adminGift Mugano Business Correspondent
In recent years, the Zimbabwean industry has come under immense pressure from the influx of cheap materials all blamed on dumping, flouting of rules of origin, porosity of borders and corruption, trade liberalisation and lack of industrial competitiveness.
Rampant abuse of the Sadc trading protocols has been on the rise as a number of commodities have been purportedly manufactured in South Africa yet they come as far as China and Brazil.
This has been mainly in the case of products like chicken and clothing as firms outside the Sadc Free Trade Agreement used South Africa as a gateway into Zimbabwe under Sadc rules of origin.
This situation has seen firms outside Sadc enjoying same preferential treatment similar to Sadc firms. To make matters worse, these firms are not operating at the same level field with their Sadc counterparts: in most cases they enjoy competitive advantage due to differences in economic profile.
“Rules of origin” is the criterion used to define where a product was made. They are an essential part of trade rules because a number of policies discriminate between exporting countries: quotas, preferential tariffs, anti-dumping actions, countervailing duty (charged to counter export subsidies), and more.
Rules of origin are also used to compile trade statistics, and for “made in . . . ” labels that are attached to products. This is complicated by globalisation and the way a product can be processed in several countries before it is ready for the market.
In Zimbabwe, the Zimbabwe Revenue Authority is responsible for administering the rules of origin. Rules of origin are laws, regulations and administrative rulings applied by the Government to determine the origin or source of imported goods. The customs authority assesses whether a shipment qualifies for a tariff preference, falls within a quota limitation or is affected by an anti-dumping duty subject to specific conditions as defined in WTO agreements and regional trade arrangements.
However, Zimra has let the nation down due to its incapacity to deal with flouting of the rules of origin due to rampant corruption of its officials and institutional incapacity. As it stands, Zimra has no capacity (both institutionally and resource wise) to put in place mechanisms that will track the source of the commodity taking into consideration the complexity involved in tracking rules of origin.
Another cancer killing Zimbabwean economy is the influx of cheap materials especially from China which is alleged as dumping.
As it stands, we don’t know whether China is dumping its products in Zimbabwe as dumping is another complicated monster which many countries due lack of capacity fails to prove.
Dumping occurs when a company exports a product at a price lower than the price it normally charges on its own home market.
Dumping brings about unfair competition hence many governments take action against dumping in order to defend their domestic industries.
The WTO agreement under GATT (Article 6) allows governments to act against dumping where there is genuine “material” injury to the competing domestic industry.
In order to do that the Government has to be able to show that dumping is taking place, calculate the extent of dumping (how much lower the export price is compared to the exporter’s home market price), and show that the dumping is causing injury or threatening to do so.
The Competition and Tariff Commission is the investigating authority for unfair trade practices in Zimbabwe.
To operationalise this function, the Government of Zimbabwe enacted two statutory instruments, namely: the Competition (Anti-Dumping and Countervailing Duty) (Investigations) Regulations 2002 and the Competition (Safeguards) (Investigations) Regulations 2006.
However, like Zimra, the CTC is not capacitated to investigate and prove that dumping is taking place in Zimbabwe. Hence, Government must capacitate and strengthen the investigating authority for it to be able to establish the existence of unfair trade practices caused by dumping and subsidised imports, with a view to initiating anti-dumping action as well as instituting countervailing measures.
At the moment what we can accept easily is that the economy is suffering from an influx of cheap imports from which we can invoke safeguard measures.
A WTO member may restrict imports of a product temporarily (take “safeguard” actions) if its domestic industry is injured or threatened with injury caused by a surge in imports. WTO safeguard measures are avail-able under GATT (Article 19).
In order to apply safeguard measures the injury has to be serious. An import “surge” justifying safeguard action can be a real increase in imports (an absolute increase); or it can be an increase in the imports’ share of a shrinking market, even if the import quantity has not increased (relative increase).
However, they were infrequently used, some governments preferring to protect their domestic industries through “grey area” measures – using bilateral negotiations outside GATT’s auspices, they persuaded exporting countries to restrain exports “voluntarily” or to agree to other means of sharing markets. International agreements of this kind were reached for a wide range of products: automobiles, steel and semiconductors, for example.
In order to curtail the influx of certain imported goods which are threatening the survival of local industry, Government must consider a mix of safeguard measures under the WTO rules.
Zimbabwe’s legislation on safeguard measures falls under the Competition (Safeguards) (Investigation) Regulations of 2006 in line with GATT Article XIX of the WTO.
In the same vein, Government must put in place a financial package to resuscitate industry.
Gift Mugano is an author and expert in trade and development and PhD finalist (Economics) and a lecturer of International Trade and Finance at Nelson Mandela Metropolitan University. He is based in Port Elizabeth, South Africa. Email: [email protected]
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