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A common thread of cynicism

Business Day, South Africa

A common thread of cynicism

Robert Wilson

6 September 2006

After numerous stakeholder inquiries and intense media commentary, government has finally revealed how it intends to effect the textile and clothing agreement concluded with China in June. In a notice published in the Government Gazette last Friday, it is now proposed that the importation of certain Chinese textiles and clothing be restricted in the form of import quotas. This seems to publicly dispose of the question whether China would voluntarily restrain exports to SA or whether SA would limit imports from China. But the question remains whether the agreement must still be ratified under the South African constitution before the import restrictions can be effected.

Further, as a member of the Southern African Customs Union (Sacu), the role and rights of the other Sacu members - Botswana, Lesotho, Namibia and Swaziland - in relation to the agreement and proposal, is questionable. Leaving aside the merits of the agreement and proposal, recent developments point to worrying trends in SA’s trade law and policy processes. In a seemingly cynical view of the role of other stakeholders, as well as a blind indifference to the constitutional value of participatory democracy, the International Trade Administration Commission (Itac) now invites comments on the proposal by the end of this week - within seven days of publishing the proposal.

It seems, though, that even a week’s comments would be worthless. The June agreement is said to already record the applicable final volumes on textiles and clothing. It is not clear whether Itac, and possibly the South African Revenue Service’s customs and excise department, have begun preparing for the additional and potentially onerous certification procedures.

Also unclear is whether the likelihood of greater volumes of unofficial or illegal Chinese imports has been adequately taken into account.

The haste and opaqueness surrounding these developments contrast sharply with earlier events. These can be traced to China’s accession to the World Trade Organisation (WTO) on December 11 2001 and the termination of the Agreement on Textiles and Clothing on January 1 last year. The subsequent increase of Chinese textiles and clothing entering SA led to the manufacturer association, CloTrade, and the Southern African Clothing and Textile Workers Union (Sactwu) submitting safeguard applications to Itac. Although a panel of commissioners found that safeguard measures should be imposed, these applications came to nothing.

Instead, presumably after diplomatic exchanges between the countries, the Chinese ambassador to SA said in January that his country would voluntarily restrict its textile and clothing exports to SA. A few weeks later, the South African trade and industry minister said that the countries had agreed in principle to regulate the import of cheap Chinese textiles and clothing, but were still working to finalise a deal.

The subsequent discussions leading to the agreement and proposal were presumably conducted within the context of China’s WTO accession protocol. This includes provisions on special safeguards against Chinese products until the end of 2013.

Although there are no special safeguard regulations in SA, article 16 of China’s accession protocol assumes an investigation and determination by a South African authority before the two countries consult. They may then either agree on action to be taken by China or, in the absence of such agreement, by SA. As this is likely to affect interests, stakeholder participation is required. Merely informing some stakeholders of ongoing developments is inadequate.

Leaving aside the question of whether SA may restrict imports in the manner now proposed, given that there is an agreement with China, the 2005 ordinary safeguard investigation and determination by Itac is arguably insufficient for the purposes of SA now imposing import quotas. Many products CloTrade and Sactwu complained of have been removed from the list. Further, no safeguards are imposed against Chinese footwear, though this was part of the original discussions. Stakeholder interests and views have changed. The factual and legal analysis is different.

It might thus be asked whether government wished to limit the protection that stakeholders would have enjoyed under the 2005 proceedings. If so, what other interests were served by instead acting under the special safeguards provisions in China’s accession protocol?

Further, did SA wish to appease China before entering into negotiations for a free trade agreement? If so, was this an optimal negotiating strategy? In short, if trade-offs were made, why is so little known about them?

It is argued that one trade-off SA made is this: that China is unconditionally granted market-economy status, which effectively nullifies the use of antidumping measures against China. This is despite arguments that trade in China does not take place in the ordinary course of trade as per market-economy countries.

The analysis and questions above are likely to be criticised by trade officials on the grounds that other considerations determined the eventual outcome. In so doing, they will be hoist by their own petard. Such speculation would not have been necessary had SA’s trade law and policy processes not been so deficient.

While the existence of safeguard, countervailing and antidumping regulations go some way to enhancing the independence, transparency, accountability and, ultimately, credibility of administrative decisions taken in relation to unfair trade (except of course special safeguards against China), the same cannot be said of decisions taken in relation to trade policy, including trade negotiations and trade disputes.

At a more fundamental level, recent developments call into question the respect SA’s trade officials have for the constitution, including the recognition that they are subject to its provisions, as well as the stated values. The trade and industry department would be advised to include constitutionalism, administrative justice and governance as themes in its capacity-building initiatives.

Of course, this will not prevent other stakeholders now assessing their rights to challenge the June 2006 agreement and last week’s gazetted proposal. There is clearly no end in sight for the China textile and clothing debacle.

‖Wilson is the capacity building manager at The Trade Law Centre for Southern Africa.