Jun 08, 2012
A weaker rand will offer protection against importsBack
Africa|Asphalt|Generator|Mining|System|Water|Africa|Albania|South Africa|Contracting|Equipment|Manufacturing|Manufacturing Industry|Service|SARS|Adriatic Sea|Water|Adriatic|Eastern Europe
© Reuse this
The argument one hears frequently is that, as a consequence of its strength, the rand exposes South Africa to cheap imports, while impacting on South African exports’ competitiveness – a double whammy, if you will.
This has resulted in calls from certain quarters, particularly the manufacturing industry, for the weakening of the rand against the major international currencies, which, it is argued, will decrease the com- petitiveness of imported goods and increase the competitiveness of South Africa’s exports.
My intention is not to be involved in this debate and to deliberate on the merits or demerits of a weakened rand; rather, it is to question whether calls for the weakening of the rand are not masking the fact that the increase in the ‘general’ rate of customs is not possibly the result of South Africa’s participation in the World Trade Organisation (WTO) by explaining certain aspects of the organisation.
Prior to the creation of the WTO – on January 1, 1995 – the imposition of customs duties as a protective function or as a revenue generator was the sole domain of governments. The WTO, however, introduced ‘bound rates’ following negotiation of the ‘general’ rate of customs duty. In essence, a bound rate is the ‘ceiling’ of the rate of customs duty – the highest rate of customs duty that can be imposed on a given tariff subheading, of which there are more than 7 000.
As a consequence, should the ‘general’ rate of customs duty be set at the bound rate, then a higher rate of customs duty cannot be imposed, thus nullifying customs duty as a measure of protection. (The prevailing rate of customs duty is called the applied rate. The difference between the bound rate and the applied rate is called the ‘policy space’ or the ‘water in the tariff’.)
If there is no policy space, then the only measure available to South African manufacturers to tackle competition, including unfair competition, is the impo- sition of trade remedies, namely anti- dumping duties or countervailing duties (antisubsidy duties). As for fair competition, there is no protective measure avail- able other than safeguard duties. At present, no safeguard duties are imposed, and the reasons for this is could be the subject of an article for another day. Weakening the rand against major international currencies could provide what is referred to as ‘natural protection’. So, in essence, a weak currency could also serve as a protective measure.
Court Rules: Tariff Classification in SARS’ Favour
Edited by: Martin Zhuwakinyu© Reuse this Comment Guidelines (150 word limit)
Other Trade@Work News
Updated 36 minutes ago State-owned power utility Eskom on Monday urged consumers to save electricity as it implemented stage one load shedding, owing to unforeseen technical problems at some of its power stations.
Updated 1 hour 15 minutes ago A strike is looming at commercial airline Comair, affiliate of Kulula and British Airways airlines, after salary negotiations with its cabin crew failed. Negotiations between Solidarity and Comair started in September 2014, and, in December, the union referred a...
Updated 3 hours ago Tanzania's Energy and Minerals Minister Sospeter Muhongo resigned on Saturday amid a graft scandal that has rocked the gas-rich country and led Western donors to delay aid, though he called himself "incorruptible" and denied wrongdoing. Muhongo became the third...
Recent Research Reports
Liquid Fuels 2014 - A review of South Africa's Liquid Fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2014 Report examines these issues, focusing on the business environment, oil and gas exploration, the country’s feedstock supplies, the development of South Africa’s biofuels industry, fuel pricing, competition in the sector, the...
Water 2014: A review of South Africa's water sector (PDF Report)
Creamer Media’s Water 2014 report considers the aforementioned issues, not only in the South African context, but also in the African and global context, and examines the issues of water and sanitation, water quality and the demand for water, among others.
Defence 2014: A review of South Africa's defence industry (PDF Report)
Creamer Media’s Defence 2014 report examines South Africa’s defence industry, with particular focus on the key participants in the sector, the innovations that have come out of the sector, local and export demand, South Africa’s controversial multibillion-rand...
Road and Rail 2014: A review of South Africa's road and rail infrastructure (PDF report)
Creamer Media’s Road and Rail 2014 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail network, the funding and maintenance of these respective networks, and the push to move road...
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
Real Economy Insight: Automotive 2014 (PDF Report)
This four-page brief covers key developments in the automotive industry over the past 12 months, including an overview of South Africa’s automotive market, trade figures, production and the policies influencing the sector.
This Week's Magazine
Three-dimensional (3D) printers being sold in South Africa by electronics distributor Rectron currently print in two types of plastic, but have a clear upgrade path over the next five years to eventually print in wood, ceramics and metal-alloy materials, says Rectron...
The world’s two dominant commercial aircraft manufacturers, Airbus of Europe and Boeing of the US, both recently announced that they had made record aircraft deliveries in 2014. Boeing set a global record for the industry with 723 commercial aircraft delivered, while...
The Western Cape is shifting further into the renewable-energy space with the official opening of a factory specialising in solar inverters, a key component of solar photovoltaic (PV) plants. The investment in the manufacturing facility in Cape Town aims to boost the...
Business Leadership South Africa (BLSA) last month welcomed Cabinet’s establishment of a technical team war room to undertake various interventions to improve electricity supply security over the short- and medium-term, but added that the private sector also had a...
Despite a rapid rise in mobile connections and the economic and social benefits of such connectivity, more than half of the world ended 2014 unconnected. For this reason, industry commentators believe the biggest impact of mobile technology is still to come –...