1 itac strategic plan presentation to the portfolio committee on economic development 17 august 2010

1

ITAC STRATEGIC PLAN PRESENTATION TO THE PORTFOLIO COMMITTEE ON ECONOMIC

DEVELOPMENT

17 AUGUST 2010

2

CONTENTS

• Establishment of ITAC• Import Tariffs• Trade Remedies• Import and Export Control

3

ESTABLISHMENT

• Established by an Act of Parliament, ITA Act of 2002.

• Mandate: to foster economic growth and development in order to raise incomes and promote investment and employment in SA and within the Common Customs Union Area by establishing an efficient and effective system for the administration of international trade.

• Structure: The Commission is constituted of 2 Full- time Commissioners ( Chief Commissioner and Deputy Chief Commissioner) and 6 Part-time. The administrative arm of the Commission has a staff compliment of 132.

• Reporting Lines: The administration of the ITA Act has been transferred to the Minister of Economic Development (Policy and Oversight) except for decision making powers on individual tariff and trade remedy investigations that have been retained by the Minister of Trade and Industry.

• Core Functions: Tariff Investigations; Trade Remedies; Import and Export Control.

4

IMPORT TARIFFS

• Policy and Legal Framework• Tariff Amendments• Sectors Investigated• Methodology• Procedure

5

Policy and Legal Framework

• Developmental Growth Path; Trade Policy Framework and National Industrial Policy.

• Domestic Law: ITA Act; Regulations; PAJA; Constitution.

• International Agreements (WTO)

• Regional Integration (SACU & SADC)

• Bilateral Agreements (EU; EFTA; & MERCOSUR)

6

Tariff Amendments

• Ongoing investigations for selective tariff increases.

• Ongoing investigations for selective tariff decreases.

• Creation of rebates.

• Objectives: Promote domestic production; Retention and creation of jobs; & International competitiveness.

• Agriculture Sector: Tariff setting for this sector is more complex given the global distortions; the need for a right balance between profitability of producers on the one hand and consumer prices on the other is critical.

7

Investigated sectors/industries

• Basic chemicals (polymers)

• Aluminium

• Capital equipment and machinery

• Textiles for Clothing; Fabrics for Home Textiles

• Clothing

• Plastic products

• Self copy paper

• Automotive components

• Spades and shovels; gas cylinders

• Wheat; Sugar; Soya bean oil cake; and Pineapples.

8

METHODOLOGY

• Domestic productive capacity and potential

• Trade flows (Imports and Exports)

• Cost Structure

• Price differentials (Disadvantage or Advantage)

• Market share of domestic producers

• Demand and supply

• Financial state

• Employment

• Investment

• Productivity

9

PROCEDURE

Government Gazette Notice

Final Submission

Exco-Sub Committee

Commission’s Final

Determination

Reports & Submission4

05 1

515

Minister of Trade and Industry

Deputy Minister of

Finance

Publication Notice by

SARS

Receipt of Application

Properly Documented Application

Preliminary Submission

Exco-Sub Committee

Commission’s Preliminary

Determination 19

14

5 15

10

10

148 Days = 6 Months

10

TRADE REMEDIES

• Trade remedy instruments

• Dumping and anti-dumping actions

• Procedure

11

Trade remedy instruments

• Objectives: Enable fair trade in order to sustain domestic production, retain and create jobs and promote international competitiveness.

• Anti-dumping measures are taken against injurious dumped imports. Dumping is used to refer to a situation where goods are sold to a foreign market at prices less than the country of origin.

• Countervailing measures are used against subsidised imports that threaten and/or cause injury ( i.e. decrease in prices; loss of market share; decrease in profits; decrease in sales volumes; job losses etc.) to the domestic manufacturer.

• Safeguards are actions against trade that may be regarded as fair but overwhelms domestic producers. Safeguards are used against an unforeseen surge of imports that threatens and/or causes injury to the domestic producers.

12

Dumping and anti-dumping actions

• Dumping: Selling goods at a lower price in the export than the domestic market.

• Firms engage in geographical price discrimination to maximise profits.

• The problem arises when dumping threatens and/or causes injury to domestic manufacturers ( Decline: Prices; Sales Volumes; Profits; Market shares; Job losses etc.)

• Since Dumping is regarded as an unfair trade practice the WTO AD Agreement sets out the rules for acting against dumping that causes injury.

• South Africa is an old and active user of the instrument with the first law on AD having been enacted in 1914.

13

21 days

Properly documented application

Applicant verification

prep

Merit submission prep

21

Merit decision

SM approval & place on

agenda7

Verification of exporters

12 7+30+14 2

2Comments on prelim. report 21

2 18 10 72Prelim report ready for SM

Commission prelim. decision

Provision for an oral hearing

10

SARS publication

1818

14 10 18 7 3 21

Total days: 274 (9 months)

Total days: 309 (10 months)

721 18 10

14Sending exporters’ verification reports

14 14Verification plan for

importers & exporters & verification of

importers

Identify deficiencies and

send letter

Exporter/ importer

responses

Comments on verification reports

Prelim report approval by CC

Final submission on

agenda

Sending out prelim. report &

notice

Implementation of decision

Notification initiation of investigation

Responses on deficiencies

Finalise prelim & submit agenda

Publication of provisional payments

Essential facts letters

Final decision

Approval by Minister

Final report approval by

Chief Comm.

Comn. final decision after essential facts

Final submission after essential facts

Comments on essential facts

PROCEDURE

14

IMPORT & EXPORT CONTROL

• Import control measures

• Export control measures

15

Import Control

• Governed by the WTO Agreement.

• SA introduced its first import restrictions in 1949 to address balance of payments problems.

• Invoked and withdrawn between the years 1969-1983.

• From 1985 import controls were withdrawn from 2400 tariff lines to 276 tariff subheadings (items).

• WTO Agreement 1995 Tariffication of import restrictions in agriculture.

• Import Substitution strategy: High tariffs and import restrictions on agricultural and industrial goods.

16

Import Control (New and 2nd hands)

• Objective: To enforce health, safety, environmental, and technical standards that arise from domestic law and international agreements.

• Partnerships with government departments and institutions.

• Industrial and trade policy implications (defensive and offensive interests).

• New Goods: Radioactive chemicals; Pneumatic tyres; Chemicals 1988 Convention; Fossil fuels; Arms and ammunition.

• 2nd hands: Clothing; Motor vehicles; Electronic equipment; Waste and scrap; medical equipment; Aircraft.

17

Export Control

• Objective: Health; safety, environmental and technical standards.

• 177 tariff subheadings are under export control.

• Minerals including tiger’s eye.

• Raw materials ( waste and scrap metals).

• Motor vehicles

• International agreements: Montreal Protocol, Basel Convention, and 1998 UN Convention.

• Enforcement of the Regulations.

18

Thank You

Office Contact Details: 012 394 3713

Cell: 082 454 8979 stsengiwe@itac.org.za

www.itac.org.za