Topics publications: Trade law and regulation
Books
Supporting Regional Integration in East and Southern Africa – Review of Select Issues
There has been renewed interest in regional integration in Africa in the last few years. Political ambitions to progress along the linear path of regional integration from free trade areas (FTA) to customs unions, and even to achieve monetary union, have led to the reiteration of commitments to tight deadlines especially to move from FTAs to establish customs unions, despite the fact that implementation of FTAs has met with many challenges.
The Treaties establishing regional economic communities in the East and Southern African region are all very clear on the developmental objectives of regional integration. Yet, it appears that the mere move from an FTA to a customs union is viewed, at least by politicians in the region, as significant progress in regional integration.
The Economic Partnership Agreement (EPAs) negotiations with the European Union have highlighted particular challenges associated with regional integration in East and Southern Africa. The EPA configurations cut across existing regional economic communities (REC) in a region that is characterized by unparalleled overlapping membership. Mozambique is the only country in the Southern African Development Community (SADC) for example that belongs to only one REC.
Given that one of the key objectives of the EPAs is to promote regional integration, the interface between the EPA negotiations process and the regional integration agenda is important to review.
Several countries in the region have begun to assess their trade policy options in a regional context and to weigh up the choices that they will have to make when the RECs to which they belong establish customs unions. For some at least membership of more than one REC is motivated very clearly by economic and broader political and security considerations. Membership choices will have to be considered very carefully, taking into account, amongst other things, also regional trade agreements such as the EPAs.
At the Southern African Development Community (SADC) Summit held in Lesotho in August 2006, a decision was taken to convene an Extraordinary Summit to discuss the SADC regional integration agenda. Although concerns were raised regarding the ambitious SADC targets to achieve a customs union and further integration objectives, political ambitions remained very high to move towards achieving a customs union, monetary union and common market. Early in 2009 SADC agreed however to postpone the 2010 target for establishing a customs union. While the establishment of a customs union is not off the agenda, its postponement provides an opportunity to focus on the implementation of the Free Trade Area and to assess the rationale for, and the implications of moving ahead to establish a customs union.
The Common Market for East and Southern Africa (COMESA) launched a partial customs union 2009, with some member states clearly not ready to take the step to join the customs union yet. The East Africa Community (EAC), taking into account the asymmetry with in the group, opted to establish a customs union first, before liberalizing trade amongst the member states to establish an FTA.
All these developments have to be viewed in a broader African context.
The African Union (AU) articulates a pan-African regional integration plan to establish the African Economic Community (AEC) as envisaged in the Abuja Treaty. Developments in East and Southern Africa epitomize some of the challenges that this broader integration agenda will have to negotiate.
This collection of papers reviews select issues on the regional integration agenda in East and Southern Africa. We start with the bigger picture, reviewing the African Paradigm of Regional Integration, as well as the broader AU integration agenda. We also reflect on the impact of the global economic crisis on Africa. This is followed by a review of progress on regional integration in SADC. We then consider country specific issues; including the trade policy choices of several countries, the role of new generation trade issues such as services on the regional integration agenda, and assess the status of protectionism, trade remedies and safeguards in regional trade agreements, both intra- and extra-regional to which countries in this region belong. Finally we present a review of the developments in the SADC EPA negotiations, specifically focusing on concerns raised within the SADC group.
© 2010 Trade Law Centre and The Royal Danish Embassy
This project has been funded by DANIDA, and we gratefully acknowledge this support. We would like to thank our colleagues at the Danish Embassy in Pretoria very much for their support to tralac.
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. All views and opinions expressed in these publications remain solely those of the authors and do not purport to reflect the views of tralac.
Trade Reports
Safeguards and trade remedies in the SADC and ESA Economic Partnership Agreements
This paper discusses the “Trade Defence Instruments” in the Economic Partnership Agreements (EPAs) currently being negotiated between the European Union (EU), on the one hand, and different configurations of ACP (African, Caribbean and Pacific) countries on the other. These “instruments” cover remedies against unfair trade practices (anti-dumping and countervailing measures) as well as safeguards. ACP concerns about infant industry protection, food security and agriculture are also on the agenda.
The use of “contingency measures” has increased generally, inter alia because of the global economic slump. These measures include anti-dumping and countervailing duties imposed by recipients of illegally subsidised exports, as well as safeguards, which are temporary protections that countries can offer to vulnerable domestic industries. The 2009 WTO World Trade Report notes that there are dangers involved in the use of such measures: “The core challenge in the design of these measures is to make them flexible enough to be useful, but not so flexible as to undermine the integrity of an agreement,” said WTO Director-General Pascal Lamy, when he spoke at the launch of the Report in July 2009. “The need for this balance has sometimes been a key issue in negotiations.”
