and the requirements of GATS Article V. The brief also proposes some alternatives to safeguard local industries and concludes by evaluating the possible exceptions provided by the services agreements.
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 – Making the Tripartite Free Trade Area work
The Heads of State and Government of the 26 member states of the Common Market for East and Southern Africa (COMESA), the East African Community (EAC) and the Southern African Development Community (SADC) agreed in October 2008 to establish a grand Free Trade Area (FTA) which is now referred to as the Tripartite FTA (T-FTA). This integration initiative has in the (almost) three years since this political decision, followed a course rather different from other regional integration initiatives in Africa.
Since October 2008 various task teams of technical experts have been engaged in analytical work and have prepared a Draft Agreement and 14 annexes, dealing with issues, in addition to tariff liberalisation, ranging from Rules of Origin (RoO) to the Movement of Business Persons and Dispute Resolution. The most recent iteration of this technical process has produced drafts of these instruments, dated December 2010. These drafts provide points of reference in many of the chapters of this book.
Negotiations, however, were only officially launched at a Summit, held in South Africa, in June 2011. It is, therefore, very important to recognise that the Tripartite FTA does not exist yet and substantive negotiations have not yet begun. The Draft Agreement and the 14 annexes lack official status, yet it is a useful exercise to review these draft instruments and the emerging negotiations process, as member states deliberate negotiating guidelines, and soon start substantive negotiations.
The Trade Law Centre (tralac) has already published a book, Cape to Cairo – An Assessment of the Tripartite Free Trade Area, on specific issues related to the Tripartite FTA (INSERT LINK) to coincide with the Summit in June 2011. The book focuses on economic analysis, and a broadly focused assessment of the impact of the T-FTA, with particular focus on agriculture and agri-business development.
This second book delves more deeply into a range of issues relevant to a discussion about what will make the T-FTA work. At this early stage of the process, before negotiations begin in earnest, there are important issues to consider that could contribute to making the T-FTA a successful integration arrangement. Thus far, Africa's integration record is marked by 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. Can the T-FTA be different?
The answer to this question lies not in the draft instruments, but the outcome of the political economy process that will begin as member states negotiate the legal instruments of the T-FTA. However, the analysis in this book can provide an opportunity to reflect on what exists already in terms of regional integration in East and Southern Africa, and what lessons can be learned from this experience. Specific issues covered include sugar trade, RoO, trade in services, movement of business persons, dispute settlement and trade remedies and safeguards, as well as World Trade Organisation (WTO) rules on regional trade agreements and implications for the T-FTA.
© 2013 Trade Law Centre, the Danish International Development Assistance and the Swedish International Development Cooperation Agency
Publication of this book was made possible by the support of the Trade Law Centre (tralac), the Danish International Development Assistance (Danida) and the Swedish International Development Cooperation Agency (Sida). 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 publications for educational, non-profit purposes, provided the source is acknowledged. Please contact us to obtain authorisation for reproducing this material.
Trade Briefs
Policy Brief: Southern Africa Customs Union – Getting ready for services negotiations
tralac has worked with Trade and Industrial Policy Strategies (TIPS) on Trade in Services matters in the Southern African Customs Union (SACU). Although the 2002 SACU Agreement does not cover services, SACU member states are engaging trade in services issues in the context of regional trade agreement negotiations and this Policy Brief considers how SACU can prepare for services negotiations.
Overview
For many African states, negotiations to liberalise trade in services is a relatively new experience. Southern African Development Community (SADC), Common Market for Eastern and Southern Africa (COMESA) and East African Community (EAC) member states are set to negotiate services at several levels – regional, bilateral, multilateral and even at the supra-regional level in the context of the Tripartite agreement.
Trade in services is not a feature of the 2002 Southern African Customs Union (SACU) agreement, and although the Heads of State and Government hinted at the possibility when they undertook to develop “SACU positions on new generation issues”, it is unlikely that services will be negotiated in the context of SACU any time soon. SACU member states already have to contend with bilateral services negotiations with the European Union (EU) (Botswana, Lesotho, Swaziland), regional negotiations as part of SADC (all five SACU member states), regional negotiations as part of COMESA (Swaziland), and even at the supra-regional level as part of the Tripartite negotiations. This is already ambitious, particularly for a country with limited capacity such as Swaziland.
These negotiations are mostly focused on services liberalisation, which addresses regulatory barriers relating to the access and treatment of foreign services suppliers. If SACU member states feel the need to directly address the issue of services within the configuration, the basis of the discussion should be deeper integration. With deeper integration, the focus should be shifted from liberalising the barriers that exist at the borders, towards addressing the behind-the-border issues, which exist within the jurisdiction of the member states.
Deeper integration, among other things, includes domestic issues such as transparency, competition regulation, specific sectoral disciplines, mutual recognition and the harmonisation of certain areas. Some of these issues are, however, also addressed at the regional level of SADC, so SACU member states will have to carefully define the scope of the negotiations according to their needs and expectations.
In the wider region, only EAC member states have concluded binding commitments to liberalise certain services sectors. COMESA member states still have to start negotiating rounds to agree on binding commitments, while the SADC member states are in the final stages of approving the SADC Protocol on services. According to the draft text, SADC negotiating rounds to liberalise trade in services will be concluded within three years after the adoption of the Protocol. During these negotiating rounds, countries will draft ‘schedules of specific commitments’ which will form an integral part of the services framework.
