Johannesburg - China was poised to be the workshop of the world and tariff protectionism against it would be to the detriment of local industries, former finance minister Trevor Manuel said, encouraging local industry to be more competitive in areas where it was strong instead of trying to compete.
Speaking in Sandton at investment company Sanlam’s i3 Summit, Manuel said tariff protection was a double-edged sword in that it also served to restrict the country’s exports.
Transparency
“The problem is that unless we have open and transparent measures of why certain industries are being protected, we will cause the collapse of these industries,” Manuel said on the sidelines of the meeting at the Sandton Convention Centre last week.
Steel manufacturing companies, including Arcelor Mittal SA, Evraz Highveld Steel, Scaw Metals and Hulamin among others, are in a state of limbo as they battle against the flooding of the local market with cheap imports, particularly from China.
Evraz Highveld Steel, in particular, is in the process of retrenching more than 1 000 workers and is under temporary closure.
The local ferrochrome industry employs about 30 000 people, contributes about 2 percent to gross domestic product, contributes about R80 billion to the trade balance and makes a direct contribution to the steel, construction and automotive sectors.
According to the International Trade Administration Commission (Itac), the number of determinations for import restrictions has risen from about zero before the 2008 world economic meltdown, with more than nine in the current year, to a total of 39 determinations.
Pending determinations include that of the Southern Africa Coil Coaters Association (Sacca), which represents: ArcelorMittal SA and Safal Steel, which are seeking an increase from free of duty to 10 percent ad valorem for zinc coated, alu-zinc coated and painted flat steel; Hulamin Operations, which has applied for an increase from free of duty to the World Trade Organisation bound rate of 15 percent ad valorem for aluminium rolled products; Hulamin Extrusions, which is seeking an increase from 5 percent ad valorem to 15 percent for aluminium extrusions; as well as Hall Longmore, which has applied for an increase from free of duty to 15 percent ad valorem for large bore steel pipes.
No silver bullet
Manuel said tariff protection was not a silver bullet against cheap imports. He cited the case of the poultry industry, which had put up a heavy fight against chicken imports from Brazil two years ago but had to let go of these gains for the country to be re-admitted into the Africa Growth and Opportunity Act (Agoa).
“If you think the only thing that matters is tariff protection then you aren’t actually taking an approach of competitiveness,” Manuel said.
He argued that consumers did not benefit from the advantage gained by local producers.
Steel and Engineering Federation of South Africa economist Henk Langenhoven conceded that there did not seem to be a feasible solution, but he was concerned the industry “would be reduced to a hamburger stand”.
BUSINESS REPORT