SACU Trade Policies
Territory of Taiwan, Penghu, Kinmen and Matsu
SACU
1. Question:
As indicated in paragraph 16 on page 8 of the Secretariat report, under the 2002 SACU Agreement,
trading arrangements would only be possible with SACU as a whole and not with individual SACU
members. SACU is currently negotiating trading arrangements with MERCOSUR and the United States,
and is considering the possibility of negotiating other agreements. Would SACU please provide us
with an update on the status of these negotiations and the timetable expected for future progress
to be made.
Answer:
The negotiations with Mercosur are underway and at a stage where requests for tariff concessions
have been exchanged. It is expected that the negotiations will be concluded by mid-2004.
The negotiations with the US are scheduled to commence in May 2003, and to conclude by the
end 2004 at the earliest.
2. Question:
According to the Secretariat report, a decline of customs and excise revenues is expected as a
result of further tariff liberalization initiatives, both at the multilateral and preferential
levels, particularly from the free-trade agreement between South Africa and the EU. Indeed, if
SACU proceeds down the path of liberalization as it makes new trade arrangements with other trade
partners, its revenues from tariffs could be cut drastically. We have noted also that SACU countries
attach great importance to the SACU revenue pool in reforming their economic structures and the
restructuring and expansion of the SACU mechanisms themselves will increase fiscal expenditures.
We would appreciate knowing whether SACU has already developed concrete fiscal policies to deal
with the possible imbalance between revenues and expenditures and, if so, what they are.
Answer:
The new SACU Agreement makes provision for a new revenue sharing formula. In this regard,
agreement on the new formula was reached on the basis that it will ensure a fair distribution
of the common revenue pool. In addition, the new ‘development component’ of the revenue sharing
formula ensures that countries with smaller per capita GDP, such as Lesotho, receive a greater
share of this part of the revenue.
The BLNS countries have undertaken fiscal reforms to address revenue loss as a result of trade
liberalisation in general. In as far as the EU-SA FTA is concerned the BLNS countries expect to
address the possible negative impact in the context of the Cotonou negotiations.
3. Question:
The tariff structure of SACU has been simplified somewhat and, since its last trade policy review in
1998, the simple average MFN duty rate has come down from 15% in 1997 to 11.4% in 2002. However, as
indicated in the Secretariat report, the tariff remains complex, still comprising ad valorem,
specific, mixed, compound, and formula duties. For example, the application of formula duties based on
reference prices does not ensure compliance by SACU members with their obligations under the WTO
Agreement on Implementation of Article VII of the GATT 1994 (Customs Valuation). This is also the
case with the application of non-ad valorem tariff rates when SACU members have made their
binding commitments at ad valorem rates. We would like to know whether SACU intends to further
simplify and streamline its tariff structure in order to ensure conformity with the relevant WTO rules.
Answer:
A process to simplify the tariff structure is currently underway. This process includes the
conversion of non ad valorem duties into ad valorem duties, and the reduction of the number of
tariff bands.
4. Question:
As indicated in the Secretariat report, South Africa is the fifth largest user in the world of
anti-dumping actions, after the United States, the EU, India and Argentina. In 1996, South Africa
undertook to amend related regulations on anti-dumping practices and countervailing measures to
ensure its compliance with the requirements of the WTO Agreements. After that, South Africa’s
competent authority, the Board on Tariffs and Trade (BTT), investigated the restructuring of the
anti-dumping and countervailing system. The recommendations and the proposed regulations of the
BTT will be published in the second half of 2003. Bearing in mind the WTO’s transparency principle,
we would appreciate being provided in advance with an outline of the recommendations so that members
of SACU and the WTO may have the opportunity to express their views on the newly proposed regulations.
Answer:
The regulations on anti-dumping are currently published for public comments in the government
gazette of 28 March 2003. A copy of the draft regulations is available on the dti website
(www.thedti.gov.za).
Once the process in South Africa is complete the WTO will be notified.
5. Question:
As indicated in the Secretariat report, Article 28 of the 2002 SACU Agreement provides that
members shall harmonise product standards and technical regulations within the common customs
area, and apply product standards and technical regulations in accordance with the WTO Agreement
on Technical Barriers to Trade. We would appreciate knowing the provisions of the agreement
related to the harmonization of product standards and technical regulations. Also, would SACU please
explain whether there is a supervisory mechanism to ensure the harmonization of customs regulations
among the member countries, which could prevent trade distortion caused by differences in standards
and technical regulations.
