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The Reform of South Africas Anti-Dumping Regime

This case study examines the development and reform of South Africas anti-dumping regime as
an example of a countrys participation in the WTO. The long history of the use of trade
remedies by South Africa illustrates the fact that developing countries can successfully
participate in the global trading system. By using the WTOs Anti-dumping Agreement (ADA) as
a model for its own anti-dumping system, South Africa also serves as an example of how a
country can make use of WTO instruments to ensure that its domestic legislation is complying
with its international obligations.

The first section takes a brief look at the history of the use of trade remedies in South Africa,
international developments on anti-dumping rules and the various legislative changes South
Africa has undertaken in the past century that have helped shape its current anti-dumping system.
It examines the factors that necessitated the reform of the South African anti-dumping regime,
and briefly discusses the impact of the change in regional dynamics on the anti-dumping process
in South Africa.
Section 2 gives an overview of the government, business and civil society players involved in the
process of reforming the South African anti-dumping system. It also briefly touches on the roles
of the various parties responsible for the administration of the system in the pre-apartheid and
post-apartheid periods.
Section 3 identifies the challenges faced by these different players in the process of reforming the
existing anti-dumping regime. Special attention is given to the impact of regional developments
on the progress of South Africas reform. It evaluates the suitability of the new regime that is
currently being put into place and the rationale behind the design of the new system to administer
anti-dumping duties. Finally, it takes a look at whether the interests and concerns of various
stakeholders were adequately addressed in the new system.

Section 4 concludes the study by reflecting on the process South Africa has been through and
identifying the experience that can be transferred to other countries. This section argues that
proper consultations between government and the various national stakeholders are important for
effective policy-making.

I. The problem in context

The history of the use of trade remedies in South Africa

South Africa is one of the earliest users of trade remedies in the world. The first references to
such remedies as anti-dumping actions, subsidies and countervailing actions can be found in
section 8 of the Customs Tariff Act of 1914.(1) These remedies were administered by the then
Customs Department, which later became the South African Revenue Service (SARS).(2)

The responsibility for dealing with anti-dumping remedies was taken over by the Board on Trade
and Industries (BTI) in September 1923. South Africa was a very early and prolific user of anti-
dumping measures; in the period between 1921 and 1947 more than 90 anti-dumping and
countervailing investigations were undertaken, while another 818 investigations were undertaken
between 1948 and October 2001.(3) The exact number of anti-dumping investigations cannot be
ascertained, as prior to 1992 no distinction was made between anti-dumping and countervailing
investigations. The first anti-dumping investigation considered the imposition of anti-dumping
duties on cement.

At the time of the negotiation of the International Trade Organization (ITO) and the General
Agreement on Tariffs and Trade (GATT) in the 1940s, anti-dumping as a trade remedy was a
well-known and accepted practice, and was included in the GATT of 1947 as Article VI:

The Contracting Parties recognize that dumping, by which the products of one country are
introduced into the commerce of another country at less than the normal value of the products, is
to be condemned if it causes or threatens to cause material injury to an established industry in the
territory of a contracting party or materially retards the establishment of a domestic industry.

As Article VI only included some basic rules for the determination and imposition of anti-
dumping duties, contracting parties to the GATT agreed to its review. This led to agreement on
the Anti-dumping Code (to which South Africa was not a signatory) in the Kennedy Round of
multilateral trade negotiations that ran from 1963 to 1967, which in turn was replaced by the
Agreement on the Implementation of Article VI of the General Agreement on Tariffs and Trade
(Anti-dumping Agreement) in the Tokyo Round ending in 1979.

In 1977 the BTI recommended in its annual report that all anti-dumping duties in place in South
Africa should be withdrawn as of 1 January 1978. They argued that these measures had been in
place for such a long time that their removal would not pose any threat to South African
industries, and that any disruptive competition could be addressed through the use of formula
duties.(4) In the five years leading up to the recommendation the board had only twice approved
the imposition of anti-dumping duties. The decrease in the use of anti-dumping measures during
the 1970s and 1980s is explained by the fact that South African producers were protected by very
high tariff barriers.(5) Trade sanctions imposed on South Africa because of its apartheid policies
also encouraged the government to provide protection to industries it considered to be of
strategic importance.(6) Import surcharges, among other things, were used for this purpose and
diminished the need for anti-dumping measures.

