1

BRIEFING ON TARIFFS AND REMEDIES TO THE PORTFOLIO

COMMITTEE

ON ECONOMIC DEVELOPMENT

21 August 2012

Siyabulela Tsengiwe

Chief Commissioner

2

Contents

1. Policy and legal Framework

2. Alignment to the New Growth Path.

3. Import Tariffs.

4. Trade Remedies.

3

Policy and Legal Framework

1. NGP; IPAP2; Trade Strategy and Policy Framework

2. Domestic Law: ITA Act; Customs and Excise Act; Regulations; PAJA; Constitution

3. International Agreements (WTO)

4. Regional Integration (SACU and SADC)

5. Bilateral Agreements (EU; EFTA; & MERCOSUR)

4

Alignment to the New Growth Path (NGP)

• In light of the unacceptable high levels of unemployment, huge inequalities and poverty, the NGP places job creation at the centre of economic policy.

• Importantly for ITAC is the direction of trade policy and sectors that have been prioritised for job creation (Jobs Drivers).

• The NGP advocates Developmental trade policies:

Promoting exports of value added manufacturing. Addressing unfair competition against domestic manufacturers. Active support for new trade opportunities including newly established industries. Reciprocal commitments on applicants for tariff changes & rebates addressing areas of

investment and employment creation. Pragmatic and evidenced based approach in pursuing socio-economic objectives. Unnecessary accession to narrow interests or failure to respond to real economic needs.

5

Alignment to the NGP

Sectors of particular relevance to ITAC that have been prioritised for job creation (Jobs Drivers):

–Infrastructure (Rebates created for the Gautrain and the Transnet Pipeline Project will be strictly controlled to ensure that only intended imports are cleared. New industries may emerge to supply inputs into infrastructure development and may require developmental tariffs thus reducing import leakage).

–Green Economy (Analysis of the tariff regime for green goods to identify opportunities for local manufacturing and tariff support. Green goods include: solar and wind energy goods, batteries for electric vehicles, machinery & equipment for waste management).

–Agriculture value chain (Recognition of the uniqueness of the agriculture sector given the global distortions. Tariff support for agro-processing. Food security considerations).

–Mining value chain (Export Controls will be positioned to give support to the dti and Mineral Resources to promote local beneficiation)

–Manufacturing sectors, which are included in IPAP 2.

6

Import Tariffs

• Tariff Structure.

• Sectors Investigated in the past 4years

• Methodology.

• Procedure.

7

Tariff Structure

• Tariff reforms post 1994.• Average applied rate 24% to 8%.• Complex Duties from 25% to 3.1%.• Duty Free Lines from 45% to %54%.• From 12 500 tariff lines to 6 650.• EU-SA TDCA.• SADC.• MERCOSUR.• EFTA.

8

Methodology for evaluating Tariff Applications

• Domestic productive capacity and potential.• Employment.• Investment.• Trade flows (Imports and Exports).• Cost Structure.• Price differentials (Disadvantage or Advantage).• Market share of domestic producers.• Demand and supply.• Financial state of the industry.

9

Investigated Sectors

• Basic chemicals (polymers)

• Aluminium and Power pylons

• Capital equipment and machinery

• Textiles for Clothing; Fabrics for Home Textiles

• Clothing

• Plastic products

• Self copy paper

• Automotive components and set top boxes

• Spades and shovels; gas cylinders

• Wheat; Sugar; Soya bean oil cake; and Pineapples and Juice

concentrates

10

Procedure for conducting Tariff Investigations

Government Gazette Notice

Final Submission

Exco-Sub Committee

Commission’s Final

Determination

Reports & Submission4

05 1

515

Minister of Trade and Industry

Deputy Minister of

Finance

Publication Notice by

SARS

Receipt of Application

Properly Documented Application

Preliminary Submission

Exco-Sub Committee

Commission’s Preliminary

Determination 19

14

5 15

10

10

148 Days = 6 Months

11

Trade Remedies

• Trade remedy instruments.

• Dumping and anti-dumping actions.

• Procedure.

12

Trade Remedy Instruments

• Objectives: Enable fair trade in order to sustain domestic production, retain and create jobs and promote international competitiveness.

• Anti-dumping measures are taken against injurious dumped imports. Dumping is used to refer to a situation where goods are sold to a foreign market at prices less than the country of origin.

• Countervailing measures are used against subsidised imports that threaten and/or cause injury ( i.e. decrease in prices; loss of market share; decrease in profits; decrease in sales volumes; job losses etc.) to the domestic manufacturer.

• Safeguards are actions against trade that may be regarded as fair but overwhelms domestic producers. Safeguards are used against an unforeseen surge of imports that threatens and/or causes injury to the domestic producers.

13

TRADE REMEDY INITIATIONS1 January 1995 – 31 December 2011

Total 4,513

14

Dumping & Anti-dumping (AD) Actions

• Dumping: Selling goods at a lower price in the export than the domestic

market.

• Firms engage in geographical price discrimination to maximise profits.