These specific commitments are legal obligations undertaken by the individual countries concerning the level of market access permitted to foreign services suppliers and the conditions under which they are allowed to operate domestically. Specific commitments are recorded in the national schedules of each member state on a sector-by-sector basis and only bind the countries to the extent that they have committed themselves. Basically these schedules set the parameters for foreign participation in a country’s domestic services industries.
Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged.
Trade Briefs
Determining the Weighted Average Margin of Dumping
Dumping is viewed as price discrimination between the domestic and export markets and takes place where the export price of a product is lower than the normal value of such product. The normal value is usually determined with reference to the domestic selling price in the exporting country. Adjustments have to be made to the normal value and export price for differences that affect prices at the time that such prices are set, including differences in terms and conditions of sale, taxations, levels of trade and quantities. Finally, the margin of dumping is defined in South African legislation as the ‘extent to which the normal value is higher than the export price, after adjustments have been made for comparative purposes’.
This trade brief sets out to determine how the weighted average margin of dumping may be determined, i.e. the single margin of dumping applicable to several models or types of a product under investigation where only a single anti-dumping duty is to be imposed on all models. This will typically be the case where the South African Revenue Services (SARS) cannot, for administrative or other reasons, distinguish between different models for the levying of anti-dumping duties. This would include products such as tyres, where the margin of dumping may vary greatly between different sized tyres, and bolts and nuts, where each individual bolt and nut may have a different margin of dumping.
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
Is the liberalisation of trade in services in the East African Community compliant with WTO law?
All the member states of the East African Community (EAC) are also members of the World Trade Organisation (WTO) and are obliged to adhere to its rules on regional integration. The WTO agreements recognise the creation of regional trade agreements as exceptions to the Most-Favoured-Nation (MFN) principle of non-discrimination. The WTO’s General Agreement on Tariffs and Trade (GATT) allows the formation of customs unions, like EAC, and Free Trade Areas, provided the strict criteria of Article XXIV are met. Similarly, Article V of the General Agreement on Trade in Services (GATS) provides for the creation of Economic Integration Agreements (EIAs) for the liberalisation or facilitation of trade in services.
The purpose of this trade brief is to consider the relevant provisions under GATS for the preferential liberalisation of trade in services within the context of the East African Community (EAC) and then to assess the compliance of the EAC Common Market Protocol with World Trade Organization (WTO) law.
The brief discusses the multilateral rules for the establishment and notification of Economic Integration Agreements (EIAs). Thereafter the relevant parts of the EAC Common Market Protocol insofar as they relate to trade in services will be discussed in the context of the multilateral requirements before an assessment of legal compliance is made.
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
Non-tariff barriers affecting trade in the COMESA-EAC-SADC Tripartite Free Trade Agreement
Successive rounds of multilateral trade negotiations have led to a decrease in the use of tariffs as barriers to trade. However, the reduction in tariffs has been substituted by the utilisation of non-tariff barriers (NTBs). NTBs are defined as any barrier to trade other than import and export duties. This includes export taxes, import bans, government monopolies, cumbersome documentation requirements and a lack of physical infrastructure. The utilisation of NTBs is a growing concern in Africa and a major obstacle to regional integration, since these barriers increase business costs and restrict market access.
The most prevalent NTBs hindering regional trade in the Tripartite Territory (COMESA, the EAC and SADC) include customs procedures and administrative requirements, technical standards, government participation in trade and the lack of physical infrastructure. This is of particular importance to agricultural trade within the region. Cumbersome documentation requirements, stringent standards and inefficient road and rail networks cause time delays and increase the cost of intra-regional trade. This has a direct and indirect impact on the quality and price of agricultural products available in the regional market.
The member states of COMESA, the EAC and SADC have realised that NTBs are a major impediment to the expansion of intra-regional trade and identified the elimination of NTBs as one of the key objectives of the Draft Tripartite Agreement. In order to reach this objective a Web-based NTB Monitoring Mechanism has been put into place. Although the mechanism has been successful in resolving various NTB complaints among trading partners, there is still a range of NTBs prevalent in the region. In order to enhance regional development and promote intra-regional trade the Tripartite member states need to intensify efforts to address NTBs on a regional basis.
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
Do EPAs undermine regional integration in Southern Africa?
Regional integration features prominently in the development strategies of most African countries. The current regional integration agenda for East and Southern Africa is ambitious. The Southern African Customs Union (SACU) member states have agreed to a new vision for deeper integration, and as part of SACU’s legal and institutional development, to institutionalize a Summit of Heads of State and Government. The Southern African Development Community (SADC), which includes all the SACU member states, is consolidating its Free Trade Area, and the East African Community has started the implementation of its common market, which was launched in mid-2010. The 26 member states of SADC, EAC and COMESA have agreed to establish a Tripartite Free Area; a draft Agreement and 14 Annexes have been prepared, but negotiations have not yet begun.
tralac is preparing a series of Trade Briefs focusing on key issues related to the African integration agenda, focusing specifically on the agenda of member states in East and Southern Africa.
This Trade Brief is the third in this series and explores whether the proposed Economic Partnership Agreements (EPAs) undermine regional integration in Southern Africa.
The first two Trade Briefs in this series are available here:
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.