This situation led to the decision by South Africas then Minister of Trade and Industry to
remove all existing anti-dumping duties as of 1 January 1978, as he considered that the high
tariffs in place at the time provided sufficient protection for domestic companies.(7) All incidents
of disruptive competition after 1978 were therefore treated as tariff cases. Whenever the prices of
certain imports would drop below a specific point, a formula duty would apply which effectively
would increase to a pre-determined level the price of the imported goods.(8)

The Board on Tariffs and Trade Act replaced the BTI with the Board on Tariffs and Trade (BTT)
in September 1986.(9) In 1992 a Directorate of Dumping Investigations was established within
the Department of Trade and Industry (DTI) to assist the BTT by conducting anti-dumping and
countervailing investigations on its behalf.(10) The BTT published a Guide to the Policy and
Procedure with regard to Action against Unfair International Trade Practices: Dumping,
Subsidies and other forms of Disruptive Competition in 1992. This was followed by a second
guide in 1995 entitled Guide to the Policy and Procedure with Regard to Action against Unfair
International Trade Practices: Dumping and Subsidized Export. The latter guide was, however,
withdrawn from the South African Customs Union (SACU) in 1996.(11)

South Africas increasing use of anti-dumping measures back to top

South Africa returned to the global community in the early 1990s after facing decades of trade
sanctions. Its transformation to a democracy led to the removal of these sanctions. It started
opening its economy to become more competitive and to integrate into the world economy.
South Africa actively participated in the Uruguay Round of trade negotiations and was a
founding member of the WTO.

South Africa embarked on a process of rapid liberalization by introducing tariff offers aligned
with those of developed countries. This left domestic firms facing increased competition from
both fair and unfair international trade. South Africas average most favoured nation (MFN) tariff
rates for all goods fell from over 14% in 1996 to 8% in 2001; the MFN rates for industrial goods
also fell by 50% and 55% for textiles and clothing respectively over the same period. The
weighted average MFN tariff rate came down from a level of 8.6% in 1996 to 5% in 2001.(12)

With tariff protection falling away, trade remedies such as anti-dumping and countervailing
measures became increasingly important for domestic producers, to protect them from the rise in
imports. This led to a sharp increase in South Africas application of trade remedies, in particular
anti-dumping measures. South Africa reported initiating 157 anti-dumping investigations and
applying 106 anti-dumping measures between 1 January 1995 and 30 June 2002.(13) This makes
it the fifth-largest user of anti-dumping actions (after the United States, the European Union
(EU), India and Argentina).(14)
South Africas obligations under the WTO back to top

By joining the WTO South Africa became a party to all WTO agreements, including the
Agreement on Implementation of Article VI of GATT 1994 (the Anti-dumping Agreement).
Article VI of GATT 1994 provides for the right of contracting parties to apply anti-dumping
measures, that is measures against imports of a product at an export price below its normal
value (usually the price of the product in the domestic market of the exporting country) if such
dumped imports cause injury to a domestic industry in the territory of the importing country.
Even though all the WTO agreements were ratified by the South African Parliament, they do not
form part of South African public law, as they were never promulgated. The South African
Constitution, however, explicitly states that international agreements should be used as reference
and guidelines in the interpretation of domestic laws.(15)

Article 1 of the ADA requires that members will only apply anti-dumping measures under the
circumstances provided for in Article VI of GATT 1994 and only after investigations which have
been initiated and conducted in accordance with the provisions of the Agreement. The ADA
provides detailed rules in relation to the method of determining whether a product is dumped; the
criteria to be taken into account in a determination that dumped imports cause injury to a
domestic industry; the procedures to be followed in initiating and conducting anti-dumping
investigations; and the implementation and duration of anti-dumping measures. Where a member
country institutes measures that are not in accordance with the WTO rules, these measures are
subject to dispute resolution in the WTO.

