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The beginnings of a trade war have erupted between South Africa and the US as the Americans threaten to cancel citrus imports from South Africa if there isn’t some rapid breakthrough in allowing US chicken, pork and beef imports into the country again.
US President Barack Obama on Thursday evening issued an ultimatum to the department of trade and industry.
He instituted a 60-day notice period, after which he will revoke a part of South Africa’s eligibility for duty-free access to the US market under the African Growth and Opportunity Act (Agoa).
It would principally affect the export of oranges and mandarins to the US, which totalled about 47 500 tons, worth R374 million last year.
Other significant agricultural exports, such as macadamia nuts and wine, also qualify under Agoa.
The move comes only days after South Africa finally put a deal in writing to allow an annual quota of US chicken pieces into the country.
The US, however, wants this finalised and wants sanitary measures against other meat products lifted as well.
Trade and Industry Minister Rob Davies called a press conference at short notice on Friday to deny Obama’s claims that there had been little progress on reallowing US poultry, pork and beef into South Africa.
This relates to bans on these products due to outbreaks of avian flu and mad cow disease in the US, among other things.
According to Davies, the exact opposite is true: South Africa and the US basically just need to dot the i’s and cross the t’s on most of the disputes.
“We take the letter seriously as a warning,” he said.
The notice is also “reversible at any stage”, said Davies.
He attacked the insinuation that there was a political impasse, saying he could not interfere with the technocratic work of South Africa’s government veterinarians.
The veterinary authorities had the final say on permitting animals into South Africa, he said.
“I don’t know what avian flu looks like; I don’t pretend to be an expert on that ... those vets have got to do their due diligence and satisfy themselves that what is going to be given a certificate will mean there is not going to be a risk to the local poultry flock.”
Efforts were being made to expedite the process of clearing US chicken, he added.
As far as beef and pork were concerned, the certificates needed to appease the US had already been issued, he explained.
Davies also slated suggestions that South Africa should have simply given the US whatever it wanted in the negotiations around chicken.
“When someone says jump, you don’t just say ‘how high?’. What you do is negotiate.”
A deal to exempt 65 000 tons of US chicken pieces per year from antidumping duties was released for public comment last week.
American poultry lobbies hoped for a quota double the size of the chicken deal. Half of the import quota is also going to black-owned companies, which may result in much of it not being used at first due to the lack of black players in the poultry industry.
Davies said this issue was also being addressed and there would not be a reduction in the effective quota for US chicken because black importers could not be found.
“We’ve had to make a concession we didn’t have to make before under the previous Agoa. We’ve done it in a way that is doable, and I think that is not a record one needs to be ashamed about at all.”
The action against South Africa represents the US’s first use of the new powers written into Agoa after the 2000 act was amended and extended this year.
Among the amendments was a system for “out-of-cycle” reviews, such as the one South Africa has been subjected to. Another amendment was the sanction now being used against South Africa – revoking only part of a country’s Agoa benefit instead of the blunt instrument of totally excluding them.
The amendments make Agoa a far sharper tool for getting trade concessions out of African countries.
In hindsight, these amendments seem to have been designed specifically to allow the US to punish South Africa without destroying Agoa’s major advanced manufacturing success story – vehicle exports from South Africa.
Apart from the special “out-of-cycle” review of South Africa’s Agoa eligibility, the US last week kicked Burundi out of the scheme entirely.
The normal annual review of all African countries’ Agoa eligibility was taking place parallel to the South African review.
Burundi’s crackdown on political opposition is cited as the reason for the country’s eviction.
Swaziland was ejected in the previous review due to its suppression of trade unions.
Tit-for-tat
The vast majority of South African exports to the US do not qualify for Agoa benefits. The key sectors that do qualify are citrus fruit and cars.
Of South Africa’s roughly R70 billion in exports to the US last year, about 27% benefited from Agoa.
These exports consisted mostly of R12 billion in BMWs, but oranges and mandarins formed an important labour-intensive second stream of Agoa-related exports.
This year has seen a spectacular decline in South African imports of US animal products that are actually allowed here.
At least some of this is probably related to the strengthening dollar, which has made all US products far more expensive than they were last year.
The major group of animal products imported from the US is “guts, bladders and stomachs”, used for the casings of sausages. Imports fell from R130 million last year to only R16 million in the first three-quarters of this year.
The sanitary trade barriers on pork and beef have been around for a long time, but were expanded with a ban on chicken imports this year due to a bird flu outbreak in the US.
South African imports of US live chickens, about 91 000 in total, were worth R34 million last year. In the first three-quarters of this year, it was zero.
South African imports of R17 million in chicken offal from the US fell to R1.3 million early this year before stopping altogether.
Turkey imports likewise fell from R33 million last year to nothing this year.
These products are separate from the “bone in” chicken pieces about which there has been a long-running dispute after South Africa imposed antidumping duties more than a decade ago.
* This article was amended on December 1 2015 to reflect that wine and macadamia nuts do, in fact, fall under Agoa. The initial article reported that Agoa did not cover some of the major agricultural exports to the US, including wine and macadamia nuts.
