Page 12 - AMIE Newsletter August 2024
P. 12
THE COST OF DUTIES
XA Global Trade Advisors released their Import Duty Investigation Report No. 5 on 27th of August 2024.
To access the complete report, click here. Below is the introduction to the report, curtesy of XA Global Trade Advisors.
Professors Dani Rodrick and Joseph Stiglitz conclude their January 2024 paper, “A New Growth Strategy for Developing Nations”, with
“All government policies, either by commission or omission, shape the economy and affect economic growth. In that sense, every country has an industrial policy — it’s just that some don’t know it. An awareness of how the rules of the game, public expenditures and taxes, and explicit industrial policies shape the economy is not only important to prevent capture, but also to promote sustainable and inclusive growth.”
The same paper insists that
government learning has to be systematised and reflected in subsequent actions and decisions. This requires an explicit effort to monitor and evaluate the outcomes of industrial policy decisions. Many of these decisions will inevitably lead to sub-optimal outcomes and mistakes. What matters for the success of industrial policies is not the ability to “pick winners,” (or even identify projects with large externalities) but the ability
to “let the losers go,” a less difficult but still demanding requirement.
Trade policy, in South Africa, is a subset of industrial policy. Much of our trade policy is implemented by way of import duty changes (tariff policy), which is what this report is all about. Whether you think import replacement and by extension duty changes is a good or bad idea, it matters that the process is predictable. Over the last few years, this process has become incredibly unpredictable, making the tariff instruments less effective than they could be.
Understanding the tariff instruments:
Tariffs can be changed either by increasing the import duties, reducing the duty levels or creating a rebate of duty.
A rebate is a conditional suspension of the duties on a given tariff code. When this condition is connected to using the imported raw material in the manufacture of a specific product, this is known as a manufacturing rebate. When the rebate is given for a period while the local industry can’t supply, this is known as a temporary rebate. Temporary rebates always require a permit before being accessed, while manufacturing rebates sometimes require a permit and other times can be used if the conditions are complied with.
ITAC’s guide to Tariff Investigations notes:
As a general guideline, tariffs on upstream industries will be reviewed to lower input costs into labour-intensive employment creating downstream industries. Tariffs on downstream industries, in light of the imperative of job creation and to ensure long-term sustainability and global competitiveness, could be raised judiciously on a case-by-case approach. Such tariff investigations will take into account the specific circumstances of the sector involved.
To read the full report click here.
PAGE 11