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Jan 20, 2012

Trade trends and forecasts

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China|South Africa|Duty Increase Applications|Food Products|Intermediate Products|Sunset Review Antidumping Applications|Supply Chain|Ebrahim Patel|Rob Davies
china|south-africa|duty-increase-applications|food-products|intermediate-products|sunset-review-antidumping-applications|supply-chain|ebrahim-patel|rob-davies
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The year 2011 was a fascinating year from a trade point of view. We saw a huge resurgence in protectionist measures, the likes of which have not been seen since the 1990s. During the course of the year, we saw four new antidumping applications, four sunset review antidumping applications and six duty increase applications, which is definitely a record in recent times.

This is particularly interesting, compared with 2010, when there were no fresh antidumping cases at all. We had, in fact, thought that 2010 would be the year of protection, but we apparently missed the target by a year.

So, why all this activity? We can partly attribute this surge to companies really struggling and requiring protection, but I think a healthy dose of this is also opportunistic. Companies are aware that they finally have a sympathetic ear in the form of Economic Development Minister Ebrahim Patel. The result is that, on average, duties are moving upwards, giving local manufacturers some advantage over their import competition. At the same time, though, we will see prices slowly creep up as the duties have a direct inflationary impact. Some of this is not so visible because the items are hidden as intermediate products somewhere in a supply chain, but other items will impact on people far more directly, such as the protective application on food products.

Let us speculate a bit about 2012. Certainly, it would appear this protection trend is going to continue for a while and we believe this year will once again see significant applications for both antidumping and normal customs duty increases. I also think we will start to see countervailing (antigovernment subsidy) applications appear (the last counter- vailing application was published in 2008) as manufacturers find limited joy with antidumping cases against China.

South Africa signed a memorandum of understanding with China in 2004, the result of which is that China is treated as a free-market economy as soon as a Chinese company responds in an antidumping case. Without getting into all sorts of technical detail, the net result of this is that it is almost impossible to impose a meaningful antidumping duty against China if Chinese companies respond in antidumping cases (and evidence suggests that, increasingly, they are responding).

Globally, the trend is strongly in the direction of countervailing cases against China. In 2010, a total of nine countervailing cases were initiated (as opposed to 28 in 2009). Of these nine cases, six were brought against China, making China the most countervailed country in the world, which is in direct contrast to Trade and Industry Minister Rob Davies’ comment that no one brings countervailing cases against China.

The question is: Will the politicians allow the imposition of a countervailing duty against China or will they intervene and stop this being applied? Many directors of manufacturing companies believe the politicians will intervene and no duties will be imposed. Of course, the comments by Davies fuel this position, so we will have to wait and see.

What will the economic impact be of all this protection? Will jobs be created or will local company margins simply be improved? Will other countries retaliate and start invoking more protective measures against South Africa?

All these are possible outcomes. There is never an action without some sort of repercussion, so let us see if the repercussions are positive or negative. Whatever happens, 2012 promises to be an interesting year from a trade point of view.

Edited by: Martin Zhuwakinyu
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