Statutory Instrument 64 of 2016 especially in relation to the doctrine of free trade and

international trade
1. Question interpretation
This question requires one to explore effects of Statutory Instrument 64 of 2016 especially in
relation to the doctrine of free trade and international trade. Therefore in addressing the
rudiments of this question this article will explore the purpose of SI 64 of 2016 examining
whether Zimbabwe acted within the confines of the provisions of the General Agreement on
Tariffs and Trade (GATT) and the World Trade Organisation (WTO) rules in implementing
protectionism through SI 64 of 2016. It will also be discussed as to how other countries reacted
to the SI 64 of 2016 and evaluate whether it was a justified move of protectionism.

2. Introduction
The government of Zimbabwe promulgated Statutory Instrument 64 of 2016 on 1 July 2016.
The main objective of the instrument, according to the government was to protect domestic
firms from unfair competition from foreign firms and therefore boost production by local
firms.1 However, Zimbabwe’s neighbours especially South Africa and Zambia claimed that the
instrument adversely affected their economies and violated the Southern Africa Development
Community Protocol on Trade which seeks to promote free trade among member countries. 2
The Statutory Instrument 64 of 2016 had created ‘tension’ in the Southern Africa Development
Community region with some exporters in countries like Zambia openly requesting their
governments to retaliate by restricting imports from Zimbabwe. 3 Some firms in the
neighbouring countries had scaled down operations or closed down while others such as
Willowton of South Africa had established a plant in Zimbabwe.4

3. The rationale of SI 64 of 2016

The rationale of the instrument is to protect local industries with capacity to satisfy domestic
demand as well as to solve foreign currency problems caused by externalisation of foreign
currency.5 The government has indicated that this non-tariff barrier is required to stimulate
domestic production, through increasing capacity utilisation whilst also serving as a demand
management measure to limit the excessive use of scarce foreign currency for imports.6 The

1
Influx of cheap imports hurt Zimbabwe firms, Newsday, 28 July, 2016
2
South Africa wants answers on Zimbabwe trade restrictions by end August, Enginnering News, 4 August, 2016
3
Imports ban isolates Zimbabwe. Daily News On Sunday, 10 July, 2016,
4
Ibid (n 4 above)
5
SI 64.2016 is not an import ban, The Sunday Mail, 10 July, 2016
6
ibid

1
measure also recognises the need to encourage some measure of import substitution,
particularly for those commodities that the country has capacity to produce. This is expected
to contain import demand, leading to a reduction in the trade deficit.

It is important for one to understand that a number of countries have used different forms of
non-tariff barriers (NTBs) to protect their industries whenever they feel that their industries are
under severe threat from imports. Above all, the protection of infant industries is an absolute
necessity in developing countries. This argument for protection is of far greater importance in
a country like Zimbabwe, which is rich in natural resources and, therefore, possesses vast
potentialities for industrial growth. But owing to competition from other countries, industries
could not either be started or when started could not make rapid progress. Therefore, the
affording of a protective umbrella to infant industries assumes a special significance in such a
country.

4. Zimbabwe, GATT 1994 and WTO Membership

In order to understand the possibly far reaching consequences of SI 64/2016, this essay will
first appreciate Zimbabwe’s present commitments at the international level. Zimbabwe has
been a member of the 165 member World Trade Organisation (WTO) since 1995. The WTO
is a key intergovernmental organisation whose main purpose is to maintain orderly
international commerce through trade by negotiating and maintaining a variety of trade
agreements.

The WTO also has a highly utilized neutral dispute settlement system which member countries
fall back on when things go wrong as they do in global trade. By virtue of its WTO membership,
Zimbabwe is also party to one of the most important multilateral trade agreements within the
WTO namely the General Agreement on Tariffs and Trade (GATT) which it first became a
contracting party as Rhodesia on 11 July 1948. It later signed the updated GATT commonly
known as GATT 1994 in 1994 as an independent country. SI 64/2016 is targeted at imported
goods only and therefore excludes services. GATT has been the key pillar governing the trade
of goods internationally among contracting parties since the late 40s and after its update in
1994. Zimbabwe being a member of the WTO, WTO agreements remain the context in which
to examine the credibility of government’s economic actions..