Developing countries are particularly concerned about the availability of safeguards – as demonstrated by the final debates in the Doha Round of negotiations just before those talks broke down in July 2008. The immediate technical problem was the insistence by certain developing nations that a special agricultural safeguard had to be included. For the ACP nations there is an additional challenge: their preferential access to the EU markets came to an end in December 2007 when the WTO waiver for the Cotonou trade chapter expired. They now have to trade with the EU in terms of WTO compatible EPAs unless they decide to rely on the Generalised System of Preferences (GSP) or (for Least Developed Countries (LDCs)) the Everything but Arms (EBA) arrangement.
What do the proposed EPA texts provide for in terms of “trade defence” mechanisms and how should the applicable provisions be implemented? Do they cater for the needs of developing countries? Are they flexible enough? Do developing countries have the technical and institutional capacity to implement these measures? What domestic steps are required in order to invoke safeguards and other protective measures? Will they be given special technical assistance in order to develop the required capacity where it is lacking? How do the proposed EPA measures compare with WTO rules on safeguards and trade remedies?
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
An assessment of the trade measures proposed as part of the Department of Trade and Industry’s Draft Rescue Package for the clothing and textile industry
One of the South African government’s latest responses in its ongoing and thus far unsuccessful effort to assist the country’s ailing clothing and textile manufacturing industry was the drafting of a rescue package by the Department of Trade and Industry (DTI) in consultation with industry stakeholders. In addition to several industrial policy measures, such as programmes for skills development and investment in capital, the package also contains certain trade policy measures. Notably, the package proposes raising applied tariffs on imported clothing to bound levels, and implementing an investigation into the use of safeguard measures, with higher temporary duties to be levied on imports of various clothing lines.
Partly in response to the rescue package, and partly as a follow up to previous work on the quantitative restrictions levied on clothing and textile imports from China, tralac has produced a working paper which addresses the value of the new trade measures proposed by the DTI. The paper begins by providing a brief overview of the clothing and textile industry in South Africa, including an analysis of the recent quota experience. Next it highlights the industry’s weaknesses, posing the important question of whether it has a sustainable future. Leaving this question open, the paper examines the trade measures mentioned above, looking in particular at a number of issues that need to be explored when considering an increase in import tariffs, including the scope that exists for such a move, the nature and coverage of the proposed tariffs, and the impact that such an increase would have on the South African Customs Union (SACU), as well as on South Africa’s trade relations with developing country exporters of clothing. After addressing the proposal to implement safeguards and highlighting the legal issues involved, the paper concludes with remarks on the future prospects for the clothing and textile industry in South Africa.
Given the lack of policy space for increasing tariffs on clothing imports and the political and economic costs that such a move would likely entail, the paper argues that raised tariffs would be of little benefit to the local industry and to South Africa as a whole. If a viable future for the industry is envisaged and if the government is committed to providing the industry with breathing space to adapt to increased competition, then the safeguards proposal makes far more sense than raising tariffs. Not only are safeguards inherently conditional and temporary, thereby forcing the local industry to undertake much needed restructuring, they are also likely to be more palatable to the international community than an increase in tariffs.
The local clothing and textile industry shows many of the hallmarks of an industry in potentially terminal decline, and it is difficult to see how it could become internationally competitive in the future. The government however, seems determined to assist the industry and has already committed significant resources to it. In addition to the inappropriateness of increased tariffs as a measure for assisting the industry, another important issue raised by the paper is whether government resources would not be better utilised elsewhere. If the government is concerned with the effects of widespread job losses for instance, it could address this issue more directly instead of supporting a chronically inefficient industry with largely ineffective policy tools such as tariffs.
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
Draft amendments to the WTO Anti-Dumping Agreement – any reason to get excited?
On 30 November 2007 the World Trade Organization (WTO) published draft amendments to the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (the Anti-dumping (AD) Agreement) and the Subsidies and Countervailing Measures (SCM) Agreement. These proposals follow a WTO members’ agreement reached at the WTO Ministerial in Doha in 2001 to negotiate with the aim of clarifying and improving disciplines under, inter alia, these two agreements.
The draft texts address all issues raised in paragraph 28 of the Doha mandate, but do not reflect all proposals placed before the Negotiating Group. This working paper analyses all proposals contained in the Chairman’s text, but will not consider the proposals that have not been included in the texts. It also does not consider the draft proposals pertaining to the SCM Agreement and fishing subsidies.
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
African Member States and the Negotiations on Dispute Settlement Reform in the WTO
This paper provides an overview of the WTO’s Dispute Settlement system and gives pointers on the areas African negotiators should focus on during negotiations for reform of the system.
