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What has happened since customs duties on 124 vesture tariff lines were increased in 2009?

What has happened since customs duties on 124 clothing tariff lines were increased in 2009?

20 Feb 2022

Willemien Viljoen, tralac Researcher, discusses what has happened since community duties on 124 wearable tariff lines were increased in 2009

The vesture and cloth industry has a long history in South Africa and is nonetheless a very important source of employment, especially for women and in poorer communities. The industry is geographically bound to specific provinces, including the Western Cape, KwaZulu-Natal, the Gratuitous State and Gauteng. In many rural areas the clothing and cloth sector is often the just source of formal employment. Since about 2002 the Rand appreciated substantially and South African exports became less competitive in the global market. Coupled with the trade liberalisation, in terms of South Africa'due south WTO offering, the clothing and textile manufacture has experienced sustained import competition due by and large from Asian imports. In order to try and remedy large-calibration manufacturing plant closures and employment losses in the industry the Southern Africa Article of clothing and Cloth Workers Union (SACTWU) applied for an increment in the import tariffs of 124 clothing tariff lines to the WTO bound rates of 45 per centum in 2009. These clothing tariff lines are classified under Chapter 61 and 62 of the S African Tariff Book and include various clothing items, including men's woven and knitted shirts, jackets and trousers; babies' garments; and women's woven and knitted jackets, skirts, dresses and trousers. Although the retailers objected to an increase in import duties the International Merchandise Assistants Commission (ITAC) granted the application and general customs duties on 121 vesture tariff lines were increased from xl percent to 45 percent, while the general customs duties on three tariff lines (hosiery) was increased from 20 percent to 45 percent.

In its awarding SACTWU stated iii reasons for the application: at that place has been a significant increase in imports under these 124 tariff lines flowing into South Africa; marketplace disruptions in the SACU industry which have resulted in factory closures and retrenchments warranted increased protection for the domestic industry; and increased tariffs will provide both relief and prove increased confidence in the industry. The retail industry objected to the application on the following grounds: the loss of business concern in the manufacturing industry can not only be attributed to cost competition, simply also inefficiency in the local manufacture; increased duties will have an inflationary effect impacting the ability of consumers to buy clothing at competitive prices; and increased duties volition have a punitive effect on the rail sector and the end consumers. In its decision the Committee found the declining rate of investment and employment in the clothing sector coupled with increased imports a disturbing trend. The Commission decided that an increase in community duties volition enable manufacturers to protect existing jobs, increase market penetration and price competition and growth the domestic manufacturing sector in the export market. However, the question of whether the increase in these customs duties have been successful in reaching its goal of decreased imports and increased domestic production, sales and exports withal remain.

Import and export information sourced from the World Merchandise Atlas (2013) and product and sales data sourced from Statistics South Africa (2013) testify the following patterns in the clothing industry betwixt 2009 and 2022:

  • Over the time menstruum imports of the 124 habiliment tariff lines increased past fifteen percent, from approximately US$ 834 meg in 2009 to approximately US$ 1.2 billion in 2022.

  • The top five importing countries were Cathay, Mauritius, India, Madagascar and Bangladesh, bookkeeping for 89 percentage of the total imports of these habiliment articles into South Africa over the time period.

  • Mainland china mainly exported men's, boy's, women'due south and girl's cotton trousers; knitted sweaters and pullovers; cotton and knitted t-shirts; and knitted babies' garments to South Africa between 2009 and 2022.

  • South Africa'southward exports of these wear tariff lines increased by 6 percent, from approximately US$ 71 million in 2009 to approximately United states$ 84 million in 2022.

  • These article of clothing articles were mainly exported to African countries, including Zambia, Mozambique and Zimbabwe.

  • The production index of the physical volume of production (base twelvemonth is 2005) show there has been a significant subtract in the volume of production of knitted and crocheted manufactures and wearing apparel in South Africa. The index decreased from an boilerplate of 108.11 in 2009 to an average of 79.82 in 2022.

  • The sales of knitted and crocheted articles and wearing wearing apparel also declined over the time period. Bodily value of sales declined by 3 percent, from approximately United states of america$ 18 billion in 2009 to approximately U.s.a.$ sixteen billion in 2022.

Although there has not been a pregnant lapse of fourth dimension since the increase important tariffs the data gives the short term response of imports, exports, and product to the modify in import duties in November 2009. Immediately subsequently the increase in tariffs there was an initial decrease in exports, product and sales.  Yet, exports recovered past the stop of 2022, while production and sales are still meaning lower than pre-2009 levels. SACTWU has also recently indicated that employment in the clothing, textiles and leather sector seems to exist more stable over the final 2 years. Nonetheless, i of the main objectives of the increase in import duties, to deter lower priced imports mainly from Asia, has not been achieved.

Tell us what you lot think.

Sources:

World Trade Atlas (www.gtis.com/gta);

Statistics S Africa (www.statssa.gov.za);

ITAC (www.itac.org.za)