5. SI 64/2016 and the Bilateral, Regional and Multilateral Trade Agreements

2
The import restriction under the SI 64/2016 dampens the spirit of Zimbabwe’s commitment to
free trade within the region under Southern African Development Community (SADC)7 as well
as the Common Market for East and Southern Africa (COMESA)8 treaties. On the one hand,
the SADC protocol on Trade was signed and adopted by SADC member states in 1996 and
implemented in 2000. It facilitates the free movement of goods and services across the region,
with 12 members of the region, including Zimbabwe, fully participating. By placing restrictions
and bans on some imports, Zimbabwe is now reneging on its commitments under SADC and
is likely to court a backlash for that. The first part of the Trade Protocol is devoted to trade in
goods and the removal of trade barriers including quantitative restrictions. Subject to a few
exceptions and the national treatment rule, Article 7 of the Trade Protocol states that ‘Member
States Shall not apply any new quantitative restrictions and shall in accordance with Article 3,
phase out the existing restrictions on the import of goods originating in Member States, except
where otherwise provided for in this Protocol’9. Therefore, under the SADC Trade Protocol, it
is retrogressive for a country to introduce new quantitative import restrictions.

On the other hand, Zimbabwe has been active in COMESA and has been participating in the
COMESA Free Trade Area since its inception in 2000 and therefore, as per the Treaty, the
country has liberalised trade by removing tariff and non-tariff barriers including quota
restrictions, except if allowed by Council. The fact that the import licences and permits may
take long to be issued acts as a non-tariff barrier to trade, especially in a Free Trade Area
environment. Article 4510 of the Treaty, in part, says, “Non-tariff barriers including quantitative
or like restrictions or prohibitions and administrative obstacles to trade among the Member
States shall be removed". Justifiable grounds for quantitative and other restrictions to trade are
provided for in the Treaty as follows; Balance of payments difficulties, 11 security and other
restrictions,12 to protect an infant industry,13 safeguard clause where there is a surge in imports
that injure or threat to injure a domestic industry,14 anti-dumping, 15 Countervailing duties,16

7
SADC Protocol on Trade (2005)
8
COMESA 33 ILM 1067 (1994)
9
ibid
10
ibid
11
Article 49 (5) COMESA
12
Article 50 COMESA
13
Article 49 (2) COMESA
14
Article 61 COMESA
15
Article 51 COMESA
16
Article 52 COMESA

3
In all these cases proper notification and justification should be made to the Secretariat and
other Member States before the measure is put in place. However, as of now, the Secretariat
has neither been notified of this Statutory Instrument nor the justification for it.

Furthermore, Zimbabwe is signatory to a number of bilateral trade agreements with countries

such as Zambia, Botswana, Namibia, Malawi, South Africa and Mozambique. The country
ratified its bilateral trade agreement with Botswana in 1988 which allows for reciprocal duty
free trade on all products grown, wholly produced, or manufactured wholly or partly from
imported inputs subject to a 25 percent local content requirement.

6. SI 64/2016 and international trade

In terms of section 327 of the Zimbabwean Constitution,17 Zimbabwe is not bound by an
international treaty, which has not been concluded or executed by the President until it has been
approved by Parliament. Despite the existence of such a provision in the Constitution,
Zimbabwe has international obligations, which it should abide to by virtue of it having signed
those treaties. Therefore it cannot abandon its obligations on the basis of this section.

In terms of Article XI:I General Agreement on Tariffs and Trade 1994 18, no prohibitions or
restrictions other than duties, taxes or other charges, whether made effective through quotas,
import or export licences or other measures, shall be instituted or maintained by any contracting
party on the importation of any product of the territory of any other contracting party or on the
exportation or sale for export of any product destined for the territory of any other contracting
party. The same provision provides various exceptions to that rule. For instance, it does not
apply on export prohibitions or restrictions temporarily applied to prevent or relieve critical
shortages of foodstuffs or other products essential to the exporting contracting party.

The introduction of the import ban, as has been argued by the government of Zimbabwe, as
meant to protect the local industry. This reason does not conform to any of the exceptions
provided for under Article XI:I for the reason that currently the bulk of the Zimbabwean
industries are not operational, hence, low productivity. Zimbabwe cannot, therefore, hide
behind “protection of domestic industry”, where evidence has it that Zimbabwe’s productivity
is very low. It is, therefore, safe to submit that the Zimbabwean SI 64/2016 violates Article
XI:I of the GATT 1994.

17
Constitution Of Zimbabwe Amendment (No. 20) Act 2013
18
GATT 1994:General Agreement on Tariffs and Trade 1994, Apr. 15, 1994, Marrakesh Agreement Establishing
the World Trade Organization, Annex 1A, 1867 U.N.T.S. 187, 33 I.L.M. 1153 (1994) [hereinafter GATT 1994].