Answer:
The harmonisation of technical regulations within SACU is done under the auspices of the
SADC (Southern African Development Community) trade protocol. There are certain technical
regulations which have been harmonised but the process is not complete as the harmonisation
is done on a commodity basis.
6. Question:
According to the Secretariat report, SACU countries do not yet have a common policy on standards and
technical regulations. Article 30 of the 2002 SACU Agreement indicates that members reserve the right
to apply sanitary and phytosanitary (SPS) measures in accordance with their national SPS laws and
international standards. We have noted that the unique natural environment and wildlife of the Southern
African region requires special attention with respect to the SPS measures of the member countries. We
would like to know, therefore, whether SACU intends to establish a supervisory mechanism to reduce the
trade distortion that could potentially be caused by differences between the SPS measures applied by its
member countries.
Answer:
As mentioned above, standards and technical regulations are harmonised within SADC of which SACU is an
integral part. The existing SADC Livestock Sector Technical Committee is responsible for establishing
supervisory mechanisms to reduce the trade distortion that could potentially be caused by differences
between SPS measures applied by member countries. The SADC Plant Health Committee is responsible for
dealing with phytosanitary issues. All SACU and SADC member states use international guidelines provided
by the OIE, IPPC, and Codex.
BOTSWANA
7. Question:
According to Paragraph 11, during the years 2000 and 2001, Botswana’s international competitiveness,
as measured by the real effective exchange rate, deteriorated by about 4% and 7% respectively, thereby
making domestic producers, on balance, less competitive against imports and in export markets. On the
one hand, the sharp real appreciation of the Pula against the Rand makes its non-mineral products, such
as textiles, less competitive against South African products. On the other hand, its real depreciation
against the US dollar creates a diamond-led exchange rate appreciation (the so-called "Dutch
disease"), thereby hampering the economic restructuring needed to diversify production and
exports. Will the Botswana government be making concrete changes to its exchange rate policy in
its early-2003 National Development Plan 9 to ensure that the real exchange rate of the Pula
remains relatively stable?
Answer:
| Year |
BWPvs ZAR |
BWP vs USD |
BWP vs SDR |
REER |
| 2000 |
6.0% |
-9.4% |
-3.5% |
2.6% |
| 2001 |
21.8% |
-20.0% |
-17.3% |
6.4% |
| 2002 |
-9.0% |
38.5% |
29.1% |
2.9% |
It should be noted that changes in bilateral real exchange rates (vs the ZAR, USD and SDR) have
been much greater than changes in the overall REER, thus reinforcing the point that real exchange
rate changes have largely been due to volatility in the exchange rates of the SA rand (ZAR) against
major international currencies, not changes in the value of the Pula itself. Botswana’s policy has
been, and remains, the maintenance of stability in the nominal and real effective exchange rates in
the face of fluctuations in other countries’ exchange rates.
The main reason for the appreciation of the real effective exchange rate (REER) in 2000-2002 is
Botswana’s higher level of inflation relative to (the weighted average of) inflation rates of
trading partners. The policy focus is therefore to bring inflation down so that inflation is no
higher than that of trading partners; hence the Bank of Botswana’s objective, as stated in the
2002 and 2003 Monetary Policy Statements, of bringing inflation down to within a range of 4 to
6 percent.
Exchange rate policy is based on a stable nominal effective exchange rate (NEER), i.e. the Pula
has fixed peg to a weighted currency basket. There are no plans to change this. Maintaining the
real effective exchange rate at a level that will support the competitiveness of the country’s
producers will focus on bringing inflation down to internationally comparable levels rather than
devaluing the nominal exchange rate.
8. Question:
Paragraph 11 states that Botswana has used slightly different bases between SACU and non-SACU
countries for levying value-added tax (VAT) on imports. For SACU countries, for example, VAT is
levied on either the landed duty-free price or the fair market price of the imports, whichever
is the greater. We would appreciate knowing how the fair market price is determined. Could SACU
please also clarify how this practice complies with the WTO Agreement on Implementation of Article
VII of the GATT 1994 (Customs Valuation).
Answer:
For valuing imports, Botswana uses the GATT Valuation rules as prescribed in the GATT Customs
Valuation Agreement 1994.
