Posted: May 21, 2021
The Department of Trade, Industry and Competition (the dtic) yesterday issued a Trade Policy Statement, reflecting its policy objectives for international trade in the wake of the COVID-19 pandemic and the emerging opportunities which stem from the signing of the agreement on the African Continental Free Trade Area (AfCFTA).
The Statement frames South Africa’s trade policy and its international trade engagements within SA’s industrial policy objectives. The South African Government, through the dtic, pursues a strategic approach to trade policy that seeks to
– Build industrial capacity
– Support workers, women and communities
– Unlock development across the African continent
– Drive manufacturing exports and open markets for SA goods
– Respond to the Covid-19 challenges through improved resilience and ‘building back better’
– Support a domestic digital economy
– Enhance environmental sustainability; and
– Enhance SA’s role at the EWTO and in efforts to build the multilateral trade system.
“Trade policy needs to be a source of new jobs and expansion of the industrial economy in South Africa. It must support South Africa’s industrial development. Increased exports can drive sustainable growth, generate decent well-paying jobs and widen economic inclusion, including for women and youth,” Ebrahim Patel, Minister of Trade, Industry and Competition said today.
The release of the Statement is in the context of significant recent developments, including the impact of Covid-19 on the local economy, the adoption of a policy of promoting industrialisation and localisation, and progress with the African Continental Free Trade Agreement (AfCFTA).
Pre-Covid, exports of manufactured products grew. According to the South African Reserve Bank (SARB), manufactured exports topped R500 billion for the first time in 2019, driven by growth in exports of products such as cars, catalytic converters (used to reduce carbon emissions in cars and trucks), mining equipment and even cosmetics.
The AfCFTA presents an opportunity for industrialisation in SA and for the rest of the continent. African countries imported more than R7 trillion worth of goods from outside the continent in 2019, representing the size of the opportunity local producers. Work has also begun to identify and develop regional value chains to support cross-continental industrialisation.
South Africa recorded a R270 billion trade surplus in 2020, the fifth straight surplus in a row and the highest on record. This has been followed by a R96 billion trade surplus in the first three months of 2021, again the highest for the first quarter of any year on record.
Last year’s trade surplus was largely the result of an increase in the exports of agricultural produce and platinum group metals, and a reduction in imports of crude oil and machinery. While the trade surplus supported South Africa first current account surplus in nearly 20 years, more work is required to drive the export on manufactured goods, which can support greater levels of job creation.
The Trade Policy Statement commits to promote industrial capacity. Economic development requires the expansion and diversification of the industrial sector, which is still the main catalyst of productivity growth, rising wages, innovation and a key driver for service sector expansion. SA is a comparatively small and open economy, accounting for 0.53% of world merchandise trade and approximately 0.28% of world services trade. High levels of manufactured imports and a comparatively high import-propensity underscore not only the lack of diversified domestic production but also, if given appropriate focus and support, the possibilities for domestic industrial expansion.
The Statement frames its impact on workers, women and communities. Trade policy must promote and facilitate the development of inclusive economies. SA workers should expect that government policy and actions on the trade front should increase employment and promote decent work opportunities. Where workers are displaced by trade reform, policy should as far as possible seek to put in place measures to better manage adjustment costs. Communities expect opportunities for young people, women and rural enterprises to grow and find opportunity in local and global markets. For the first time, SA is taking the deliberate and necessary step of pursuing a gender-sensitive and gender responsive trade policy.
The role of trade in driving value-added exports and African industrialisation is highlighted in the Statement. SA’s bilateral engagements are focused on expanding opportunities for higher value-added exports and encouraging inward investment to support our industrial policy objectives. The details of such engagements depend on the trade and investment profile of the partner country, whether the relationship is underpinned by binding or cooperative trade agreements and the interests of the partner. In each engagement, SA advocates that our partners increasingly view Africa as an investment destination rather than simply a market for exports in light of the AfCFTA. Industrialisation must thus be at the heart of transformation of the African economy. With 17% of the world’s population but just 3% of world manufacturing, Africa’s path to prosperity lies in increased levels industrial production and there is some evidence showing that since 1990 manufacturing employment share has grown in a number of African countries, but with modest value-added growth.
On the future of multilateralism, the Statement sets out SA’s proposed role. It notes that SA advocate’s an approach premised on the principles of inclusivity and development. The keys to the legitimacy and sustainability of the WTO lie in its ability to advance developmental interests of developing countries that will constitute new sources of global growth and prosperity in the world economy. Meeting this challenge will serve to strengthen the multilateral, rules based trading system, enhance its legitimacy and also create the basis for economic growth from which all WTO members can benefit.
To address the impact of Covid-19, the Statement advocates a rade policy for greater resilience and building back better. The Covid-19 pandemic exposed the vulnerabilities of limited industrial capabilities and an over-dependence on fragile global supply chains. SA, like many other countries, particularly in Africa, was unable to access or produce sufficient supplies of essential medical products at the start of the pandemic. While the country was able to overcome some constraints through extraordinary efforts to repurpose existing capacity and produce medical grade face-masks, hand sanitisers, ventilators and more recently vaccines, the lack of preparedness pointed to inadequate levels of prior investment in research and development and manufacturing capabilities. For greater economic resilience, now and in the future, SA’s trade and industrial policy must focus on building more diversified production centres both in SA and across Africa.
The Statement notes that the WTO has a vital role to play in addressing the global public health crisis wrought by the Covid-19 pandemic. The immediate and urgent challenge is to scale up the production of vaccines and to distribute them in an equitable manner to citizens around the world. SA and India, with growing support amongst WTO members, parliamentarians and across civil society, have proposed a temporary waiver on intellectual property rights for certain products required to fight the spread of Covid-19 (including vaccines) to ensure that the requisite technology and know-how is widely shared in order to boost global vaccine production.
It points to the challenges of trade in a digitised world and the country approach and objectives. It notes there are clearly many opportunities that arise from the application of the new technologies to work and society, including new products and services, easier communication and production or distribution efficiencies. At the same time, challenges must be addressed, including the persistent and growing digital divide, the impact of digitisation on net employment levels, increasingly concentrated markets and anti-competitive practices.
On climate change, the Statement notes that SA is committed to environmental sustainability as part of the overall UN Sustainable Development Goals. Meeting these objectives will require significant transformation in patterns of global production, consumption and distribution. While there are considerable opportunities for a range of green industrialisation initiatives, forging greater coherence, the Statement calls for greater coherence between UN goals and WTO rules. Unilateral trade measures, such as border adjustment taxes on the carbon content on imports, could undermine coherence in multilateral climate policymaking. In order to avoid such outcomes, the contours of such trade measures – how they are calculated and how they would comply with WTO rules – need to part of the multilateral dialogue.
the dtic’s Trade Policy for Industrial Development and Employment Growth can be found on the dtic’s website at http://www.thedtic.gov.za/wp-content/uploads/SA_Trade_Policy.pdf.
Sidwell Medupe-Departmental Spokesperson
Tel: (012) 394 1650
Mobile: 079 492 1774
Issued by: The Department of Trade, Industry and Competition
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