BRIEFING ON TARIFFS AND REMEDIES TO THE PORTFOLIO COMMITTEE ON ECONOMIC DEVELOPMENT

1. BRIEFING ON TARIFFS AND REMEDIES TO THE PORTFOLIO COMMITTEE ON ECONOMIC DEVELOPMENT 21 August 2012 Siyabulela Tsengiwe Chief Commissioner

2. Policy and legal Framework Alignment to the New Growth Path. Import Tariffs. Trade Remedies. Contents

3. NGP; IPAP2; Trade Strategy and Policy Framework Domestic Law: ITA Act; Customs and Excise Act; Regulations; PAJA; Constitution International Agreements (WTO) Regional Integration (SACU and SADC) Bilateral Agreements (EU; EFTA; & MERCOSUR) Policy and Legal Framework

4. 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. Alignment to the New Growth Path (NGP)

5. 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. Alignment to the NGP

6. Tariff Structure. Sectors Investigated in the past 4years Methodology. Procedure. Import Tariffs

7. 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. Tariff Structure

8. 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. Methodology for evaluating Tariff Applications

9. 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 Investigated Sectors

10. Procedure for conducting Tariff Investigations Receipt of Application Properly Documented Application Preliminary Submission Exco-Sub Committee Commission’s Preliminary Determination 10 19 5 14 15 Government Gazette Notice Final Submission Exco-Sub Committee Commission’s Final Determination Reports & Submission 40 5 15 15 Minister of Trade and Industry Deputy Minister of Finance Publication Notice by SARS 10 148 Days = 6 Months

11. Trade remedy instruments. Dumping and anti-dumping actions. Procedure. Trade Remedies

12. 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. Trade Remedy Instruments

13. TRADE REMEDY INITIATIONS1 January 1995 – 31 December 2011 Total4,513

14. 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. Dumping& Anti-dumping (AD) Actions

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

16. Procedure for conducting AD Investigations 21days Properly documented application Applicant verification prep Merit submission prep SM approval & place on agenda Merit decision Implementation of decision Notification initiation of investigation 21 7 7 18 10 Sending exporters’ verification reports Verification of exporters Verification plan for importers & exporters & verification of importers Responses on deficiencies Identify deficiencies and send letter Exporter/ importer responses 14 14 14 12 7+30+14 2 Comments on verification reports Finalise prelim & submit agenda Commission prelim. decision Prelim report ready for SM Prelim report approval by CC Publication of provisional payments 2 7 10 18 2 10 Essential facts letters Final decision Final submission on agenda Provision for an oral hearing Comments on prelim. report Sending out prelim. report & notice 18 18 21 2 21 Total days: 274 (9 months) Total days: 309 (10 months) Comments on essential facts Final submission after essential facts Comn. final decision after essential facts Final report approval by Chief Comm. Approval by Minister SARS publication 10 14 21 3 7 18

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 – Anti-dumping investigation initiations by reporting member 1995 – 2010 Source: WTO data files and ITAC

18. Different and opposing interest in the value chain. WTO Dispute Settlement Mechanism. Litigation in other Jurisdictions. 2008 – August 2010 Court Cases. Judicial Reviews

19. WTO Disputes vs. Trade Remedies + Subsidies Disputes (Based on panels established)1995 – 2011

20. Thank YouOffice Contact Details: 012 394 3713Cell: 082 454 8979 stsengiwe@itac.org.zawww.itac.org.za