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Too early to speculate on US trade policy, says South African auto body

Too early to speculate on US trade policy, says South African auto body
Published date:
Tuesday, 17 January 2017
Irma venter

It is too early to speculate on the effects the incoming Trump administration may have on automotive trade between South Africa and the US, says National Association of Automobile Manufacturers of South Africa (Naamsa) director Nico Vermeulen.

“It is best to wait for the installation of the new administration so that we can gain clarity on US trade policy.”

In an interview with German newspaper Bild, published on Monday, US president-elect Donald Trump – who continues to signal a more protectionist US trade policy –  criticised German carmakers for failing to produce more cars on US soil, threatening them with a 35% import duty. He especially targeted imports from Mexico.

Vermeulen says Trump’s comments appear to take aim at Mexico only, where several German manufacturers have set up shop, and not South Africa, from where companies such as BMW Group South Africa (SA) and Mercedes-Benz South Africa export vehicles to the US.

Mexico, Canada and the US manage trade within the North American Free Trade Agreement, or Nafta, that entered into force in 1994.

The South African automotive industry’s trade with the US is governed by the African Growth and Opportunity Act (Agoa), implemented in 2000. The legislation enhances market access to the US for qualifying sub-Saharan African countries.

Agoa is “quite different” from Nafta, says Vermeulen. Agoa is not a free-trade programme, but a developmental and assistance programme.

Despite the nature of the programme, however, Agoa has facilitated two-way growth in automotive trade between South Africa and the US, with South Africa not the only beneficiary of the agreement, he stresses.

“In fact, the growth in US exports to South Africa has outstripped the growth in exports from South Africa to the US.

“I don’t think the US has to worry about the small number of automotive exports from South Africa.”

Vermeulen says Naamsa has had discussions with the US trade representative in South Africa.

The Numbers

According to the South Africa Automotive Export Manual 2016, South African parts and vehicle exports to the US totalled R17.1-billion in 2014, growing to R20.9-billion in 2015.

It is, however, important to take note of the rand’s significant weakening against the US dollar since 2014. The rand was valued at around R11 to the dollar in January 2014, tumbling to R15 to the dollar at the end of 2015.

The export of vehicles from South Africa to the US has declined from 68 948 units in 2011, to 48 669 units in 2015.

Parts and vehicle imports into South Africa from the US remained stable from 2014 to 2015, at around R11.8-billion. Of this number, vehicle imports reached around R4.7-billion.

South Africa exports vehicles, catalytic converters, engine parts, radiators, silencers and tyres to the US, among other goods. The country imports vehicles, assembly line parts, engine parts, engines and transmission shafts and cranks from the US, among other goods.

US companies Ford and General Motors assemble vehicles in South Africa.

Trump is to be inaugurated as US president on Friday, January 20. 

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