Subtitle line 1AuthorDate

South Africa’s Trade Agenda: South-South partnerships

Workshop: Parliamentary Portfolio Committee – International Relations and Cooperation

Trudi Hartzenberg29 February 2012Cape Town

Overview

• South Africa’s trade policy scope (implications of membership of a customs union)

• Articulating South Africa’s trade policy and strategy (review of key policy statements)

• South-South relationships (BRICs, SACU-India, SACU-China)

• Conclusions

South Africa, SACU and trade policy space (1)

Definition of a customs union: common customs territory with a common external tariff (CET); this means

- there is a SACU tariff (NOT a South African tariff; although as the regional hegemon, South Africa’s policy imperatives (industrial policy) inform the CET

- management of the customs union matters i)collection of tariff and excise revenue, trade data collection and sharing revenue, trade remedies vis à vis third parties

ii) institutional architecture (Tariff Board – current role of ITAC, Tribunal, Secretariat, common negotiating mechanism)

South Africa, SACU and trade policy space (2)

• Current challenges for SACU

- Implementation (SACU 2002 Agreement entered into force July 2004….)

- Future strategy (a deeper integration agenda – becoming an economic community)

- Broader regional agenda (SACU in the Tripartite FTA process)

- Intra-regional crisis (Swaziland…..and more)

Policy statements: South Africa’s trade agenda

• National Development Plan (November 2011)

• Trade Policy and Strategy (May 2010)

• White Paper on South Africa’s Foreign Policy (May 2011)

National Development Plan (1)

• Launched in November 2011; following the Diagnostic Report (June 2011) which presented a review of achievements and shortcomings since 1994 (Achievements: Constitution, improved access to services, health of public finance… Challenges: pervasive poverty, inequality, unemployment, poor quality of education….)

Objectives:

• Important issues raised - imperative to develop more capable state, creating jobs, infrastructure, low-carbon economy, better education and training, fighting corruption….

National Development Plan (2)Positioning Africa in the World (Chapter 7)

Deepening South Africa’s integration:

i) Regional integration (Sub-regional integration)

ii) Continental integration (towards political and/or economic union)

iii) Globally (BRICs, South-South partnerships, SA in global value production and value chains)

2012: State of the Nation Address, and Budget Speech

Key focus areas: SONA - industrial development (entrepreneurship), infrastructure development, capable state, South-South partnerships

Budget Speech: regional integration, ‘developing our financial system to provide a gateway for investment into Africa’

White paper on South Africa’s Foreign Policy (DIRCO):Building a Better World - Policy of Ubuntu Final Draft May 2011

Key tenets: Pan Africanism and South–South Partnerships

• Partnering with emerging markets (trade and investment)

• Ambition for engagement at African Union (AU) – champion continental integration (focus on peace keeping, conflict resolution)

• SADC: strengthening governance and institutional capacity

• Support for the Tripartite FTA

• SACU: transformation for deeper integration (away from pre-occupation with revenue)

Trade policy statement from the dti

• Support for multilateralism

• Commitment to African integration agenda

- SADC (no support for the customs union)

- Tripartite FTA (bypassing SADC agenda?)

- SACU (recall recent support to Swaziland)

• South-South partnerships

• Strong focus on industrial development (job creation)

Hence: introduction of industrialisation (Pillar 3) in the Tripartite FTA – from South Africa’s industrial policy to a regional industrial strategy?

• Strategic tariff policy

Where does DED fit in?

• Department of Economic Development (DED) established after 2009 election: mandate – development planning, policy coordination

• Strong domestic focus (‘to ensure that employment is at the heart of economic policy’)

• Institutional responsibility: IDC, Khula Enterprise Finance, Competition Commission, Competition Tribunal, International Trade Administration Commission (ITAC)

Relationship between dti and EDD? Recall: dti has industry knowledge base which is required for tariff investigations (EDD has oversight over ITAC)

What has happened in DED’s first year? Comprehensive Annual Report on their website. Key issues:

• ITAC: ‘has now started to make tariff support conditional on reciprocal commitments on investment and employment creation’

• Competition Matters: focus on public interest matters (Cartels, mergers)

South-South Relationships

Background: changing fault lines of the global economy – role of emerging economies, rise of China, India, Turkey, Indonesia and others, Europe’s decline, America declining superpower? Where does South Africa fit in?

Remember : South Africa is a member of SACU (implications of customs union membership – South Africa does not have its own tariff….)

• South Africa becomes a BRIC (December 2010) – what does this mean? No rules-based agreement (sign MOUs); what about moral suasion in policy influence? Remember: these countries compete directly with SA in many sensitive sectors (eg clothing& textiles); what about investment (rules-based governance is lacking here…)

South-South partnerships (cont’d)

• South Africa – China: economic reality (impact of import competition); clothing quotas; MOU (August 2010) – cooperation focused on services sectors, changing the structure of bilateral trade. Bottom line: China does not want a rules-based regime (FTA)

• SACU –India FTA (actually preferential trade agreement ie very limited liberalisation), Feb 2011 tariff request from India (1050 tariff lines – 15.7% of SACU tariff book); SACU does not want services or other trade-related issues included

• SACU – Mercosur FTA (not yet implemented) – very limited scope agreement (limited tariff liberalisation)

Conclusions

• Strong focus in trade strategy on South Africa’s relationship with developing countries (South-South partnerships): emerging economies and Africa

• South Africa’s position on scope of trade negotiations: focus on trade in goods (consonant with industrial policy focus on manufacturing); no services strategy or position on trade-related issues