Is SA on a WTO Paper Chase?

On 9 May 2008 the government of Indonesia sent an official request for WTO dispute settlement consultations to the South African mission in Geneva. This effectively marks the first step in initiating a trade dispute against South Africa under the WTO rules in challenging South Africa’s alleged illegal imposition of antidumping duties against questionable low cost imports of A4 paper from Indonesia.
Ironically the initiation of the dispute by Indonesia was made virtually concurrent with a state visit by Indonesian President, Dr Susilo Bambang Yudhoyono, to South Africa. Discussions in Pretoria between Presidents Mbeki and Yudhoyono focused on the strengthening of bilateral relations between the two countries, and culminated in the signing of a host of texts consisting of a ‘Joint Declaration on a Strategic Partnership for a Peaceful and Prosperous Future’, a framework statement on an ‘Asia-Africa Strategic Partnership’, and memoranda of understanding on ‘Cooperative Activities in the Field of Defence’ and on ‘Cultural Cooperation’. While the countries do not (yet) have a free trade agreement in place, the diplomatic discussions none the less did include government to government undertakings to minimise obstacles to trade and to foster cooperation in the sphere of multilateral institutions, which would logically include the WTO. In this regard it is notable that both countries are members of the WTO’s G-20 negotiating group focused on the liberalisation of trade with a development slant. The two countries are also part of the so-called ‘NAMA 11’ group of developing countries in the industrial goods negotiations. A disjuncture between diplomacy and trade is highlighted by the timing of these events by the Indonesians. Trade policy is not applied in the service of wider diplomatic nuances when a trade dispute is initiated in tandem with what is purported to be a presidential goodwill mission.
The Indonesian complaint essentially states that South Africa first imposed definitive antidumping measures on imports of white A4 paper from Indonesia in May 1999. South Africa’s International Trade Administration Commission (ITAC) initiated sunset review proceedings in respect of this antidumping measure in April 2004, and in August 2005, ITAC concluded in its final determination on sunset review proceedings that the expiry of the antidumping measure was not likely to lead to the continuation or recurrence of dumping by Indonesian exporters A4 paper. However, South Africa continues to impose antidumping duties on Indonesian imports today, and consequently it has been alleged that South Africa’s failure to terminate the antidumping measure is inconsistent with its obligations under the antidumping agreement (Article 11.3) which requires Members to terminate antidumping measures not later than five years following the date of imposition unless a determination is made in a properly conducted sunset review that expiry would be likely to lead to the continuation or recurrence of dumping and injury. In this regard it is alleged that South Africa’s failure to conclude the necessary sunset review is inconsistent with its obligation to conclude sunset reviews expeditiously, which is considered to be within twelve months in the normal course of events.

This event is highly significant as South Africa has never actually had to act as a defendant in this WTO dispute tribunal, called a panel, in actual proceedings. By and large it is more favourable to bring a WTO action than to defend one, and as such South Africa will be decidedly on the back foot here, particularly because Indonesia has already been successful in litigating against Korea, a wily WTO dispute settlement operator, in the WTO also on a paper case, although with differing grounds. In the two previous instances that attacks were made on South Africa in the WTO (by Turkey on blankets and by India on pharmaceuticals) South Africa managed to settle ‘out of court’ as it where and the cases never fully materialised into a panel.

This new WTO action is related to recent domestic court proceedings where the local importer of Indonesian paper challenged the government as regards the validity of the antidumping duties on imported paper. The importer lost the action in the high court, but this ruling was set aside, with costs, on appeal where the Supreme Court of Appeal [Progress Office Machines v SARS [2007] SCA 118 (RSA)] ruled that the said antidumping duties “had no force and effect from 27th November 2003”. It is also notable from the domestic proceedings that it was clarified that WTO agreements cannot be relied upon under South African law. It is generally understood that international law does not have direct effect under the South African constitution. In this regard the effect of international treaties on municipal law is regulated by sections 231 through 233 of the Constitution, which essentially requires that any international agreement becomes law in South Africa only when it is enacted into law by national legislation. The WTO Agreement was approved by Parliament in 1995 and is thus binding on South Africa in international law but notably it has not been enacted into municipal law, and hence no rights are therefore derived from the international agreements themselves in domestic courts. The court reasoned that the passing of the International Trade Administration Act (No 71 of 2002) creating ITAC, and the promulgation of the antidumping regulations under that Act, was “indicative of an intention to give effect to the provisions of the treaties binding on the Republic in international law” but that the relevant text to be interpreted would none the less remain the South African legislation.

In our view, given this 2007 Supreme Court of Appeals ruling against SARS and ITAC domestically, there is a good chance that the South African duties will be amended in any event consequent to domestic process, and in so doing also appease the Indonesian complainants in the WTO. The matter is most likely just a reflection of domestic administrative lag in amending the antidumping duty system at the present time. It will be interesting to see what official stance South Africa takes now, especially in light of the fact that the country is becoming more ‘dispute fit’ now based upon the ongoing experience in the WTO Corn dispute where SA has aligned itself offensively on the side of Brazil and Canada against United States agricultural subsidies. In the meanwhile the ‘paper chase’ continues.