It is now widely accepted that an effective and efficient dispute settlement mechanism is especially important for weak and small states lacking the wherewithal to ensure protection and vindication of their rights through the projection of economic or political might. Almost all the African member states qualify as such weak or small states requiring such protection under the DSU. Yet African members are not among the frequent or regular users of the DSU mechanism. Developing countries in Asia and Latin America, in contrast, are among some of the regular and adept users of the mechanism, and have featured prominently, as main parties, or third parties, in most of the high profile precedent setting disputes resolved to date. African countries have featured mainly as third parties, and essentially to defend or prevent the corrosion of preferential trading rights.
With this in mind, the paper proceeds to look at the substantive provisions of the DSU, in as far as they apply to African countries and, after advising African negotiators on what issues to focus on, proceeds to issue a prognosis of the current negotiations.
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
A general overview of proposed changes to the Rules of Origin in ACP-EU EPAs
The revision of the ACP-EC rules of origin was long overdue, with the the prevailing regime dating back to the early Lome Conventions that governed the ACP’s access to EU markets, trade cooperation and development assistance. The waiver under which the trade chapter of the Cotonou Agreement operated, provided a largely time-bound external reference point to guide the renegotiation of preferential ACP-EU trade.
This Trade Brief appraises the renegotiation of the rules of origin (RoO), which while being a critical component of any preferential trade arrangement, were essentially dealt with during the period just before the expiry of the WTO waiver on 31 December 2007. There was simply not enough time to completely overhaul the RoO. Some important amendments have been made for important exports from the ACP, however there is still work to be done; most probably within the next two years.
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 2007
2007 may perhaps turn out to mark a watershed for regional integration in the southern Africa region. Developments both intra- and extra-regionally have raised the regional integration debate to a new level. Within the region, the substantive focus has been on the achievement of the Southern African Development Community (SADC) customs union. And the Economic Partnership Agreement (EPA) negotiations have dominated the extra-regional agenda.
Southern Africa remains committed to the linear textbook model of regional integration. SADC adheres politically to an agenda that extends well beyond the target of achieving the free trade area that SADC member states are legally bound to in the SADC Trade Protocol. The Regional Indicative Strategic Development Plan of 2003 is not a legally binding agreement, but enjoys political legitimacy. This strategic plan plots an integration agenda that includes the target of a free trade area by 2008, a customs union by 2010, and further integration towards a common market, monetary union and political union.
At the Lusaka Summit in August 2007, the target date for the achievement of a free trade area was set for August 2008, buying some extra months to achieve intra-regional trade liberalisation which is at this stage lagging well behind target. The most important discussion on regional integration this year focused on the establishment of a customs union by 2010. A study commissioned by the SADC Secretariat examined specifically how a customs union could be implemented. It notably did not examine the rationale for the achievement of a customs union.
Dominating the extra-regional agenda have been the negotiations with the European Union to conclude Economic Partnership Agreements. All the member states of the Southern African Customs Union (SACU), Mozambique, Angola and Tanzania formed the SADC EPA configuration. Tanzania, very close to the eleventh hour of the negotiations to beat the expiry of the World Trade Organisation (WTO) waiver applicable to the trade chapter of the Cotonou Agreement, left this configuration to join its East African Customs Union (EAC) partners to conclude the signing of an EPA with the European Union. All other members of the SADC group except South Africa and Angola signed the EPA before the end of December 2007. Angola has indicated that it will accede to the EPA and South Africa has still to indicate what it will be doing.
The collection of papers in this volume examines in a multidisciplinary manner the complex processes and developments related to regional integration in Southern Africa in 2007. An important contribution is perhaps not the answers provided to important challenges currently being negotiated but the questions that aim to stimulate productive debate on the future of regional integration in southern Africa.
© 2007 Trade Law Centre for Southern Africa, Konrad-Adenauer-Stiftung and the Namibian Economic Policy Research Unit
Publication of this book was made possible by the support of the Trade Law Centre for Southern Africa (tralac), the Konrad Adenauer Foundation and the Namibian Economic Policy Research Unit (NEPRU). 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.
Books
South Africa’s way ahead: trade policy options
This book presents the output of a tralac project focusing on the trade agenda of South Africa and the Southern African Customs Union (SACU) of which South Africa is a member. The proliferation of Free Trade Agreements (FTAs) is very much part of SACU and specifically South Africa’s trade agenda, since FTAs are negotiated collectively by SACU member states.
The aim of the analysis in this book is twofold. First, the implications of different FTAs that are either being negotiated or being considered, are assessed in the context of the current Doha Round of multilateral trade negotiations. Second, the book presents a sober assessment of trade modelling exercises, noting the value as well as the limitations of these exercises in the making of trade policy choices and negotiating trade agreements.
“This book raises many fascinating policy questions. The authors have systematically built a series of policy scenarios for South Africa and its Southern African Customs Union (SACU) trade partners in order to see what the welfare consequences might be of preferential trading arrangements. The simulations are not only limited to situations in which South Africa and SACU enter into variously configured free trade agreements (FTAs), but they also consider what would happen to these countries if third parties from outside the region were to establish FTAs among themselves.