Article 16 of the ADA establishes the Committee on Anti-dumping Practices (CADP). It requires
members to notify the Committee immediately of all preliminary and final actions taken in anti-
dumping investigations and to submit semi-annual reports of any anti-dumping actions taken in
the previous six months.(16) Article 18(4) furthermore requires WTO members to bring their
laws, regulations and administrative procedures into conformity with the ADA by the date of
entry into force of the Agreement.(17) Under Article 18.5, members are also required to notify
the CADP of any changes in their anti-dumping laws and regulations and in the administration of
these laws and regulations.
Already in 1994 South Africas National Economic Forum (NEF) a tripartite body consisting
of representatives from business, government and labour stressed the need for national
legislation on anti-dumping and countervailing measures and the need to establish an anti-
dumping authority.(18)

The Board Amendment Act of 1995 made small amendments to South African legislation in an
effort to bring the countrys anti-dumping regime more in line with the ADA.(19) The definition
of dumping was changed to correspond with the definition of dumping in the ADA, and certain
new concepts such as normal value were introduced. It still, however, did not provide for any
procedural framework or regulations for the conducting of anti-dumping investigations. As
mentioned earlier, the BTT did publish a guide on anti-dumping procedures in 1995, but it was
withdrawn in 1996.(20)

With the growing use of anti-dumping measures, South Africa started experiencing increased
pressure from other WTO members to bring its legislation and the administration of these
measures in line with the ADA. In April 1996 South Africa announced in the WTO Committee
on Anti-dumping Practices that it intended to amend its legislation on anti-dumping to ensure its
compliance with the relevant WTO agreements.(21)

The South African Ministry of Trade and Industry subsequently instructed the BTT to investigate
the restructuring of the South African anti-dumping regime. Small amendments were made to
existing legislation in 1997 to give the minister the power to make regulations on trade remedies
and to provide for the application of provisional safeguard measures.(22)

Professor Colin McCarthy, acting head of the International Trade Administration Commission
(ITAC), highlighted the fact that South Africa had always done its best to act in strict conformity
with the WTO rules in conducting anti-dumping investigations; the requirements of Article VI of
GATT and the ADA, especially the notice requirements, have always been strictly adhered to.
(23) Although this might have been the case in practice, South Africas existing legislation did
not fully reflect South Africas obligations under GATT 1994 and the WTO. The Department of
Trade and Industrys invitation for comments on South Africas draft anti-dumping regulations
stressed the fact that proper legislation and regulations were required to inform all stakeholders
of the substance and the procedures involved in anti-dumping investigations.(24)

The restructuring of the anti-dumping regime finally became a reality with publication of the
International Trade Administration (ITA) Act on 22 January 2003, creating a new body, the
International Trade Administration Committee (ITAC), for the administration of trade remedies
within South Africa. This was followed by the promulgation of detailed anti-dumping regulations
in November 2003 to guide ITAC in conducting its anti-dumping investigations.

Changes in regional dynamics back to top

South Africa concluded in 1999 a free trade agreement the Trade, Development and Co-
operation Agreement (TDCA) with the EU that provisionally entered into force on 1 January
2000. It also entered into a free trade agreement with eleven members of the Southern African
Development Community (SADC) on 1 September 2000 by becoming a member of the SADC
Trade Protocol. These free trade agreements provide preferential access to the South African
market for all EU and SADC member states, and bring with them increased competition for
domestic producers. Both these agreements contain provisions on anti-dumping, countervailing
and safeguard measures.

South Africa is a member of SACU together with Botswana, Lesotho, Namibia and Swaziland
(BLNS countries). These countries signed a new SACU Agreement in 2002 that entered into
force on 15 July 2004. Negotiations for this agreement were officially launched soon after South
Africa elected its first democratic government in 1994. The aim was to democratize SACU and
to create institutions that would enable the BLNS countries to participate more fully in the
decision-making processes in the customs union.

The new SACU Agreement has important implications for the anti-dumping regime within the
customs union. It changed the way in which tariff decisions, including anti-dumping tariffs, are
made, and it also requires member states to develop legislation on contingency trade remedies
such as anti-dumping for the region, and to establish national bodies to administer these remedies
within the different countries.

