State plans duty cuts on infrastructure projects

Posted On Monday, 11 June 2007 02:00 Published by eProp Commercial Property News
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The government is considering reducing import duties on products needed for its infrastructure development programme, ostensibly to reduce cost pressures as the R400bn programme gathers pace

Infrastructure IndustryThe move appears to be in line with recommendations from the Harvard group, which advises the government on economic policy, to liberalise trade in order to boost competitiveness.

But trade specialists are wary of the plan and have cautioned that it could compromise SA’s bargaining power in the multilateral trade system and ultimately put industries and jobs at risk.

It could also strain SA’s relationship with other members of the Southern African Customs Union, if slashed duties on goods produced in these countries put pressure on their industries.

Last month, the International Trade Administration Commission (Itac), in a notice in the Government Gazette, announced the review of two chapters of the tariff customs book .

The goods listed in these chapters include a wide range of electric equipment and mechanical appliances, such as nuclear reactors, boilers, refrigerators and air conditioners.

Unsurprisingly, duties on motor vehicle parts have been excluded from the review.

The automotive sector, as a strategic industry, benefits from the controversial Motor Industry Development Programme , which the state plans to extend to 2020.

The tariff review is in stark contrast with SA’s tightening of trade rules last year, when it imposed restrictions on Chinese clothing and textiles, sparking protests from retailers.

But it echoes an agreement in principle to exempt the Gautrain — another strategic infrastructure project — from import duties on all goods needed for the construction of the railway, and concession to a condition set by world soccer’s ruling body, Fifa, to lift import duties on products and services required for the hosting of the 2010 Soccer World Cup.

Itac said the review of chapters 84 and 85 of the Customs and Excise Act was a “proactive initiative” in view of the government’s focus on an infrastructure development programme over the next four years. The review would aim to establish whether the current duties would place an unnecessary cost burden on importers, especially on those items that are not manufactured domestically. It also wanted to establish whether there was any case for maintaining tariffs or for making tariff adjustments in view of new or existing products produced domestically.

The review would be done in consultation with industry associations, to gauge effects on the various industries, an Itac official said. It is understood that the commission would consider extending the review to the rest of the tariff book, if the first phase proved successful.

But a trade specialist has questioned how the review fits in with the government’s broader industrial policy and whether it is wise for trade liberalisation to take place without a broader vision for the economy.

“We have to decide how trade policy can be used strategically to stimulate industry and jobs. We need to decide what it is we want to produce and what not, and liberalising tariffs could compromise those options going forward,” said Brendan Vickers, senior researcher on multilateral trade at the Institute for Global Dialogue.

“The strategic vision is missing from these kind of initiatives ,” he warned.

The trade and industry department has previously taken flak for an incoherent approach to policy, particularly for neglecting to consider trade policy in formulating an industrial strategy.

Vickers also questioned how the review of the tariff book would be linked with SA’s commitments to the World Trade Organisation .

SA has still to make an offer on industrial tariffs as part of the Doha negotiations. The pressure is on developing countries to reduce tariffs dramatically, in return for developed countries slashing agricultural subsidies and broadening market access to agricultural goods.



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