COSATU welcomes the opportunity to make a written submission on the SACU Agreement to the Portfolio Committee on Trade and Industry.

The SACU Agreement dates back to 1910, when the then Union of South Africa and the so-called High Commission territories of Bechuanaland, Basutoland and Swaziland signed a customs union agreement. With the independence of Botswana, Lesotho and Swaziland in the 1960's, a new agreement was negotiated and signed in 1969. 1990 saw Namibia join the SACU as an independent State. South Africa qualified of course to join as a democratic State in 1994. Yet it took seven years for the SACU Ministers to agree on and initial a new agreement.

This final ratification process by Parliament therefore marks the conclusion of a process that started in 1994. Whilst COSATU has engaged government and contributed to the formulation of the SACU Agreement in a sustained and structured manner through NEDLAC for several years, it has more COSATU engaged recently engaged Parliament in 2002 on the SACU Agreement in its submission on the then International Trade Administration Bill, which has subsequently been enacted.

2. Key issues raised with Parliament on the SACU Agreement

COSATU realizes that the ratification of the SACU Agreement, already signed by the Heads of Member States, provides very little scope for amendments to the agreements. We believe however, that due consideration be given to some of our ongoing concerns¸ with a view influencing ongoing amendments once when the Agreement is reviewed.

To this end, it is useful to repeat some of our comments and concerns during the Parliamentary hearings on the International Trade Administration (ITA) Bill by this Committee.

At these hearings, COSATU was provided with the opportunity to comment on issues arising out the then draft SACU Agreement, since the ITA Bill at the time provided for certain aspects of the implementation of the Southern African Customs Union (SACU) Agreement in the Republic and, within the framework of the SACU Agreement, for continued control of import and export of goods. The engagement on the Bill emanated from a 'detailed engagement in NEDLAC in which government provided various versions of the draft Bill and labour made comments', many of which were incorporated into new versions of the draft ITA Bill, that also included some elements of our comments on the draft SACU Agreement.

Briefly, the issues arising out of the Draft SACU Agreement that we listed in the Submission on the ITA Bill included:

• Proposed amendments to the draft SACU agreement, requiring parliament hold hearings on the draft SACU agreement as soon as possible.
• The inclusion of explicit aims for trade policy, particularly net increases in regional employment and investment and the clear linkage of trade policy and structures to a coherent industrial strategy, designed to support a broader development strategy. This was borne out of a concern that negotiations between states over specific measures could otherwise 'deteriorate into power plays, [or horse-trading], leading to and a race to the bottom'.
• Concerns were also raised with regards to anti-dumping-, countervailing-, and safeguard duties; and the ability to implement trade remedies quickly enough to protect industry.
• COSATU also proposed that the SACU Agreement be strengthened through an amendment protocol to ensure that structures meet the timeframes set by the WTO; and which are necessary to protect local enterprises/industries.
• Other concerns were around the efficacy of SACU trade measures, linked to capacity of Member States police the borders of the region, the absence of which would compromise trade.
• Similarly, COSATU expressed concern regarding infrastructure needs to ensure an efficient and effective customs administration. In this regard, we are pleased that the customs pool formula addresses the issue of funding to improve custom administration.

Several of the specific questions and concerns raised, such as guidelines for South African mandates and positions within SACU structures, and decision making processes of the Council of Ministers of the members States of the SACU Agreement were largely addressed in subsequent amendments, and in particular, in the development of annexures to the SACU Agreement.

2. Labour's initial comments on Draft Annex B and Draft Annex C of the SACU Agreement - 3 November 2003

COSATU learnt at very late stage of drafting this Submission that the Portfolio Committee was only to discuss the SACU Agreement at the hearings and not the substantial Annexures B and C.

We have nonetheless decided to include Labour's concerns regarding the SACU agreement as stated in the draft Annexures, since they speak to concerns on the SACU Agreements anyways.

The following comments and questions relate only to the draft Annexes B and C. Labour's concerns regarding the SACU agreement had been raised previously and should be noted in the development of annexes.

2.1 Draft Annex B

Definition : "person"

It is difficult to see why this annexure should define a person in the expansive terms that it does.

Par. 4(b) : Tariff Investigations

This should be amended to provide that any national tariff body can recommend that a request be approved or rejected "with or without amendment". Often our own National body essentially approves a request for a customs tariff adjustment - but with amendment(s)

Par. 5 : Information Exchange - It is not clear whether this clause deals with the exchange of confidential information. Domestic applicants may be reluctant to provide our National Body with confidential information is this information will be disseminated in the BLNS states. A mechanism needs to be found to deal with this.

It should be considered whether this clause should also state that information should be not only be disclosed in terms of "legislation", but in terms of any "regulation".

