South Africa will be “resolute” in using tariffs to defend domestic industry and support industrial development, particularly in light of moves towards greater protectionism in other countries, Trade and Industry Minister Dr Rob Davies said in his contribution to the State of the Nation debate on Wednesday.
However, he also stresses that, as a small, open economy (accounting for only 0.5% of world trade) becoming “overly protectionist” could result in South Africa being denied access to other markets on which domestic jobs and productive sectors depend.
“If we break trade rules, there will be consequences and we risk retaliation. But within those constraints, the emerging new circumstances call on us to be more resolute, and indeed smart, in advancing and defending our own national interests. This will include defending our right to take tariff decisions based on our own needs and to deploy appropriate trade remedies.”
He noted that, since 2012, trade policy had been made subordinate to industrial policy and South Africa would, thus, not hesitate to use trade remedies, as well as access to dispute bodies, when being unfairly treated.
The address was made against the backdrop of rising trade pressures in certain sectors, notably poultry and steel, where government had already introduced some new trade restrictions, but where there were calls for even higher levels of protection.
Reflecting on developments in the poultry sector, Davies argued that, while there were “issues of competitiveness and inclusion” in the sector, if government did not act against the current surge of imports, South Africa “might not have an industry to raise the competitiveness of”.
“We need to learn the lessons from the experience of other countries like Ghana, Cameroon and Ivory Coast that were required to open up to these imports through structural adjustment programmes. Cameroon lost 92% of its poultry industry and 110 000 rural jobs between 1999 and 2004, while 1 500 enterprises employing15 000 workers closed shop in the Ivory Coast.”
A recently established government-industry task team would, in parallel, seek to address a wide range of matters in the sector so as to deal with some of the concerns over competitiveness.
Davies also stressed that localisation remained an imperative for government and that it would, therefore, remain steadfast in not signing the World Trade Organisation’s (WTO’s) ‘Optional Protocol on Transparency in Government Procurement’. “If we did, we would have to open up government procurement to all other State signatories on a nondiscriminatory basis and disable procurement as the tool of local development and radical economic transformation,” he said.
“Likewise we must politely but firmly say no, as we have done, when proposals are put forward for further WTO disciplines on procurement. For similar reasons we must resist the entreaties of our friends to sign the Environmental Goods Agreement. If we did we would hobble the local industrial development potential of the roll-out of renewable energy.”
AFRICAN TRADE AND BREXIT
South Africa’s “overriding” trade priority, meanwhile, would be the promotion of African regional integration.
Davies admitted that progress on the Trilateral Free Trade Area (T-FTA) – comprising the 26 member States represented in the Southern African Development Community, the East African Community (EAC) and the Common Market for Eastern and Southern Africa – had taken longer that expected. However, a framework agreement was now in place and would be presented to Parliament in the second half of 2017. The proposed T-FTA has the potential to create a 600-million-person-strong, $1-trillion market spanning from Cape Town to Cairo and is also viewed as a building block towards the so-called ‘Continental FTA’.
“The more commercially meaningful tariff negotiations between the Southern African Customs Union and the EAC are quite advanced and we aim to conclude these before the end of the year. Progress has also been achieved in the tariff negotiations with Egypt,” Davies said.
Outside of Africa, South African would prepare for a new trade arrangement with the UK, following Britain’s decision to leave the European Union (EU).
“We have engaged with the UK government and reached an in-principle understanding that there will be no damage to existing trade and investment relations that must be preserved. We also agreed that the legal commitments under the Economic Partnership Agreement with the EU, including the UK, will continue to be the basis for our bilateral trade in the immediate future and that those commitments would be carried over into any new arrangement in future.”
However, Davies said South Africa would have to pay particular attention to questions of how quotas, notably on agricultural products, would be dealt with to avoid any damage to current trade.