SA thinks again on import tariff pledge

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The International Trade Administration Commission on Friday, 26 June 2009, gazetted an application, lodged by the South African Clothing and Textile Workers' Union (Sactwu), to have tariffs on 35 lines of garments raised from the applied rate of 40% to 45%, the rate at which SA agreed to bind duties in the WTO.

The garments include everything from underwear to shirts, trousers, jackets and blazers and overcoats and raincoats.

Commentators doubt the duty increase would meaningfully improve local clothing manufacturers' competitiveness, while it could also dent SA's credibility in the global trading system.

The government has already given its tacit support for the tariff hike, as the raising of import duties to bound rates was included as a support measure in the state's draft rescue package for the clothing and textile industry.

Economist Colin McCarthy said that if the duty application was granted it would be largely symbolic as part of a broader plan to prop up the industry.

“If one compares SA's per unit labour cost with other competing markets, a five percentage point increase in the tariff would not make a material contribution to the South African industry's competitiveness,” he said. The increase in tariffs would violate the spirit of the G-20 resolution and could severely compromise SA's image.

Members of the G-20 undertook last November to “refrain from raising new barriers to investment or to trade in goods and services and imposing new export restrictions” over a 12-month period.

While most members of the G-20 have initiated trade-restricting measures since then, these measures have all been non-tariff in nature.

Manufacturers, however, argued that the tariffs, as part of a range of support measures — including loans at attractive interest rates — were justified as they would assist in the recovery of the ailing sector.

Sactwu's application is supported by the Cape Clothing Association, which in a letter to Trade and Industry Minister Rob Davies, calls for “industrial policies” to facilitate the growth and job creation potential of the clothing manufacturing industry.

Johann Baard, executive director of the Association, said “every little bit of weight that we can add on a counter scale to level the playing fields” would help the industry.

“Trade and industrial policy measures should be put in place so they better reflect the measures that are available to our major competitors. These measures are all geared at bringing about a more level playing field on which competition can take place globally,” he said.

In its motivation, Sactwu said high levels of imports continued to flow into SA in the 35 product lines, warranting the duty hike.

Source: Business Day

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