• The problem arises when dumping threatens and/or causes injury to

domestic manufacturers ( Decline: Prices; Sales Volumes; Profits; Market

shares; Job losses etc.)

• Since Dumping is regarded as an unfair trade practice the WTO AD

Agreement sets out the rules for acting against dumping that causes injury.

• South Africa is an old and active user of the instrument with the first law on

AD having been enacted in 1914.

15

Anti-dumping measures as at 30 April 2011

Anti-dumping measures in place as at 30 April 2011; Source: ITAC

COUNTRY/ CUSTOMS TERRITORY PRODUCT SACU INDUSTRY DATE OF ORIGINAL IMPOSITION

People’s Republic of China Blankets Texfed 18/06/99, GG20226Acetaminophenol Fine Chemicals 20/08/93, GG15067Bolts and nuts of iron or steel SAFMA 06/08/99, GG20363Garlic SA Garlic Ass 20/10/00, GG21650Stainless steel sinks Franke 06/11/09, GG32606Garden picks Lasher 03/12/93, GG15291Spades, shovels, rakes, forks Lasher 03/12/93, GG15291Float and Flat glass PFG 28/05/99, GG20126Welded link steel chain SCAW 09/05/08, GG31048PVC Rigid Turbo Plastics 25/04/08, GG31012Wire ropes SCAW 28/08/02, GG23790Door locks and door handles Assa Abloy 25/01/02, GG23040Staple Polyester Fibre Texfed 28/05/10, GG33211

Chinese Taipei Polyethylene terephthalate (PET) Hosaf 30/05/06, GG28887PVC Rigid Turbo Plastics 25/04/08, GG31012

Germany Wire ropes SCAW 28/08/02, GG23790India Polyethylene terephthalate (PET) Hosaf 30/05/06, GG28887

Unframed glass mirrors PFG 25/10/06, GG29329

Paper insulated lead covered electric cableAssociation of Electric Cable Manufacturers

31/03/00, GG21036

Float and Flat glass PFG 28/05/99, GG20126Indonesia

Gypsum PlasterboardBPP Gypsum (St Gobain)

02/07/04, GG26533

Drawn and float glass PFG 03/10/06, GG29272Unframed glass mirrors PFG 25/10/06, GG29329

Korea, Republic of Polyethylene terephthalate (PET) Hosaf 30/05/06, GG28887Paperboard Mondi 22/12/06, GG29506Wire ropes SCAW 28/08/02, GG23790

Malaysia Stainless steel sinks Franke 06/11/09, GG32606Sweden Tall Oil Fatty Acid IOP 05/06/09, GG32297Thailand Carbon black Algorax 13/10/00, GG21658

Gypsum Plasterboard 13/02/04, GG26022Turkey Blankets Texfed 18/06/99, GG20226United Kingdom Wire ropes SCAW 28/08/02, GG23790USA Acetaminophenol Fine Chemicals 18/06/99, GG20226

Chicken meat portions SA Poultry Assoc 27/12/00, GG21947Lysine SA Bioproducts 25/01/02, GG23059

16

21 days

Properly documented application

Applicant verification

prep

Merit submission prep

21

Merit decision

SM approval & place on

agenda7

Verification of exporters

12 7+30+14 2

2Comments on prelim. report 21

2 18 10 72Prelim report ready for SM

Commission prelim. decision

Provision for an oral hearing

10

SARS publication

1818

14 10 18 7 3 21

Total days: 274 (9 months)

Total days: 309 (10 months)

721 18 10

14Sending exporters’ verification reports

14 14Verification plan for

importers & exporters & verification of

importers

Identify deficiencies and

send letter

Exporter/ importer

responses

Comments on verification reports

Prelim report approval by CC

Final submission on

agenda

Sending out prelim. report &

notice

Implementation of decision

Notification initiation of investigation

Responses on deficiencies

Finalise prelim & submit agenda

Publication of provisional payments

Essential facts letters

Final decision

Approval by Minister

Final report approval by

Chief Comm.

Comn. final decision after essential facts

Final submission after essential facts

Comments on essential facts

Procedure for conducting AD Investigations

17

SA’s use of Anti-dumping

• Since the founding of the WTO in 1995 to 2010, the top users of the anti-dumping instrument have been, in terms of the number of investigations initiated –

India: 613 United States: 442;

European Union: 414; Argentina: 277; and

South Africa: 222; Australia: 212.

Anti-dumping investigation initiations by reporting member 1995 – 2010

Source: WTO data files and ITAC

18

Judicial Reviews

• Different and opposing interest in the value chain.

• WTO Dispute Settlement Mechanism.

• Litigation in other Jurisdictions.

• 2008 – August 2010 Court Cases.

19

WTO Disputes vs. Trade Remedies + Subsidies Disputes (Based on panels established)

1995 – 2011

20

Thank You

Office Contact Details: 012 394 3713

Cell: 082 454 8979 stsengiwe@itac.org.za

www.itac.org.za