In valuing imports for VAT purposes, there is no discrimination as between imports from SACU and
the non-SACU area. VAT is levied on the FOB cost plus the duty payable plus the cost of insurance
and freight. Where no cost is indicated for insurance and freight, a 5% uplift is applied to the
FOB cost plus duties payable.
Duty would be applicable only in respect of imports from outside the SACU area. For imports from
other SACU countries, no duty is applicable and so the VAT is charged only on the FOB value plus the
cost of insurance and freight.
The fair market value of imports is used only for personal imports or goods of no commercial value
such as gifts. In determining fair market value, Botswana follows the procedures set out in the GATT
valuation rules referred to above.
9. Question:
According to the Secretariat report, banks in Botswana are not allowed to provide non-bank financial
activities, either directly or indirectly. We would like to know whether Botswana is considering
removing this restriction. Moreover, paragraph 60 states that foreign banks must operate as locally
incorporated subsidiaries and that foreign bank branches are not allowed. We would also appreciate
knowing whether the Botswana authorities have any plans to remove these restrictions.
Answer:
Banks in Botswana are prohibited by law from engaging in wholesale or retail trade, including import
and export trade or in any business for which they are not licensed under the Banking Act, 1995.
However, the Bank is empowered under Section 17(9) of the Act to approve or disapprove any such
proposals. The Bank has never had to consider a proposal of that nature. Section 17(10) of the
Act further allows banks to hold shares in companies approved by the Central Bank, set up for the
purpose of insuring deposits, or promoting the development of a money market or securities market
in Botswana, or of improving the financial mechanism for the financing of economic development. In
the spirit of this provision, the Bank has allowed banks in Botswana to provide services that are
traditionally not related to banking business, like insurance agency services. In consideration of
such proposals the Bank is first and foremost guided by the prudential requirements it has set for
banks, and the impact of any such proposal, if approved, on the capital adequacy requirements. Foreign
Banks are allowed to operate provided they establish locally incorporated branches.
SOUTH AFRICA
10. Question:
It is noted that the larger district customs offices in South Africa accept electronic documentation in
order to expedite clearance procedures. It would be appreciated if South Africa would please provide
up-to-date information regarding its progress on electronic customs procedures.
Answer:
The electronic submission of import declarations is currently undertaken at the larger customs branch
offices but this programme will be rolled-out to all customs branch offices in May 2003.
11. Question:
As indicated in the Secretariat report, South Africa imposes a VAT that is levied on the added-tax
value (i.e. the sum of the customs value, plus 10% of the customs value, plus any non-rebated customs
duty). According to the South African authorities, the additional 10% of the customs value is added to
correct for the use of f.o.b. rather than c.i.f. prices for customs duty purposes. Please clarify whether
this 10% of the customs value is a sort of arbitrary or fictitious value as referred to in the WTO
Agreement on Implementation of Article VII of the GATT 1994 (Customs Valuation). At the same time,
please also explain whether these measures comply with this WTO Agreement.
Answer:
For customs value purposes, South Africa applies and complies with the Agreement on Implementation
of Article VII of the General Agreement on Tariffs and Trade. This means that the primary basis for
customs value is the transaction value. For the purpose of imposing Value-added Tax (VAT), which is
a local fiscal tax, and not for calculating the customs duty payable, the 10% factor was introduced
as South Africa uses FOB instead of CIF prices for customs value purposes. The purpose of the 10%
factor is to ensure that local products and imported products compete on an equal footing insofar as
VAT is concerned. The 10% factor is therefore aimed at compensating for the use of FOB instead of CIF
as the FOB price excludes costs related to the transportation and insurance of the goods. The factor
is based on research undertaken that indicated that the insurance and transportation costs for goods
imported from major trading partners account for approximately 11%. This figure was then rounded off
to 10%.
12. Question:
Paragraph 49 states that several types of incentive scheme are available to South African exporters
for the promotion and development of exports and export markets. In this regard, we have observed that
the Industrial Development Corporation (IDC) continues to provide credit facilities to South African
exporters. Aimed at enabling them to offer competitive terms to foreign purchasers, the credit facilities
are subject to a South African local-content requirement of at least 70%. Could South Africa please
provide details of these credit facilities, including how many companies are benefiting from these
credit facilities, the amount offered to these credit facilities, and the earnings’ status of the IDC.
Please also clarify whether these credit facilities are consistent with the WTO SCM Agreement.