As mentioned above, South Africa enacted the ITA Act in January 2003.(25) Its aim is to provide
an institutional basis for the conduct of trade policy and the application of customs tariffs in line
with South Africas obligations under international agreements, that is agreements under the
WTO, the Southern African Development Community (SADC) and SACU. We take a more
detailed look below at the implications of this change in the administration of international trade
affairs in South Africa.

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II. The local and external players and their roles

Anti-dumping in South Africa under the 1996 SACU Agreement

Under the 1996 SACU Agreement, South Africa was solely responsible for the setting of
customs duties, as well as any anti-dumping, countervailing and safeguard measures for the
customs union. As members of the customs union BLNS countries were obliged to apply these
measures, although they were not always beneficial to the BLNS countries since the relevant
items were mostly not produced by their domestic industries.

As the body in South Africa responsible for the determination of customs duties and the
administration of anti-dumping measures,(26) the BTT initiated anti-dumping investigations at
the request of a domestic industry within SACU. Importers, exporters and foreign producers
would then be provided with an opportunity to submit information for consideration in any such
investigation. After conducting the investigation the BTT would make a recommendation to the
South African Minister of Trade and Industry, and that ministry would then request the Ministry
of Finance to impose anti-dumping duties. In 1992 a Directorate for Dumping Investigations was
established within the Department of Trade and Industry to assist the BTT by conducting anti-
dumping and countervailing investigations on its behalf. As the board never had a set of
published regulations to work from, it made use of its enabling legislation Article VI of GATT
and the ADA to conduct its investigations.

Anti-dumping under the 2002 SACU Agreement back to top

ITAC was established on 1 June 2003 by the ITA Act. ITAC replaced the BTT and will act as
South Africas national body in terms of Article 14 of the 2002 SACU Agreement. It currently
acts as the tariff body for the whole of SACU and is responsible for previous BTT functions such
as the investigation and evaluation of applications for the amendment of customs duties, duty
and tax concessions, and import and export controls, and for administering anti-dumping,
safeguard and countervailing measures.

The 2002 SACU Agreement provides for a number of new institutions for the customs union.
SACU will now have a Council of Ministers, a Secretariat (based in Windhoek, Namibia), a
Tariff Board, a Tribunal, a Customs Union Commission and a number of technical committees.
When South Africa wants to impose an anti-dumping measure, ITAC is responsible for
conducting the investigation, and under the new SACU Agreement, ITAC is now obliged to
make any recommendations directly to the SACU Tariff Board.

The Tariff Board will be a supra-national SACU institution, consisting of experts drawn from
member states. It will make its own recommendation to the council based on that of the national
body. The final decision will then lie with the Council of Ministers, comprising at least one
minister from each member state. Council decisions are then referred back to the member states
for implementation. As the new SACU Agreement is still far from being fully implemented,
member states have agreed upon an interim solution. The current situation is discussed in more
detail in section 3 below.

The domestic adoption of the International Trade Administration (ITA) Act and the SACU
Agreement back to top
The ITA Act had to be adopted by Parliament for it to become law in South Africa. A series of
briefings and public hearings were held jointly by the Parliamentary Portfolio Committee on
Trade and Industry and the Economic Affairs Select Committee to explain the rationale behind
the Act to stakeholders and to address their concerns. Submissions were received from the South
African Chamber of Business (SACOB) on behalf of the private sector and from the Congress of
South African Trade Unions (COSATU) on behalf of organized labour. After extensive
consultations and debates both inside and outside Parliament, the bill was passed in November
2003.

The 2002 SACU Agreement had to be ratified by Parliament before it could enter into force in
South Africa, as required by section 231 of the South African Constitution.(27) The
Parliamentary Portfolio Committee on Trade and Industry again held a number of briefings and
public hearings to give all stakeholders the opportunity to comment on the proposed ratification.
Written submissions were received from SACOB, the Trade Law Centre for Southern Africa
(Tralac), academics, the National Economic Development and Labour Council (Nedlac),
COSATU and from Agri-SA on behalf of agricultural producers.