The annexure should provide that information should be provided timeously provided. It should be clearly spelt out that if any information is not provided within a reasonable time frame by any member state then the National Body can make a recommendation to the Tariff Board on the basis of available information. The Tariff Board / and the Council of Ministers should be made aware of the fact requested information was requested but not provided and that they should take this into account when it making a recommendation / final decision.

Par. 7. Investigation Requests

If any National Body is requested to do an investigation on the behalf of any member state then additional financial resources from the Customs Pool should be made available to undertake such an investigation.

Par. 8. Consideration of dumping and subsidised exports

It should be stipulated that all national bodies should develop a common approach with regards interpreting WTO agreements.

Par. 8.2. It is stated that a National Body should "at the earliest possible time" impose provisional payments. This could be abused. If should be stipulated that if any state does not impose such a payment that its share of the revenue pool should be reduced.

Par. 9. Implementation of Council Decisions

It is unfair - in the case of ITAC - to make it responsible to implement a decision. IN the RSA this is the respo9nsibility of SARS. In South Africa SARS sometimes takes its own time to implement decisions.

2.1.(b) notes that, read a whole, a National Body may refer tariff and other related matters to the Board or any other SACU institution subject to "the rules that may govern the procedures of the relevant SACU institution." Our concern here is that there is alignment of the Annex and the rules governing the procedures of the relevant SACU institution.

3.2.(a). It may be useful to specify a time, if possible, wherein a National Body should notify the SACU Secretariat of "every request for customs tariff changes, or other related SACU issues, received by it as contemplated in paragraph 1 of Article 14; and;

3.1.(b). The National Body's disposition of each such request. Timely notification would enable another National Body to do its own research and make representation to SACU, if it so chooses, in an effective manner.

4 - Paragraph 4 should, if possible, include reference to a time period or have wording such as, 'as soon as is possible', in order to ensure expeditious dealings with tariff issues.

5.(b).(i). and 5.(b).(ii) - Does the specification that the information must be relevant to the effective operation of SACU not pose an obligation on proving relevance? This may be a difficult obligation to meet if one does not have the information - our experience in requesting information in retrenchment processes is that it is very difficult to prove relevance if one does not have the information.

Would any domestic legislation refered to in 5.(b).(ii) result in it being impossible to share desired information?

7.1 and 7.2 - Notification is dealt with in paragraph 3. National Bodies should be able to do investigations, compile information, evaluate a recommendation etc, even if not requested in terms of 7.1.(a) and 7.1.(b).

8.2 - A National Body should notify the Secretariat of an application, whether it intends to investigate the matter or not. A certain time period should be set wherein this notification takes place, as well as notification regarding a decision to investigate or not. A time period should also be set for notification to the Secretariat of imposition of provisional payment.

9 - Is there any legislation in force in Member States that would prevent or inhibit the country from amending customs tariffs? Who are the relevant bodies responsible for implementation in Member States? In South Africa, ITAC has this responsibility so what is the implication of the Annex making the National Body responsible for implementation ?

2.2 Draft Annex C

5.1.(b) Please see suggested change in wording as underlined: "Have suitable qualifications and/or experience......" A person may have experience in industry, for example, but not have the qualification such as a BCom. The person should also have suitable qualification and experience in labour, labour markets and development to ensure that the impact of tariff changes is understood in its totality.

8.7 should read "by consensus of the members present". (underlined wording is labour's suggested addition).

8.9 allows for National Bodies to appear before the Board when a submission or recommendation is not supported by the Board or the Board needs additional information. National Bodies should also be allowed to appear before the Board if there are strong disagreements regarding recommendations made from other National Bodies. This could ensure that dialogue takes place and full information is shared prior to the Members not being able to agree on the basis of reports.

9.5 - If the Board were to initiate investigation into a matter, would it still report to and advise the Council (as provided for in 9.4)? Labour's view is that it should be allowed to initiate investigations and advise Council.

10.2 - Notification of an application should be made to the Secretariat etc even if a National Body decides not to investigate the application. Once the decision has been taken by the National Body whether to investigate or not, this decision should be relayed to the Secretariat. Adequate information must be provided to the relevant bodies.

10.16 - In the event of the Board not reaching consensus on a matter, the Council may also allow National Bodies to appear before it.

