Trade Minister Alec Erwin believes fast-tracking tariff cuts is in the best interests of industry as a whole. Lynda Loxton reports
Trade and Industry Minister Alec Erwin this week tried to dispel allegations that the government was placing sensitive industries — and jobs — in jeopardy by fast-tracking tariff cuts.
Briefing the parliamentary trade and industry committee, Erwin admitted that tariff cuts would take place in the clothing and textile industries more quickly than the World Trade Organisation (WTO) binding expected.
He said this had been decided on by the government, business and labour in the best interests of the industry as a whole.
“Some of the tariff issues are much more complex than they would appear to be on the surface,” Erwin said.
In terms of the Uruguay Round of the General Agreement on tariffs and trade (gatt), binding rates on tariffs had to be cut by an average of 33% over three years for developed countries and five years for developing countries.
“South Africa was given five years, not because it is seen as a developing country but as an economy in transition,” Erwin said.
South Africa’s offer bound 99% of its tariffs, excluding oil and armaments.
Erwin said the situation was complicated by the fact that the Uruguay Round also required tariffs to convert protective measures such as high specific duties into ad valorem tariffs.
“The binding rate offer we made to Uruguay was higher than the actual tariff at that time,” Erwin said.
“That meant there was not a great need to meet the new binding rate because the majority of products were already below the binding rate.”
But there was “clearly some misunderstanding at times because people think we are bringing down tariffs massively,” Erwin said.
“They do not realise it is the binding rate and not the actual rate that is coming down.”
In the clothing and textiles industries, South Africa managed, “using a lot of negotiating pressure”, to get a 12-year adjustment period.
“But when we began examining that industry more closely, we raised the possibility that if we do this over 12 years, we may end up without an industry if we are not careful,” Erwin said.
This was because most of the protection offered to these industries was through non-tariff measures such as specific duties.
These would have to be removed within the next 12 years, if not before, and it was felt that it would be in the best interests to reduce tariffs over seven years rather than 12 years.
“So in that sense, yes, it is faster than the Gatt that we had, but the reasons for it are mainly to try to allow the industry to restructure, recapitalise and retrain so that it can be effective,” Erwin said.
The automotive industry was given eight years to reduce tariffs and the government had stuck to that timetable.
“So, it is a complex issue, but I want to state very clearly that any notion that we are somehow rapidly fast-tracking the tariff adjustment is not the case,” Erwin said.