Answer:
To assist local importers, credit facilities have been established with banks and other financial
institutions in virtually all South Africa’s major trading partner countries. Repayment normally
ranges from two to five years but dedicated credit lines can be concluded for larger projects
requiring tailor-made solutions and longer credit periods of up to ten years. The International
Finance division of the IDC assists exporters of capital goods by structuring finance – extended
in rand or US dollars at guaranteed rates of exchange – to ensure that exporters receive payment
of full contract price of delivery. The division also offers short-term working capital finance
to exporters for the execution of export orders
13. Question:
According to paragraph 66, the Competition Commission (CC) must balance issues related to compliance
with the broader social and economic goals outlined in the Act, such as employment, international
competitiveness, efficiency and technological gains, as well as the ability of small, medium and micro
enterprises owned or controlled by historically disadvantaged persons to compete. We would appreciate
having South Africa’s answers to the following questions:
- Is any sector or industry exempted from application of the Competition Act approved by the CC?
If so, please provide details.
- Is any export/import cartel exempted from the Act approved by the CC? If so, please provide
justification and describe the criteria for such exemptions.
Answer:
(1) The Competition Act, 1998, provides for exemptions from the Act under certain conditions.
A prohibited practice or agreement may be allowed is when it meets one or more of the following
objectives:
- provide an industry or sector with the opportunity to adjust its productive capacity;
- promote exports;
- promote the ability of small businesses and businesses owned by historically disadvantaged
individuals to become competitive;
- be necessary for the economic stability of an industry designated by the Minister of Trade and
Industry in consultation with the relevant Minister. More detailed information can be obtained
from the Competition Commission’s website at
www.compcom.co.za.
Apart from these limited conditions for exemption, the Competition Act applies indiscriminately to
all activities that have an economic effect within SA. However, activities sanctioned by law are
excluded from the purview of the Act.
(2) The Competition Commission granted South African Airways (SAA) a short term exemption on a code
share agreement with Quantas Air on the South Africa-Australia route. The basis for the exemption was
that the practice promoted exports and the exemption was granted on strict conditions requiring price
information to be submitted to the Competition Commission on a regular basis. With this exception, no
exemptions for any import or export cartel have been granted.
14. Question:
We welcome South Africa’s further commitments during the 1997 WTO financial services negotiations.
With respect to insurance services, commitments on market access and national treatment were made for
consumption abroad and commercial presence. However, we note that a foreign insurer may only operate
in South Africa in the form of a subsidiary; a branch is not yet allowed. While we question the
consistency with the national treatment commitments of this particular restriction, we would also
appreciate having an explanation of the reasons for the restrictions in this area and would be
interested in knowing whether there is any plan to remove them.
Answer:
The restriction is in place to ensure that the home supervisor (the Financial Services Board) has
jurisdiction over the insurer. In the case of a branch office there is no such jurisdiction. It is
unlikely that this restriction will be removed in the near future.
15. Question
As indicated in the report by the governments of SACU members, SACU countries attach great importance
to the outcomes of the Doha Ministerial Conference of 2001, which put development at the centre of the
WTO agenda. At the same time, SACU countries think that broadening the scope of negotiations to
include "new issues" will severely test the human and institutional capacity of SACU
countries. Pursuant to the mandate of the Doha Development Agenda, future negotiations on the
"Singapore issues" would take place after the Fifth Ministerial Conference on the basis of
a decision to be taken at that Session, by explicit consensus, on modalities of the negotiations. We
would like to know SACU’s position on or expectations for the Singapore issues.
Answer:
SACU countries are fully committed to implementing the Doha development Agenda (DDA). The DDA is a
comprehensive negotiating mandate which includes the Singapore Issues, and a range of other market
access and development issues. It is our view that there has to be a balance both in the substance
of the negotiating agenda and the process of the negotiations. It is for this reason that we have
been concerned about the failure to meet the important deadlines that have been established in the
negotiating process. These include special and differential treatment, implementation issues and
TRIPS and public health. Critical to the process has been the need to agree on the modalities for
agriculture, which as is well known is another missed deadline. Positive and constructive progress
in the next few months in resolving the above issues will provide the necessary impetus and political
will of all SACU countries to ensure that the comprehensiveness of the negotiating mandate is complied
with. It is with this perspective that SACU countries have been participating in the study and research
phase of the Singapore Issues. Notwithstanding the capacity constraints of SACU members, we remain
willing to engage fully on all the issues of the DDA in line with the commitments made in Doha.
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