I would take the above section out and rather reflect that the changes in the Annexures accommodate specific concerns that had been raised and they can look at the Nedlac report that captures it and that COSATU supports though it has to be signed off by E.P

 

3. Labour's Additional Input to the Annexures of the SACU Agreement - made to NEDLAC on 11 November 2003

1. Annexure on Customs

• that at the initiation of the SACU Agreement there should be an independent audit of each SACU member state's customs' administration. This audit should :

• examine and make recommendations on the human resources required to run an efficient and corrupt free customs' administration
• examine and make recommendations on the physical infrastructure (e.g. Information Technology; requirements at ports of entry (such as x-ray scanners; buildings, warehouse to detain goods, etc)) required to run an efficient free customs administration

• that a supra-national customs unit in SACU be established with officers in the unit being given the necessary powers to operate in any member state. The officers attached to this unit should have all the statutory powers enjoyed by customs officials in any state to investigate cross-border trade and tax related transgressions and to report any information thus obtained to the national customs administrations of the countries concerned in the matter. This will help to track down fraudulent trade deals, to speed up investigations and to force member states into action. Member states often complain that such cross-border actions infringe on their sovereignty, but they ignore the fact that the Agreement (and the functioning of the various institutions) does make inroads into the sovereignty of member states.
• if a member state fails to take steps to correct inefficiencies and to act against corrupt officials, there should be some form of sanction which the other members can impose on the defaulting member. An effective form of punishment would be for payment from the customs revenue pool to be suspended until the defaulting member rectifies matters.

It is difficult to see why this annexure should define a person in the expansive terms that it does. Does this mean that any SACU member state could be represented by a consultancy?

One of labours concerns with the SACU agreement is the potential delays in the imposition of tariffs necessary to protect jobs. If a decision has taken unnecessarily long to take - due to constant refer-backs by many SACU structures - it may be necessary for decisions with retrospectivity clauses to allowed.

Same for the above section - put in the Nedlac report itself and take out how you put it in here.

COSATU's key concerns in relation to the Annexures of the SACU Agreements were discussed, and in many ways accommodated at the NEDLAC process. The key concerns are briefly listed below.

The Annexures should;

• Where possible, stipulate timeframes to ensure expeditious action on trade remedies and investigations,
• Ensure that information exchange exists to facilitate identifying issues of concern and thereby making timely interventions,
• Ensure that meetings of the Tariff Board and its work are not constrained, through, for example, a Member State not attending meetings or deliberately trying to delay a decision.
• Ensure a review of the operations of the structures and their functioning and allow for amendments where needed.

• Process of engagement of Labour at NEDLAC with SACU Agreement and DTI
• Problematic process in developing SACU - ? mention the exclusion of Parliament from this process
• Endorsement of ratification process with caveats
• Remaining issues of concern

We would wish to point out that the engagement on the SACU annexures at Nedlac was very fruitful. In our view there was a high commitment from the govenrnment through sending very senior officials who engaged seriously and meaningfully on the issues and were committed to a successful NEDLACedlac process. As labour we feel that our concerns regarding the annexures were largely accommodated. Our original concerns regarding the agreement (as outlined above) remain, and while we are given some comfort in the successful approach to engaging on the annexures and crafting them in a manner that addresses our concerns, we would want to be able to review the original agreement and the operationalisation thereof.However, we wish to reiterate that we would still want to engage further on the SACU agreement itself - at this time specifically on the reviews that should be taking place with scope for amendement where necessary. Our original concerns regarding the agreement (as outlined above) remain, and while we are given some comfort in the successful approach to engaging on the annexures and crafting them in a manner that addresses our concerns, we would want to be able to review the origional agreeement and the operationalisation thereof.

We recognise that Parliament will be ratifying the agreement, but urge parliamentarians and the Department of Trade and Industrydti to remain aware of the potential pitfalls of the agreement and proceed using a cautious approach.

Finally, we would like to call for harmonization of SACU policies and procedures to ensure efficient operation of the national bodies and the SACU Tariff Board. We recognize that national bodies of Member States may often delay the necessary agreements that need to be made. To this end, we call on Parliament, NEDLAC and Member States to consider the formation of one body, consisting of a merger of the national bodies, in order to have greater harmonization and processes to facilitate decision-making by consensus in a speedier manner.

The following comments and questions relate only to the draft Annexes B and C. Labour's concerns regarding the SACU agreement had been raised previously and should be noted in the development of annexes.

Definition : "person"

It is difficult to see why this annexure should define a person in the expansive terms that it does.

This should be amended to provide that any national tariff body could recommend that a request be approved or rejected "with or without amendment". Often our own National body essentially approves a request for a customs tariff adjustment - but with amendment(s)

Par. 5: Information Exchange - It is not clear whether this clause deals with the exchange of confidential information. Domestic applicants may be reluctant to provide our National Body with confidential information is this information will be disseminated in the BLNS states. A mechanism needs to be found to deal with this.

It should be considered whether this clause should also state that information should be not only be disclosed in terms of "legislation", but in terms of any "regulation".

The annexure should provide that information should be provided timeously provided. It should be clearly spelt out that if any information is not provided within a reasonable time frame by any member state then the National Body can make a recommendation to the Tariff Board on the basis of available information. The Tariff Board / and the Council of Ministers should be made aware of the fact requested information was requested but not provided and that they should take this into account when it making a recommendation / final decision.