4
In Brazil – Measures Affecting Imports Of Retreaded Tyres19 the panel stated that “there is no
ambiguity as to what “prohibition” on importation means. Members shall not forbid the
importation of any product of any other member into the markets”. In that case, the panel found
that Brazilian measures prohibiting the importation of used consumer goods and the
importation of re-treaded tyres constituted import prohibition inconsistent with Article XI:I.

Further, the Decision of Notification Procedure for Quantification Restrictions adopted by the
Council for Trade in Goods on December 1, 1995 requires members to make complete
notifications of the quantitative restrictions. To notify changes to their quantitative restrictions
and when changes occur. As required by the decision, the secretariat publishes periodically a
document listing the members having made a notification. The secretariat makes the database
available to members. The notifications are available for consultation in the secretariat. In the
Zimbabwean case, a perusal of the WTO secretariat database confirms that no such notification
was submitted by Zimbabwe. In introducing SI64/2016, Zimbabwe acted in clear disregard of
the international trade laws.

With Statutory Instrument 64/2016 being inconsistent with international trade law, particularly
Article XI:I, the General Agreement on Trade and Tariff, the Zimbabwean government should
expect sanctions from the international community, particularly from directly affected
countries such as South Africa and Mozambique

The WTO, COMESA, SADC and other regional trade agreements to which Zimbabwe is a
signatory provides some exceptional cases when the import restrictions may be acceptable but
provided that certain procedures and measures should have been put in place. Under these
agreements, members are justified to take measures to protect domestic industries from serious
injury caused by increased imports of certain goods. In addition, the action taken by the
Zimbabwean Government through SI 64/2016 confirms that the Government had safeguards
in mind.

Safeguard measures may also be seen as a safety valve for SADC governments to dilute
protectionist pressures from local constituents. Safeguard measures apply to products in a non-
discriminatory manner and regardless of the origin of the products within SADC.20 A member

19
Appellate body Report, Brazil – Measures Affecting Imports of Retreaded Tyres, WT/DS332/AB/R , circulated
to WTO Members 3 December 2007
20
Behar A, Edwards L (2011), How integrated is SADC? Trends in intra-regional and extra-regional trade flows
and policy, World Bank Policy Research Working Paper Series, World Bank

5
state may apply a safeguard measure only insofar and for so long as necessary to prevent or
remedy serious injury and to ease adjustment. In any event, a safeguard measure must not last
more than eight years, which should incidentally induce greater care in the state applying the
measure.

Furthermore, since independence in 1980 Zimbabwe has not instituted any anti-dumping
investigations nor opened any known anti-dumping cases in respect of the products in question
against any country at the WTO which is a common practice when dumping occurs. This is
despite the huge influx of cheap imports from Asia over the years. This leaves Zimbabwe’s SI
64/2016 remedy to be a case of safeguards. The logic behind measures such as safeguards is
that a country with a damaged industry, apart from local job losses, also loses its capacity to
reciprocally trade with others and therefore loses its standing in international commerce. If this
is allowed to happen at a large enough scale, the international system of trade itself which
supports modern societies’, prosperity, peace and security becomes dangerously threatened.

The Agreement on Safeguards authorizes importing WTO Member countries to restrict imports
for temporary periods if, after investigations carried out by the competent authorities it is
established that;

i. import volumes are increasing in phenomenal quantities (either absolute or in

relation to domestic production) as to cause serious injury to the domestic industry
that produces similar or directly competing products and,
ii. The increased volume of imports should be the result of unforeseen developments
and the effect of the obligations of the member in GATT 1994.

The Agreement states that the objective of the government in imposing safeguard measures
should be to promote “structural adjustment” and to “enhance rather than limit competition in
international markets”21. To this end it provides that such safeguard measures should be applied
only for temporary periods to enable the affected industry to take steps to adjust itself to the
increased competition that will follow the removal of those measures. Structural adjustment
could take the form of the adoption of improved technology or modification of the production
processes. Discussions with the Ministry officials indicated that the measures will provide
relief to the targeted industries for 3 years beyond which the sectors should revert back to

21
Fouda R.A.N (2012) Protectionism and Free Trade: A Country‘s Glory or Doom? International Journal of
Trade, Economics and Finance, Vol. 3,No. 5, October 2012

6
normally and are expected to be competitive. The 3 year horizon is also expected to help re-
build the domestic industry. In this regard, however, SI 64/2016 itself does not state the time
period the instrument will be in place.

