Facilitating South Africa’s Exports: What can trade agreements do?

1. Trudi Hartzenberg Trade Law Centre for Southern Africa trudi@tralac.org Facilitating South Africa’s Exports: What can trade agreements do?

2. Why is international trade important? Competing in international markets Competitiveness Issues and the Trade Agenda Facilitating Exports – what can trade agreements do? Overview

3. Why is international trade important? • Composition of international trade (what does South Africa export and import?) – goods and services • Who trades? Private sector is responsible for most trade. Government does, however import certain products and services (eg pharmaceutical products from India – government procurement) • Who makes the rules for international trade? Governments negotiate international trade agreements and the private sector trades by the rules • Facilitating South Africa’s exports COMPETITIVENESS

4. Competing in International Markets (1) Trends in the global economy • Industrial restructuring – clusters of competitiveness in developing countries Competing with developing countries (eg China in manufactures, India in some services…) Negotiating trade agreements with developing countries (South-South Agreements

5. Competing in International Markets (2) • Production sharing - geographic separation of stages of the supply chain for the production of a specific product/service Role of services in - manufacturing competitiveness (transport, financial, communication and other services) It is very difficult to be competitive in manufacturing you are not competitive in services

6. Competitiveness Issues and the Trade Agenda • International Trade Agreements World Trade Organisation (WTO) – 153 Members currently negotiating the Doha Round (but it’s very quiet in Geneva…) Regional Trade Agreements (RTA) – Free Trade Agreements, Customs Unions (agreements between two countries or groups of countries) – RTAs provide preferential market access for partner countries Even though there is very little happening in Geneva – the WTO remains very important – one reason is that RTAs must be WTO-compatible

7. Facilitating Exports – what can trade agreements do? • Facilitating of Exports is complex (includes the work of the trade promotion agency) Fundamentally – competitiveness matters (product specifications, quality, price…) Trade agreements can impact on competitiveness is two ways: - at the border (tariffs, quota’s, customs procedures and other trade facilitation measures eg if your truck has to wait 3 weeks at the border between Zambia and Malawi your competitiveness is eroded) - behind the border (at the place of production – rules of origin, sanitary and phyto-sanitary measures (SPS), services inputs eg transport – it costs $6000 for a 40ft container from Durban to Lusaka by road) BUT importers may also have specifications eg Tesco (not usually the subject of international trade negotiations) Note: these categories overlap!

8. Facilitating exports – what can trade agreements do? (2) • What is on the trade agenda? Trade in goods (tariffs, quota’s, rules of origin, customs procedures..) Trade in services – liberalisation…. Investment Competition Government Procurement …… Dispute resolution (trade remedies, arbitration……WTO dispute resolution is sometimes taken on board in FTAs eg Interim EPA for countries in SADC EPA)

9. Facilitating Exports – what can trade agreements do? (3) • Looking at the trade agenda – what can be done to facilitate South Africa’s exports? i) At the border (eg tariffs – how important are they for specific products – if they are important barriers then this is important in trade negotiations) ii) Behind the border (eg rules of origin may prevent firms accessing cheapest, best quality inputs when producing for a specific export market; high cost-poor quality services can erode competitiveness)

10. Promoting Exports – what can trade agreements do? (4) • South Africa’s position on the international trade agenda Substantive focus in context of RTAs: Trade in Goods (eg in EPAs, SACU – India and historically also in SACU-USA negotiations NOTE: South Africa is a member of the Southern African Customs Union (SACU) and is required to negotiate RTAs with external parties together with its SACU partners What are the implications of SACU membership?

11. Trade Facilitation Issues for Trade Negotiations • Business knows where trade (export and import eg inputs) opportunities are – can assist government to identify partner countries to negotiate trade agreements with • But, we recognise that govt may identify specific partners for political economy reasons. Consultation with business is still important in these cases • Business knows what the barriers to exports are: tariffs? quota’s, SPS, or ‘we simply cannot compete with China’ – then we need to ask why? The answer may lie behind the border (services – cost, quality?)

12. What happens once a trade agreements is concluded? • Facilitating exports once a trade agreement has been concluded Domestic incorporation of international trade agreements - Role of Parliament (SA Constitution determines specific procedure for domestic incorporation) – but, South Africa is a member of SACU and all SACU members must ratify a FTA before it enters into force (eg SACU-EFTA – signed in 2006, entered into force on 1 May 2008 – lost market opportunities for almost two years, meanwhile EFTA was negotiating with other partners, and so SACU’s preferential market access could have been eroded…) - How does business get to know what has been incorporated in a trade agreement?

13. Conclusions • Facilitating exports is not only about marketing/branding and outward missions to trade fairs (These are important, but exercise caution eg what happens to a small business once it has been to a trade fair??) • Shaping South Africa’s trade agenda (both in terms of who to negotiate trade agreements with, and what should be on the agenda are very important) to promote trade (exports and imports) • Supporting competitiveness development is essential (how can the trade agenda assist? Eg supporting domestic regulatory reform – trade agreements can be an anchor for promoting such processes) • Involving the private sector in the trade policy making process is important – they trade!