TRALAC - Trade Law Centre

South Africa: Car makers in strong plea to US on duty-free access under AGOA

Friday, 18 August 2017 Published: | Linda Ensor

Source: Business Day (South Africa)

The automotive industry has made a strong plea to the US trade administration for it to continue enjoying the benefit of duty-free access to the US market under the African Growth and Opportunity Act (AGOA).

Nico Vermeulen, director of the National Association of Automobile Manufacturers of SA, and Renai Moothilal, the executive director of the National Association of Automotive Components and Allied Manufacturers, argue in a letter to Edward Gresser, chairman of the trade policy staff committee in the office of the US trade representative, that the nonreciprocal preferential trade deal benefits both countries.

The letter was sent in response to a request for interested parties to submit comment for the annual review of the eligibility of sub-Saharan countries to continue to receive Agoa benefits in 2018.

Eligibility criteria include whether a country has a market-based economy in which the rule of law applies and whether there are barriers to trade and investment.

US interests say countries have introduced trade measures that prejudice their interests.

Vermeulen and Moothilal note that the automotive trade between the US and SA has shown consistent growth, with imports into SA from the US growing at a faster rate in many years than South African automotive exports to the US.

In 2016, South African automotive exports to the US amounted to R22.6bn (2005: R3.2bn), while automotive imports from the US totalled R11.5bn (2005: R3.2bn). The biggest category is for light vehicles, with the figures at R16.3bn and R3.9bn, respectively.

Other South African exports include catalytic converters, engine parts, radiators, silencers, exhausts and tyres. Since 2001, when Agoa commenced, automotive exports from SA to the US have risen 380.4% and US exports to SA by 383%.

arrow right  View trade data in the table alongside

arrow right  Click here for additional automotive trade data under AGOA

"The mutual benefits of two-way trade in automotive products … for both the US and SA are significant," the industry chiefs say in their letter. For example, US multinational automotive corporations are able to source their requirements globally and benefit from duty-free access to products manufactured in SA.

Vermeulen and Moothilal concede "that there are legitimate concerns on the part of US interests regarding barriers to trade and investment" and say that these can and should be tackled at an intergovernmental level possibly by way of a bilateral trade agreement.

The US administration and various US businesses have expressed concern about the unfair advantage enjoyed by European companies as a result of the free-trade agreement between the EU and SA.

Vermeulen and Moothilal stress that SA’s full eligibility for Agoa benefits is vital to reduce poverty, unemployment and inequality, noting that the automotive industry contributes 7.4% to SA’s GDP.

"Agoa represents an important and generous trade instrument to support the future growth and development of SA and sub-Saharan Africa, whilst at the same time offering positive spin-offs for US businesses. It remains our view that growing trade and business relationships benefit both parties."

arrow right  Download the submission at this link.  

 

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