Nedlac submitted its report after holding discussions in its Trade and Industry Chamber on both
the new SACU Agreement and the ITA Act. Nedlac is South Africas primary institution for
social dialogue and organizes exchanges between the business community, government, trade
unions and civil society on issues of social and economic policy.(28) Nedlac has to consider all
proposed labour legislation before it is introduced into Parliament, as well as any legislation that
may have a significant impact on social and economic policy.(29) It is also the primary forum for
discussion on all trade agreements. Nedlac provides a platform on a national level for these
different stakeholders to reach consensus on these issues. The aim is to make economic decision-
making more inclusive and to promote the goals of economic growth and social equity. Other
chambers in which Nedlacs work is conducted are the Labour Market Chamber, the
Development Chamber and the Public Finance and Monetary Policy Chamber.
Nedlacs predecessor, the NEF, has also played a very important role in the formulation of South
Africas policies. It provided valuable inputs in the determination of South Africas tariff offers
to other WTO members when South Africa joined the WTO in 1995. Since then the effectiveness
of Nedlac in the formulation of policies has been in steady decline. Nedlac needs to be refocused
and reorganized and also to be better resourced.

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III. Challenges faced and the outcome

Defending South Africas anti-dumping legislation in the WTO

The promulgation of the ITA Act and the anti-dumping regulations for ITAC was an attempt to
bring South Africas anti-dumping legislation in line with the requirements of the WTO.(30)
ITAC published the draft anti-dumping regulations for public comment in March 2003. It used
the ADA as a model and it looked at the anti-dumping regimes of the EU, the United States, New
Zealand and Australia as examples in drafting the regulations.(31) ITACs investigations are
therefore based on the ADA, while the regulations serve as a procedural guide. Inputs on the
draft regulations were received from several lawyers from Canada, the United States and New
Zealand, as well as local lawyers and academics. According to Professor McCarthy the draft
regulations were discussed and commented on in detail within ITAC as well.(32) The regulations
in their final form were approved by the Minister of Trade and Industry on 12 November 2003.

As required by Article 18(5) of the ADA the anti-dumping regulations, together with the new
International Trade Administration Act were notified to the WTOs Committee on Anti-dumping
Practices (CADP) on 20 January 2004.(33) These notifications included the full texts of the
relevant laws and regulations, and are, like other official WTO documents, made available by the
WTO to members in all three WTO languages for purposes of the review.(34)
The new legislation and regulations were subject to review in the CADP. This review takes the
form of written questions from other members; questions can also be put to the notifying country
during the meeting of the CADP. ITAC had to provide satisfactory written answers to all these
questions and ITAC officials had to appear before the CADP to address additional questions put
forward by members.(35) Written questions were submitted by the EU, the United States and
Venezuela, with additional questions tabled in the CADP by Turkey. South Africa successfully
defended its new legislation and regulations in the CADP by providing members with
satisfactory answers and explanations addressing all their noted concerns.

Implementing the new anti-dumping system in SACU back to top

The new SACU institutions have not all been established. The Secretariat is currently in the
process of being set up in Windhoek, Namibia. The Council of Ministers exists ipso facto, but the
Tariff Board, the Tribunal and the Customs Union Commission still need to be established. South
Africa is also the only member state of SACU that has established a national body to date.
According to Professor McCarthy it is important for the BLNS countries to establish these
bodies, as only they can make recommendations through to the SACU Tariff Board. The Tariff
Board will not be able to function unless such national bodies are in place. In the light of these
difficulties, the SACU Council of Ministers requested ITAC on 1 July 2004 to continue with the
administration of anti-dumping investigations for an interim period of twelve months. The only
proviso was that all anti-dumping investigations should be undertaken in consultation with the
BLNS countries.(36)

