Trade policy, the WTO and productive transformation strategies in a context of regional and bilateral trade agreements: Perspectives from South Africa HSRC BRICS Seminar Series 3 November 2015 Nicolette Cattaneo
Outline • Introduction • 1. South Africa’s Trade Policy and Strategy Framework • 2. Strategic trade and industrial policy • 3. Recent trends and challenges • 4. Lessons for the BRICS economic cooperation agenda
1. South Africa’s Trade Policy and Strategy Framework • Trade and industrial policy since late 2000s informed by 2007 National Industrial Policy Framework • NIPF goals: diversification of SA’s productive structure towards non-traditional tradeables; a more labour- absorbing value added industrialisation trajectory; support for development of Africa’s industrial capabilities • Emphasises need for coherence with other policy areas, particularly macroeconomic, technology and social policy • Trade policy viewed as an instrument of industrial policy: – Strategic tariff policy – Export promotion and diversification strategies • FDI promotion in line with industrial policy goals
1. South Africa’s Trade Policy and Strategy Framework • 2010 TPSF has two key aspects: • 1) outlines a developmental trade policy in support of the industrial policy framework, reinforcing the ‘strategic tariff policy’ set out in the NIPF • 2) sets out a policy of ‘strategic integration into the global economy’ designed to participate in the world economy while preserving sufficient policy space to pursue domestic development objectives. • There are bilateral, regional and multilateral dimensions to this global strategy.
Strategic global integration At the multilateral level: • SA committed to conclusion of Doha Round on basis of development mandate • Special and differential treatment and less-than-full- reciprocity to underlie developing country commitments • Critical of pressure on emerging economies for greater market access commitments in industrial tariffs and services on the basis of growth performance • Opposes the pursuit of plurilateral agreements in the WTO (erode multilateralism, lack transparency, inclusiveness) • Concerned about the policy prescriptions associated with the emergence of GVCs
Strategic global integration At the regional level: • Tripartite FTA negotiations between SADC, EAC and COMESA. Trade-in-goods agreement based on 3 pillars: market integration, infrastructure development and industrial development • ‘Developmental integration’ approach • SACU work programme to resolve outstanding issues related to the implementation of 2002 Agreement • SADC: SA favours consolidation of FTA , sectoral cooperation, infrastructure, industrial development, addressing NTBs; concern that deepening to a customs union would impact on STP
Strategic global integration At inter-regional and bilateral levels: • Preferential trade agreements (PTAs) that may initially be fairly limited, but provide institutional basis from which to develop and consolidate relations • Recognition of need to structure trade and investment relations with developing countries in ways that are sensitive to industrial devt and employment goals • Of concern is replication of traditional North-South trading patterns in SA’s trade with emerging economies • Reflected in provisions of Comprehensive Strategic Partnership Agreement signed with China in 2010 and limited PTA concluded between SACU and MERCOSUR in 2009
Strategic global integration • From SA’s perspective, therefore, strategic integration into the global economy should support industrial policy at each level by harnessing trade and investment relations to improve market access for SA products and firms. • In this regard, other African countries are a key destination for SA’s manufactured exports • But SA trade and industrial policy-makers underscore the need for development integration and regional industrial policy to prevent the reproduction of the same imbalances that concern SA in its own trade with SSA • Highlights the important point that trade expansion in and of itself does not equate to development
Strategic global integration • Recognition has implications for NAMA negotiations on industrial tariffs at the multilateral level, approaches to regional integration and bilateral trade agreements, and prospects for moving towards a BRICS-wide market • TPSF outlines main focal points of economic engagement with BRICS partners: reform of global economic and financial architecture, including enhanced collaboration in the Doha Round, building trade and investment relations that take account of industrial policy goals, and supporting BRICS engagement with the rest of Africa in ways that further the continent’s development agenda (the dti, 2012: 25). • Engagement with the US: AGOA, TIDCA • SADC EPA with the EU
2. Strategic trade and industrial policy 2.1 Industrial policy and the strategic use of tariffs 2.2 Industrial policy instruments and policy space 2.3 Trade policy and the new generation ‘trade- related’ issues: 2.3.1 Investment policy 2.3.2 Public procurement policy 2.4 Development integration
2.1 Industrial policy and the strategic use of tariffs • SA’s TIP position is based on a fundamental critique of orthodox trade theory and its policy prescriptions. • Adopts a heterodox approach: highlights the longstanding argument that the type of products a country produces is of major importance for development (Chang, 2005; Reinert, 2008) • Output and growth consequences differ significantly for increasing as opposed to decreasing return activities. • Focus on a labour-absorbing industrialisation trajectory. • Transfer of production technology and other knowledge not costless or immediate. Technologies not “blueprints” that can be costlessly applied elsewhere. • Time needed for learning by doing, investment in developing technological capabilities and absorbing / adapting technologies.
2.2 Industrial policy instruments and policy space • Strategic use of trade and industrial policy instruments required to create and nurture dynamic comparative advantage. • But implementation can be significantly constrained by lack of coherence between different aspects of economic policy-making • In addition, wide array of trade and industrial policy instruments affected by WTO rules with conclusion of Uruguay Round. • And North-South trade agreements that induce developing countries to undertake deeper obligations than those required at the multilateral level, particularly in areas such as services, intellectual property protection and investment policy, have proliferated.
2.3 Trade policy and the new generation “trade-related” issues • Services, investment, intellectual property rights, public procurement, competition policy • Each has a critical role in industrial policy and its articulation with other key policy areas • In a context of trade and financial liberalisation each has been subject to the discourse of liberalisation and regulatory reform • With the Doha impasse, it is in the context of plurilaterals, RTAs and IIAs that some of these issues are being taken forward
2.3.1 Investment policy • With Doha impasse: proliferation of international investment treaties and investment chapters in RTAs Constraints to development policy space: • Affects coherence between FDI, industrial and technology policy • May significantly restrict ability to use capital controls (Gallagher, 2010) • Issue of investment arbitration: investor-state dispute mechanisms allow foreign firms to institute claims against host governments (Gallagher and Shrestha, 2011) • Claims targeted against public policies and costs high • SA’s response has been not to renew BITS and to develop a domestic legislative framework to protect local and foreign investment that takes account of domestic policy goals
2.3.2 Public procurement policy • WTO GPA is a plurilateral agreement that few developing countries have shown interest in signing • GP is an important industrial policy tool in a shrinking policy toolkit • Pressure in some North-South RTAs to prise open the procurement markets of developing countries • Such markets comprise as much as 20% of GDP or more in both developed and developing countries • Weiss and Thurbon (2006): procurement as trade strategy in the US – tight procurement markets at home while pursuing market opening abroad • SA: public procurement an integral part of the IPAP sector strategy and for social redress • Links to technology policy via PPfI (public procurement for innovation) (Kattel and Lember, 2010) and links to green economy sectors
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