“We have known for a long time that trade liberalisation will throw up winners and losers, both within countries and, in some circumstances, among countries. Where winners and losers are located within the same jurisdiction, it may be argued that governments have a chance to mitigate the adverse effects of trade liberalisation on disadvantaged groups through the use of various adjustment-related and social policies. But what happens when the winners and losers are different countries? These distributional outcomes may often prove more delicate and difficult to deal with. Multilateral trade liberalisation can have these effects, especially through adverse terms of trade effects associated with reductions in subsidies. One of the things that the preferential trade liberalisation scenarios simulated in this book suggest, however, is that such distributional consequences are likely to occur more frequently under discriminatory trade liberalisation. No easy answer exists to this particular policy challenge, but it is not difficult to see that this may be one reason why we observe ‘herd’ behaviour and burgeoning regionalism around the world.
“Overall, this book makes a valuable contribution to increased understanding of the consequences of various trade policy choices in southern Africa. The authors are to be commended. The real contribution of work of this kind is not so much in specifying what governments should do, but rather where to look for their options and what questions to ask before exercising them.”
Chief Economist, World Trade Organisation
© 2007 Trade Law Centre for Southern Africa and AusAid
Publication of this book was made possible by the support of the Trade Law Centre for Southern Africa (tralac) and the Australian High Commission (AusAid). The financial support of AusAid for this project is gratefully acknowledged. 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.
Books
Monitoring Regional Integration in Southern Africa Yearbook 2006
Regional Integration in general is considered as an important theoretical paradigm for and successful practical instrument of economic growth and development. Particularly in Southern Africa with its comparatively small economies, regional integration can play a crucial role in the pursuit of common strategic interests for the successful economic development of the involved countries.
Regional Integration, however, requires political will, the understanding of politicians of the necessity to pass relevant national legislation and the decision to implement respective strategies. The political discourse will naturally deliberate on the expectations for economic growth and the consequences of partly renouncing national sovereignty. The dynamics of such national discourses and the political will to regional integration are unpredictable with repercussions for the course of and striving for regional integration.
In addition, the discourse on regional integration is no end in itself, but a means to an end. In the centre of all attention on regional integration must be the human being, the living standards of people and their social cohesion. The subject, however, will not primarily be the citizen of a particular nation but the people of the whole region.
Hence regional integration emerges as a multilayered challenge for experts, politicians and finally to the people involved in a region. They must all be informed about the ongoing process, and must be involved in the deliberations and in the decision-making processes.
The European Union, now comprising 27 vastly different (not only economically) member states, is proof that the efforts of investing in regional integration pay dividends, economically, socially, and politically.
This book was launched on 26 February 2007. Read the speech by the Honourable Member of Parliament and Chair of the Portfolio Committee on Trade and Industry, Benedict Martins.
© 2006 Trade Law Centre, Konrad-Adenauer-Stiftung and the Namibian Economic Policy Research Unit
Publication of this book was made possible by the support of the Trade Law Centre for Southern Africa (tralac), the Konrad Adenauer Foundation and the Namibian Economic Policy Research Unit (NEPRU). 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 Reports
WTO and the Singapore Issues
A feature of the World Trade Organization (WTO) during its first ten years has been the impact of the so-called Singapore issues of investment, competition, government procurement and trade facilitation. The name association arises because WTO Members decided at the 1996 Singapore Ministerial Conference to set up three new working groups on trade and investment, trade and competition policy, and transparency in government procurement. They also instructed the WTO Council for Trade in Goods to look at possible ways of simplifying trade procedures, or, as it became known, ‘trade facilitation’. These four issues were also included on the Doha Development Agenda (DDA), with negotiations to start after the 2003 Cancun Ministerial Conference, ‘on the basis of a decision to be taken, by explicit consensus, at that session on modalities of negotiations’. However, following the infamous ‘train wreck’ of Cancun, a wreck induced in part by the acrimonious debate on the same Singapore issues, WTO Members agreed on 1 August 2004 (the so-called July Framework) to proceed with negotiations in only one Singapore Issue, trade facilitation. The other three were dropped from the DDA. Thus, the impact of the Singapore Issues has been not through negotiating new disciplines per se, but rather due to their pivotal role in contributing to the failure of recent Ministerial conferences in the WTO.
The objective of this paper is to review the issues in the context of the WTO and assess to what extent they legitimately belong in this WTO forum, or alternatively, to what extent they belong within regional and bilateral agreements and how they may be treated within these types of agreements. An essential question related to the latter is the extent to which the EU and the US in particular are attempting to re-introduce these Singapore issues ‘through the back door’ of African bilateral and regional trade agreements where they are perceived to have a more asymmetrical negotiating position than in the WTO.
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.