One of the main objectives of the new SACU Agreement is to democratize the decision-making
process within the customs union. The final decision on matters such as anti-dumping duties lies
with SACUs supreme decision-making mechanism, the Council of Ministers. This means that
decisions by all SACU institutions shall be made by consensus.(37) This amounts to a right of
veto for member states; as there are only five this should facilitate consensus, but they have
divergent interests.(38)
This change in the process of imposing anti-dumping duties has been a cause of serious concern
to various stakeholders in South Africa. Business and labour associations have raised several
issues during the public hearings on the ITAC Bill regarding the new SACU institutions,
particularly as these would affect the functioning of ITAC.(39) The South African Chamber of
Business (SACOB) pointed out in its submission to Parliament that it remains concerned about
potential delays in decision-making in other SACU member states with regard to anti-dumping
and other trade remedies, due to the cumbersome and time-consuming decision-making
structure. The competitiveness of South African industry and that of the region is highly
dependent on the speed of decision-making, especially in these times of increased trade
liberalization and globalization.(40)

This issue was also taken into account in the drafting of the anti-dumping regulations for ITAC,
as the ADA prescribes strict time periods for the conducting of anti-dumping investigations. The
regulations therefore include stricter timelines for the allowed duration of investigations.

ITAC aims to complete its investigations within twelve months, although the anti-dumping
regulations allow investigations to take up to eighteen months.(41) In practice these deadlines are
often missed. Colin McCarthy has pointed out that there are valid reasons for this: the
Commission plays an active role in these investigations; it often has to refer submissions back to
the parties involved when it is not entirely happy with the contents, and this creates delays.
Interested parties also take maximum advantage of the opportunity to ask for a postponement.
(42) SACUs new decision-making process is not yet in place; no one has, therefore, had the
opportunity to evaluate its effectiveness. We shall have to wait and see whether or not the
concerns about the process are justified.

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IV. Lessons for others
Countries should always keep in mind that it is the private sector that trades, not governments. A
common problem faced by all countries is a lack of proper consultation between government and
stakeholders to ensure that their concerns are addressed when government determines trade
policies. It is important that a government establish opportunities for public-private dialogue in
order to involve all spheres of society in its decision-making processes, as policy-making cannot
take place in a vacuum.

South Africa has a number of existing national frameworks in place, such as Nedlac and the
parliamentary hearings described above, to ensure the effective participation of different
stakeholders in the legislative process. The question is, however, whether this amounts to
effective consultations and to what extent government takes note of stakeholders concerns. In
SACOBs submission to the Parliamentary Portfolio Committee on the new SACU Agreement, it
expressed concern that the parliamentary hearings only served to rubber stamp something which
had already been decided upon. It based this concern on the fact that very few of businesss
concerns on the draft SACU Agreement had been taken into account in the final Agreement
signed by the government.

While these are legitimate concerns, it must be remembered that the SACU Agreement is a
product of lengthy negotiations with other member states and that this limits the government on
what it can seek to have included in the Agreement. A need exists for better consultations
between government and stakeholders. According to Marion Hummel, SACOBs international
trade and investment executive, SACOB is often not given sufficient time by government to
consider and comment on important issues affecting business.(43) SACOB, along with other
organizations, has capacity constraints and cannot give quality inputs without adequate time for
research and discussions.

The whole policy-making process needs to take more of a bottom-up approach. There should be
a free flow of information between government and stakeholders, as they cannot anticipate all
upcoming issues. The government should also move away from its individual approach to
business issues. Business cannot be neatly divided into sectors, as this often leads to cross-
cutting issues being disregarded.
Discussions with stakeholders should not only focus on micro issues, but also strive to include
issues that will affect the whole economy. Currently there is a lack of strategic multi-sectoral
planning by business and government in South Africa. This should include debate on South
Africas national trade policy. The various business sectors have to become more involved. The
recent restructuring of business associations in South Africa has had a negative impact on this
process of co-operation, but this should now improve.

The use of the ADA as a model for South Africas legislation is an example of how a country can
make use of WTO instruments to ensure that it complies with its WTO obligations. Countries can
adjust these instruments to suit their various needs without having to reinvent the wheel. The
history of the use of anti-dumping measures by South Africa and the whole process it has
undergone, both domestically and in the WTO, shows that developing countries can successfully
participate in the world trading system.