Finally, a challenge at the WTO for Trump’s tariffs
In a significant development for international trade, Brazil has formally requested consultations with the United States through the World Trade Organization (WTO). This action initiates a dispute settlement process against a series of US tariff measures that Brazil claims are inconsistent with US obligations under the WTO goods agreement, the General Agreement on Tariffs and Trade (GATT 1994). The GATT regulates trade in goods.
The dispute is about what the US calls its “Fair and Reciprocal Plan” (FRP). This plan, developed after a Presidential Memorandum in February 2025, aims to counter “non-reciprocal trading arrangements” with tariffs. On 2 April 2025, Executive Order 14257 declared a national emergency due to US trade deficits and imposed a 10% ad valorem duty effective from 5 April 2025 on all imports from trading partners, including Brazil.
However, the situation escalated further in July 2025. On 9 July, President Trump informed Brazil of an upcoming 50% import duty on all Brazilian products, citing concerns seemingly unrelated to trade, such as the trial of former President Jair Bolsonaro and alleged “attacks” on free elections and free speech rights of Americans, as exemplified by Brazil’s Federal Supreme Court orders against US social media companies. This was followed by a 30 July Executive Order that imposed an additional 40% ad valorem duty on certain Brazilian goods, bringing the total duty to 50%.
Brazil’s complaint alleges that these US actions violate several key WTO rules:
- Most-Favoured-Nation Treatment (GATT Article I:1): By exempting some trading partners from additional tariffs while imposing them on Brazilian products, the US is failing to provide equal treatment.
- Bound Tariff Rates (GATT Article II:1(b)): The US is imposing duties that exceed the maximum rates it committed to in its WTO schedule.
- Dispute Settlement Understanding Rules (Articles 23.1 and 23.2(a)): The US is seeking to resolve a trade dispute through unilateral tariffs instead of following the WTO’s dispute settlement procedures.
Brazil’s request for consultations is the first step in the WTO dispute process, with both parties expected to seek a mutually convenient date to begin discussions.
The bigger underlying issue seems to be the US’ push towards self-help, replacing the rules-based equality and free trade framework that the WTO created over decades time. This poses an existential crisis coupled with the US’ fatal blow to the adjudicative arm of the WTO, which cannot presently hear appeals. This effectively renders WTO enforcement impossible. Brazil’s request for consultations to the WTO seeks to shift the dispute from the chaos of geopolitical politics to a rules-based forum. I doubt Brazil believes this will change the US approach, but in principle, a victory in this regard, would reiterate the importance of a principled framework for equality and free trade that has served the WTO well, until now of course.
South Africa’s response to the US’ unilateral tariffs – Draft Block Exemption for to Promote South African Exports published for comment
On 12 August 2025, the Minister of Trade, Industry and Competition, Minister Tau, published a draft of the Block Exemption for the Promotion of Exports, 2025. This significant notice invites public comments on proposed regulations that aim to exempt specific categories of agreements and practices from certain provisions of the Competition Act.
The primary objective is to mitigate the economic impact of increased US tariffs and bolster the resilience and growth of South African exports. This is done by exempting the qualifying entities from violating the cartel and vertically restrictive practices provisions of the Competition Act.
So what do you have to know?
The exemption outlines specific areas where firms can collaborate without violating the Competition Act. These exempted activities are focused on enhancing the competitiveness of South African goods in export markets. The key categories of agreements and practices include:
- Economies of Scale and Efficiency: Firms can coordinate to achieve greater efficiencies and economies of scale, thereby improving the competitiveness of their export products.
- Cost Sharing: The regulations permit coordination on sharing or offsetting landed costs, as well as the costs associated with shipment, storage, freight, insurance, and other logistics in export markets.
- Infrastructure and Information: Collaboration is allowed for the joint financing and development of export-related infrastructure, both within South Africa and at transit and destination points. Furthermore, firms can coordinate on funding and sharing market information, including details on import and product regulations in the export market.
- Marketing and Compliance: The draft regulations facilitate collective marketing of South African goods as a unified brand and joint negotiations on export programs, quality specifications, and standards.
Exclusions and Regulatory Requirements
It is crucial to note that the exemption is not universal. Some conduct is still not allowed. In particular, the exemption does not cover market allocation of goods and services, collusive tendering, and resale price maintenance for goods sold to end customers or consumers. Merger transactions are also not covered by this exemption. This certainly closes the door to this pervasive behaviour that distorts the market and bakes inefficiencies that are harmful to consumer welfare and innovation.
Firms seeking to engage in these exempted activities must first obtain written confirmation from the Competition Commission, the so-called ‘in-scope confirmation’. This request must include details such as the parties involved, the terms of the agreement, and the implementation timeline. The Commission is required to provide a decision within 30 business days, with a possible extension of another 30 business days if it has good cause to do so. If a decision is not made within the specified timeframes, the agreement is considered confirmed. This confirmation can be revoked if for instance, the participants breach the bounds of the exemption, or it was granted based on false information or the reason for the confirmation no longer exist.
Inclusivity
A key feature of the draft is its emphasis on inclusivity. It mandates that firms owned and controlled by Historically Disadvantaged Persons (HDPs) and Small, Micro, and Medium-sized Enterprises (SMMEs) must be allowed to participate in these agreements and related negotiations. This provision aims to ensure that the benefits of the exemption are extended to a broad range of businesses.
Passive Monitoring
Firms that participate in these agreements are also subject to monitoring requirements. They must notify both the Competition Commission and the Department of Trade, Industry and Competition (the DTIC) within seven business days of implementation. Furthermore, they are required to keep accurate written records of meetings, correspondence, and the exchange of competitively sensitive information. The Commission reserves the right to request these records at any time.
The exemption can be expanded or reduced by the Minister, after consulting the Commission by Notice in the Government Gazette.
What to make of these proposed regulations
A few thoughts on these proposed exemptions. They do not have the customary independent facilitator to monitor the exchange of competitive information. The industry players are essentially policing themselves. The Commission presumably counters this problem by having a passive mechanism that allows requesting the written records of such meetings. This, of course, is subject to the actual request being made and is thus a weak mechanism. They are trusted to record faithfully these deliberations. It would be in the public interest if such records could be made available in a non-confidential version to the public upon request.
The short turnaround for comments is also a cause for concern since industry players normally get 30 days to comment on trade instruments. It is an urgent situation, but the proposed length of the measure is 5 years, so more time must be given to fully consider the economic implications of such a drastic measure. It is unclear why this 5 year period has been chosen. There needs to be an explanation as to why the exemption would last this long. A better approach would be that they last for a year at a time, and then they get reviewed to assess if the injury persists.
Furthermore, there needs to be an explanation for the areas of collaboration that have been chosen for exemption. What is the data and rationale for these areas of collaboration? This would aid the meaningful consultation of the process.
Finally, the exemptions should also allow for comments from interested parties whenever the exemption is expanded or reduced by the Minister. The exemption at present only requires the Minister to consult the Commission. The best placed people to comment and assist the Minister are the interested and affected parties together with the Commission. The same goes for the extension of these regulations for a further period by the Minister, which presently only requires consulting the Commission. Public participation is crucial to this economic situation.
These regulations, officially named the Block Exemption for the Promotion of Exports, 2025, will come into effect upon publication in the Government Gazette and will endure for a period of five years. Interested parties have a period of 15 business days from the publication of the notice to submit their comments (up to 2 August 2025).