The Tariff and Tax Administration Bill has been hailed as a proactive measure to remedy the age-old problem of dumping in Lesotho, and protect the local market from unfair trade practices and competition from outside.
Introduced in the National Assembly by trade, industry, business development and tourism minister Mokhethi Shelile last week, the Bill provides for trade and tariff administration in matters relating to import and export control, tariff investigation and trade remedies.
It also provides for the implementation of certain aspects of the Southern African Customs Union (SACU) agreement and for an efficient and effective system for the administration of international trade.
According to experts, Lesotho’s economy is heavily reliant on agriculture, manufacturing, and services, with a significant portion of its goods and services coming from international trade. As such, the country is vulnerable to the effects of dumping, which can negatively impact local producers and industries.
A significant challenge faced by Lesotho’s local industries is the threat of unfair competition from imported goods sold at prices below their market value, a practice known as dumping.
As a result, the Bill provides for a system of trade remedies to deal with harmful imports. The objective of trade remedies is to counter the negative effects caused by the imports in the country. These remedies include anti-dumping, countervailing duties and safeguards measures.
Anti-dumping duties will be imposed where dumping is detected by an investigating authority. In this case dumping refers to a form of international price discrimination, where for example, a firm is found to be selling the same product at a lower price in an export market than in its domestic market. An anti-dumping duty is a protectionist tariff that a domestic government imposes on foreign imports that it believes are priced below fair market value.
The Bill states that it is an unfair business practice and is actionable under domestic and international law when international price discrimination causes or threatens to cause material injury to domestic manufacturer producing a product that is identical or similar to the dumped import.
With regard to countervailing measures, an action of this nature is taken to offset the benefit conferred by a subsidy on products coming in to Lesotho which have adverse effects on the relevant domestic industry.
Lesotho National Farmers Union’s programme manager, Khotso Lepheana indicated that, while they did not contribute to the creation of the Trade and Tariff Administration Bill, 2024, it addresses critical issues faced by local farmers.
Lepheana embraced the Bill’s stance against dumping, which he believes could help control the unfair pricing of Basotho potatoes compared to imported alternatives.
“Anti-dumping measures are crucial; some people claim Basotho potatoes are considered expensive due to unfair dumping practices.
“If we can control this by tracing the origin of these products and compare their local prices with international market prices, we can better assess and mitigate any negative impact on the economy.
“I view this as a significant step towards protecting local agriculture and maintaining fair pricing,” he said.
Weighing in on the hazards of dumping, the secretary general of the Lesotho Chamber of Commerce and Industry, Fako Hakane welcomed the Trade and Tariff Administration Bill, particularly its position on anti-dumping.
Hakane recalled that Botswana rejected importation of iodine-deficient salt (in 2010), which was subsequently diverted to into Lesotho (by an unnamed exporter).
He warned that such practices can potentially degrade a country’s market, treating it as a repository for inferior goods.
He underscored the importance of developing national standards, noting that Lesotho’s standards infrastructure is still under development with recent support from the African Development Bank.
“The African Development Bank informed us three months ago, of its plans to help build our standards infrastructure. This development is crucial because we currently rely heavily on standards set by South Africa and Botswana.
“Adhering to international standards is crucial for local industries and helps reduce reliance on imports. When a country has its own standards, it becomes more cost-effective to produce goods locally that meet international benchmarks.
“There is an urgent need to prevent dumping of rejected products, such as clothing and food items like soy sauce. Our market is overridden with such sub-standard products. We need to implement laws to prevent such practices and promote organic products, which we advocate for. For example, our water is renowned for being the best in the country,” Hakane noted.
Meanwhile, a National University of Lesotho international economic law expert, Dr Tsotang Tsietsi, said introducing the new trade law would fulfil Lesotho’s commitments in regional and international agreements.
Dr Tsietsi said these commitments have to be domesticated so that they can be executed within the relevant jurisdiction.
Furthermore, she said the law appears to streamline the processing of trade-related permits while safeguarding transparency and augmenting the opportunities for businesses to seek government intervention in matters that affect their viability.
“The caution would be that it is essential for the eventual implementing authorities to ensure expediency in applying this law. The regulatory environment for business should not be heavily bureaucratic as that would stifle both domestic as well as foreign investment.
“It is definitely a step in the right direction because it is filling a gap that existed in terms of addressing unfair trade practices. Both the use of dumping and illegal export subsidies, can distort trade and be detrimental to local businesses. Having laws that provide for the investigation of, and retaliation against, such practices is important for protecting domestic businesses against such practices.
“Businesses need to compete on an equal footing, without one business having unfair advantages over others due to, for example, receiving illegal subsidies. What remains to be seen, however, is whether the government will have the capacity to implement all aspects of this law.”
According to Dr Tsietsi, the conduct of such investigations is intensely complicated and requires niche expertise that many developing countries don’t have.
On the African continent there are probably only two or three countries that have such capacity, South Africa being one of them.
“Some people misconstrue what dumping means as they think that it relates to the quantity of products that are entering the market; this isn’t accurate. It’s not about the quantity of the product; it’s about the cost at which the product retails, relative to its cost in the home market. If a product retails cheaper in Lesotho than in the market where it was produced, then that is dumping.
“This can be detrimental to competing businesses because they may be unable to match this very low price and may, thus, be squeezed out of the market. In cases where dumping is predatory, the foreign business can then take advantage of the exit of domestic competing businesses and capture the market / monopolise it, and increase prices; thereby recouping any losses that it made during the dumping stage. However, not all dumping is predatory. But that is one way in which dumping can affect Lesotho,” she concluded.
The main purpose of the Trade and Tariff Administration Bill, 2024 is to regulate imports into and exports out of Lesotho.
The Bill provides for mechanisms to deal with import surges which have adverse effects on the domestic industry and the economy of Lesotho in general.
It introduces a Directorate within the ministry of trade and industry that will be responsible for, among others, consideration of applications for import and export permits, rebates and drawbacks, determination and imposition of anti-dumping and countervailing duties and imposition of safeguard measures where necessary.
