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Unpacking why SA could lose R23.4bn of US exports

Oct 01 2015 10:51
Rene Vollgraaff and Tshepiso Mokhema

Johannesburg - South Africa is fighting to retain duty-free access for exports to the US worth as much as R23.4bn a year in a dispute that pits farmers in the two nations against each other.

The US is reviewing South Africa’s status as a full beneficiary of a preferential trade pact known as the African Growth and Opportunity Act (Agoa), which eliminates import levies on more than 7 000 products ranging from textiles to manufactured items. Agoa was renewed in June for another 10 years, benefiting 39 African nations.

At the heart of the dispute are American chicken and cattle farmers who want the South African government to remove trade restrictions imposed to protect the local industry from a flood of cheaper imports. While Trade and Industry Minister Rob Davies said on September 29 that South Africa had done all it can to retain access to Agoa, the US government says there are still major unresolved issues.

“South Africa needs to take concrete steps towards eliminating barriers to US trade and investment, a key criterion to be eligible for Agoa trade benefits,” Trevor Kincaid, a spokesperson for the office of the US Trade Representative in Washington, said in an emailed response to questions on Wednesday. “Ultimately, South Africa’s Agoa eligibility is in South Africa’s hands.”

No sooner had the two countries reached an agreement over American chicken imports to South Africa in June, a new dispute emerged relating to import restrictions following an outbreak of avian flu in the US. Veterinary experts from the two nations met last month to discuss health concerns around the shipment of chicken, beef and pork to South Africa.

The risk of South Africa losing its Agoa benefit is not “based so much on the realistic assessment of the value of the South Africa market, it’s more about politics in America,” Christopher Wood, a researcher in the economic diplomacy department at the South African Institute of International Affairs, said by phone from Johannesburg. “The chicken caucus within the US Congress is particularly strong.”

South African Poultry Association CEO Kevin Lovell said he expects the US government and farming industry to “adopt a more equitable and reasonable approach”.

The US embassy in Pretoria said on September 16 that eliminating barriers on American poultry and beef exports will address concerns raised by the industry.

Agoa has enabled South Africa to more than double its exports to the US since 2000, with vehicles and agriculture products benefiting the most. Shipments under Agoa accounted for more than a fifth of the nation’s exports to the US last year, according to data compiled by the Tralac Trade Law Centre, based in Stellenbosch, near Cape Town.

Eliminating barriers

To remain a beneficiary of Agoa, African countries are required to, among other things, eliminate barriers to US trade and investment, operate a market-based economy, protect workers’ rights and implement economic policies to reduce poverty.

South Africa is accused of restricting US businesses with plans to cap foreign ownership of private-security companies at 49%. If the law is passed, ADT, based in Boca Raton, Florida, will be required to relinquish control of its South African unit.

African nations that no longer qualify as beneficiaries under Agoa include the Democratic Republic of Congo, Gambia and South Sudan. Swaziland lost its access in January because of an alleged lack of protection of workers’ rights, while Zimbabwe and Sudan aren’t eligible.

“South Africa is the key player under Agoa and neither side would want to see South Africa graduated out of the programme - the economic and political fallout would be big,” Eckart Naumann, an independent economist and associate at the Trade Law Centre, said in an emailed response to questions.

“There is a decent chance that South Africa may just scrape through.”

agoa  |  trade  |  exports  |  economy
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