Furthermore, when the policy was announced, Government should have outlined a clear plan
on how to revive the local industry in line with the National Industry and Trade Policy.22 In
this case they should have anchored SI 64/2016 within the current Industry and Trade Policy
under review, 2012-2016. Under WTO disciplines, the maximum safeguard measures can go
before a permissible extension preceded by a fresh thorough investigation is four years. The
period for the duration of the agreement may be extended provided that the competent
authorities of the importing Member have determined, in conformity with the procedures set
out in Articles 2, 3, 4 and 5, that the safeguard measure continues to be necessary to prevent or
remedy serious injury and that there is evidence that the industry is adjusting, and provided that
the pertinent provisions of Articles 8 and 12 are observed. The total period of application of a
safeguard measure including the period of application of any provisional measure, the period
of initial application and any extension thereof, shall not exceed eight years.

In addition, Article 3 of the SADC Protocol on trade states that consultations must first be made
with the Committee of Trade Ministers in SADC before looking any adjustments to import
policies. It also lists conditions and processes in which a member state must take in changing
those regulations.

Under WTO rules, Zimbabwe was expected to carry out a thorough investigation that links the
targeted imports to industry injury prior to the implementation of the measures. A causal link
is crucial. If it cannot be established or if there are other factors involved then safeguards cannot
be justified. There is debate as to what has caused injury to our industry. Is it imports alone or
a combination of other internal factors? Many agree that a cocktail of issues some of them not
related at all to imports have brought our industry to its knees. These include: a. Use of the US
dollar which militates against export competitiveness of local manufactures b. Drought
especially considering that the country’s agricultural production is not dependable as it is
largely based on rain fed farming c. Liquidity and cash shortages, d. reduced supplies of locally
supplied inputs, e. the losses of skilled personnel and, f. weak commodity prices for many of
its exports.

22
Government of Zimbabwe (2012), ‘National Trade Policy document 2012-2016’ Harare Zimbabwe

7
All of these problems are made more serious by the low levels of efficiency among the suppliers
of electricity, water, telecommunications and municipal services and by the large numbers of
people who have to depend on the earnings of the very few in steady employment.

Safeguard measures require that the WTO “member imposing them must pay compensation to
the members whose trade is affected”. Compensation has previously taken the form of
reductions of tariff duties on certain products from the affected countries. Compensation
payment also serves to make the cost of safeguards steep so that they are only used when it is
really necessary and for a just and proven cause. This also shows that safeguards are an
exception and not the norm in international trade. As to whether Zimbabwe will actually get
around compensating anyone is another matter, apart from damaging our international
reputation in trading circles, it provides a legal basis for those affected to take it up using the
Dispute Settlement System of the WTO, or worse still, retaliation. The WTO provisions require
that affected trading partners be compensated for their losses. South Africa as the major trading
partner for Zimbabwe is likely to be amongst the biggest casualties of the SI 64/2016. In that
regard, South Africa has a right to demand compensation from Zimbabwe for its losses brought
about by SI 64/2016. Although South Africa have not yet indicated that it might seek
compensation from Zimbabwe, monetary compensation might be out of the question because
of Zimbabwe’s financial position but more importantly due to the complex nature of arriving
at a fair amount, compensation can be done by way of reduced tariffs applied on other imports
coming from affected countries.

7. Conclusion
Government has taken a sector approach towards protection of the domestic industry and hence
the SI 64/2016 is expected to shield local industry from competition. However, immediate
prospects of the hoped-for domestically-driven recovery remain affected by a number of supply
side bottlenecks that have continued to haunt the local industry. Therefore the impact of the
instrument on triggering recovery in the manufacturing sector will depend on a number of
factors key of which should be a radical shift in the competitiveness of local firms, their
productivity, head room to upscale capacity under the current liquidity constraints, and industry
retooling challenges. Thus, even though in the short term the SI alone may not have the desired
long term impact of developing local industry unless complemented by other comprehensive
ancillary measures that improve the availability of affordable working capital and plant
upgrade as well as retooling initiatives. Finally, if the SI is to achieve its intended objectives
boosting local production, it should be reviewed in such a manner that will ensure that it does

8
not bar the importation of raw materials. In such as case, the main target should be on
controlling the importation of finished goods.

The study recommended that the government of Zimbabwe should continue to engage
neighbouring countries and Southern Africa Development Community as well as respect the
outcome of any negotiations to restore trust and confidence in its trading partners. The
government should also strive to strike a balance between Statutory Instrument 64 of 2016 and
other policies such as Industry and Trade Policy and investment promotion policies; and avoid
protecting inefficient industries that continued to underutilize capacity and resources. Thus, the
government of Zimbabwe should institute policies that seek to revamp the whole supply chain
for the benefit of Zimbabwe and its neighbours.

9
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