SA scraps steel import tariffs
16 November 2007South Africa has scrapped import tariffs on carbon- and stainless-steel products in a bid to make them more affordable, enabling local steel users to reduce costs while promoting competition among upstream steel industries.
Speaking last week, Trade and Industry Minister Mandisi Mpahlwa said the move to abolish tariffs on steel imports comes after widespread complaints of high prices for South African-sourced steel, and concerns that downstream industries would continue to suffer.
The move comes amidst a debate among economic strategists - in context of both the South African domestic economy and in terms of World Trade Organisation negotiations - as to the merits or otherwise of a comprehensive tariff reform.
One view is that the removal of tariffs can make local firms more competitive by subjecting them to the pressure of cheaper imports.
Mpahlwa added that while a review of "intermediate" tariffs in the paper and pulp, the chemical and the aluminium sectors had begun, his department was not considering a blanket removal, describing tariffs as an "important instrument" of industrial policy.
"Your average tariff has actually come down to about 8.2%, from about 23% and that about 54% of those tariffs are at zero currently," Mpahlwa pointed out.
He added that tariffs were also being "phased down" as part of a trade agreement between South Africa and the European Union (EU), which will ensure that 86% of imports from the EU will be at zero tariff levels by 2012, while 94% of South Africa's exports to the EU would have zero tariffs by the same period.
Simplification and reform
In late October, Finance Minister Trevor Manuel also called for the "simplification and reform of tariffs" to ensure that competition is fostered during his Medium Term Budget Policy Statement (MBPS).
In the MBPS, released on 30 October, the National Treasury points out that economic research stresses the long-term importance of developing a diversified, export-oriented manufacturing base.
"This requires competitive input costs, markets that are open to foreign competition to create innovation incentives and addressing market failures where they occur," the Treasury states.
The Treasury has leant toward the abolition of tariffs, arguing that incentives result in "higher levels of productivity, innovation and reduced unit costs will be favoured, with the aim of encouraging businesses to boost exports in highly competitive global markets".
"Some net economic gains could be achieved through further tariff reduction and simplification that promotes innovation in production and market strategy," the Treasury adds.
The Treasury further pointed out that while tariffs had remained high enough in the clothing and textiles sector to maintain producer profitability, little new investment had been seen in the sector and employment levels had not increased.
Several factors at play
Speaking on the reasons for the South African manufacturing industry not reaching full potential, Mpahlwa there were several factors at play, such as infrastructure and logistics, as well as internally generated factors such as monopoly pricing for industrial inputs - as has been largely the case with steel.
Another factor was a competition environment that has not always been optimal, enabling certain players to dominate their markets, though the government is currently addressing this problem through introducing amendments to the legislation on competition.
"In the South African context, competitiveness is about all of these things, and not simply so-called tariff barriers," Mpahlwa said. "Our own stance is not a stance of protectionism, it is simply a more nuanced approach… that sees a role for addressing the matters of tariffs in relation to the different sectors, and you will not have a blanket approach that applies equally to all sectors."
Source: BuaNews