If any National Body is requested to do an investigation on the behalf of any member state then additional financial resources from the Customs Pool should be made available to undertake such an investigation.

It should be stipulated that all national bodies should develop a common approach with regards interpreting WTO agreements.

Par. 8.2. It is stated that a National Body should "at the earliest possible time" impose provisional payments. This could be abused. If should be stipulated that if any state does not impose such a payment that its share of the revenue pool should be reduced.

2.1.(b) notes that, read a whole, a National Body may refer tariff and other related matters to the Board or any other SACU institution subject to "the rules that may govern the procedures of the relevant SACU institution." Our concern here is that there is alignment of the Annex and the rules governing the procedures of the relevant SACU institution.

3.2.(a). It may be useful to specify a time, if possible, wherein a National Body should notify the SACU Secretariat of "every request for customs tariff changes, or other related SACU issues, received by it as contemplated in paragraph 1 of Article 14; and;

3.1.(b). The National Body's disposition of each such request. Timely notification would enable another National Body to do its own research and make representation to SACU, if it so chooses, in an effective manner.

4 - Paragraph 4 should, if possible, include reference to a time period or have wording such as, 'as soon as is possible', in order to ensure expeditious dealings with tariff issues.

5.(b).(i). and 5.(b).(ii) - Does the specification that the information must be relevant to the effective operation of SACU not pose an obligation on proving relevance? This may be a difficult obligation to meet if one does not have the information - our experience in requesting information in retrenchment processes is that it is very difficult to prove relevance if one does not have the information.

Would any domestic legislation referred to in 5. (b). (Ii) result in it being impossible to share desired information?

7.1 and 7.2 - Notification is dealt with in paragraph 3. National Bodies should be able to do investigations, compile information, evaluate a recommendation etc, even if not requested in terms of 7.1. (a) and 7.1.(b).

8.2 - A National Body should notify the Secretariat of an application, whether it intends to investigate the matter or not. A certain time period should be set wherein this notification takes place, as well as notification regarding a decision to investigate or not. A time period should also be set for notification to the Secretariat of imposition of provisional payment.

9 - Is there any legislation in force in Member States that would prevent or inhibit the country from amending customs tariffs? Who are the relevant bodies responsible for implementation in Member States? In South Africa, ITAC has this responsibility so what is the implication of the Annex making the National Body responsible for implementation?

5.1.(b) Please see suggested change in wording as underlined: "Have suitable qualifications and/or experience......" A person may have experience in industry, for example, but not have the qualification such as a BCom. The person should also have suitable qualification and experience in labour, labour markets and development to ensure that the impact of tariff changes is understood in its totality.

8.7 should read "by consensus of the members present". (underlined wording is labour's suggested addition).

8.9 allows for National Bodies to appear before the Board when a submission or recommendation is not supported by the Board or the Board needs additional information. National Bodies should also be allowed to appear before the Board if there are strong disagreements regarding recommendations made from other National Bodies. This could ensure that dialogue takes place and full information is shared prior to the Members not being able to agree on the basis of reports.

9.5 - If the Board were to initiate investigation into a matter, would it still report to and advise the Council (as provided for in 9.4)? Labour's view is that it should be allowed to initiate investigations and advise Council.

10.2 - Notification of an application should be made to the Secretariat etc even if a National Body decides not to investigate the application. Once the decision has been taken by the National Body whether to investigate or not, this decision should be relayed to the Secretariat. Adequate information must be provided to the relevant bodies.

10.16 - In the event of the Board not reaching consensus on a matter, the Council may also allow National Bodies to appear before it.

1. Annexure on Customs

• that at the initiation of the SACU Agreement there should be an independent audit of each SACU member state's customs' administration. This audit should :

• examine and make recommendations on the human resources required to run an efficient and corrupt free customs' administration
• examine and make recommendations on the physical infrastructure (e.g. Information Technology; requirements at ports of entry (such as x-ray scanners; buildings, warehouse to detain goods, etc)) required to run an efficient free customs administration

• that a supra-national customs unit in SACU be established with officers in the unit being given the necessary powers to operate in any member state. The officers attached to this unit should have all the statutory powers enjoyed by customs officials in any state to investigate cross-border trade and tax related transgressions and to report any information thus obtained to the national customs administrations of the countries concerned in the matter. This will help to track down fraudulent trade deals, to speed up investigations and to force member states into action. Member states often complain that such cross-border actions infringe on their sovereignty, but they ignore the fact that the Agreement (and the functioning of the various institutions) does make inroads into the sovereignty of member states.
• if a member state fails to take steps to correct inefficiencies and to act against corrupt officials, there should be some form of sanction which the other members can impose on the defaulting member. An effective form of punishment would be for payment from the customs revenue pool to be suspended until the defaulting member rectifies matters.