US duties to knock South Africa's AGOA exports

US duties to knock South Africa's AGOA exports
Published
Monday, 16 July 2018 ~ Linda Ensor

South Africa has raised its concern with the US government about possible duties on vehicle and vehicle component imports, pointing out that their imposition on South African exports would significantly erode the benefit the country is meant to enjoy under the Africa Growth and Opportunity Act (Agoa).

Following its decision to impose import duties on steel (25%) and aluminium (10%), the US decided to investigate whether it should do likewise with regard to vehicles and car components under section 232 of the Trade Expansion Act.

The act gives the US president the power to impose tariffs on imports that threaten national security.

Trade and Industry Minister Rob Davies raised concern about the threatened tariffs in Washington last week when he met US trade representative ambassador Robert Lighthizer and Commerce Secretary Wilbur Ross, as well as senators Chris Coons and Johnny Isakson.

He pointed out that were section 232 export duties to be imposed on vehicles from SA, this would significantly erode its Agoa benefits, as section 232 tariffs effectively suspended Agoa preferences.

He said that SA accounted for 0.4% of total US imports of automotive products. In addition, he said, one of SA’s vehicle manufacturers, BMW, would no longer be exporting to the US, which would significantly reduce SA’s exports to the US.

SA’s automotive industry achieved total export sales of vehicles and components worth R164.9bn in 2017 with R18.8bn going to the US. Exports to the US are duty-free under Agoa, a nonreciprocal trade agreement, which allows duty-free access for selected goods into the US from eligible African countries.

However, National Association of Automobile Manufacturers of SA director Nico Vermeulen pointed out on Sunday that a rise in duties on vehicle imports would not have a significant effect on the local motor industry as the largest exporter, BMW, had shifted production from the 3-Series — which it used to export to the US — to the X3 SUV, which was now destined for Europe.

National Association of Automotive Components and Allied Manufacturers executive director Renai Moothilal said any new or raised import tariff would have a negative effect on the component sector and was likely to result in job losses.

motor factory southafrica

Second-highest export destination

"This could be significant given that the US market has been the second-highest export destination for South African components over the recent past as an outcome of contracts done under the Agoa framework. In 2017 the value of South African components into the US was just more than R4.2bn."

Moothilal said the components exported to the US included catalytic converters, engine parts, transmission components, cooling systems, automotive tooling, silencers and exhausts, as well as several after-market and replacement type components. "The catalytic converter and engine components subsectors [are likely to see] the most negative impact and possible job losses as both these categories have the US as a substantial export destination."

Davies was accompanied to the US by Small Business Development Minister Lindiwe Zulu and participated in the Agoa Forum, which brings together trade ministers from Agoa- eligible countries as well as representatives from the US government, private sector and civil society.

He continued to apply pressure for SA’s exemption from the steel and aluminium import duties. Canada, Mexico, Brazil, Australia, Argentina, South Korea and EU member states were granted temporary exemptions, pending further discussions. SA’s application for exemption was rejected, after it had argued that being such a small niche exporter to the US, it did not pose any threat to US national security.

Davies said SA’s steel exports to the US accounted for less than 1% of US imports and 0.3% of US steel demand.

Although this represents a small fraction of US imports, South African exports of steel to the US account for 5% of its production equating to 7,500 jobs in the steel value chain.

Aluminium exports from SA amount to about 1.6% of US aluminium imports.

View related news articles

US and South Africa's Western Cape province mark 6 month anniversary of trade and investment promotion partnership

The U.S. Consulate General in Cape Town and the Western Cape Government marked the first six months of the Trade and Investment Promotion Partnership, launched in February 2021. The partnership deepens bilateral cooperation and coordination to promote and increase bilateral trade and investment through various engagements, events, and high-level interactions. It reflects the United States’ role as the top foreign direct investor in the...

11 August 2021

'Funding challenges undermine SMEs’ growth in Africa'

Analysts who spoke at a recent webinar organised by the American Business Council in Nigeria, in collaboration with US Chamber of Commerce, Amcham Ghana and Amcham South Africa on the US-Africa relations, have identified lack of adequate funding as a major challenge to the growth of Small and Medium Enterprises (SMEs) in Africa. The analysts were of the view that SMEs across Africa are faced with serious funding challenges, despite their...

30 July 2021

'The renewal: US-Africa relationship'

In his first allocution to African leaders at the virtual African Union Summit in February, recently elected United States President, Joe Biden, reiterated his administration’s commitment to rebuilding partnerships with Africa and re-engaging with international institutions such as the African Union. Biden set out his foreign policy priorities, pointing towards multilateralism and a healthier US-Africa relationship. Within days of his...

13 April 2021

SA president to meet with US Chamber of Commerce over investment

President Cyril Ramaphosa will participate in a virtual business and investment roundtable on Tuesday (10 November) with representatives from three major business organisations from the United States. The organisations are the Business Council for International Understanding (BCIU), the Corporate Council on Africa (CCA), and the US Chamber of Commerce. “The president will be supported by South Africa’s Ambassador to the United States, Ms...

10 November 2020

Opinion: 'Trump vs. Biden: This is how it could impact South African agriculture'

As the race for the White House continues, agriculture leaders say a win for Democrat Joe Biden will strengthen and fast-track trade relations between South Africa and the United States. Currently, the race between pres. Donald Trump and Biden hinges on tight races in battleground states. Trump has already falsely claimed victory while Biden called for patience and every vote to be counted. Meanwhile Mzansi’s [>South Africa<]...

05 November 2020

Will the US presidential elections impact South Africa’s economic recovery?

With over 6.29million recorded cases worldwide and over 380,00 deaths, its safe to say the COVID-19 pandemic has shaken the globe as we know it. Although Africa has, for the most part, managed to avoid an exponential spread of the disease, the overall recovery of the country and more specifically South Africa, hangs in the balance due to a number of factors.  Long delays with vital decisions The country has experienced over...

27 July 2020

'South Africa must get ready for an inevitable loosening of trade ties with the US'

In six months’ time the world’s gaze will be trained on what is gearing up to be a contentious and hotly contested presidential election in the US. Irrespective of who emerges victorious between the incumbent President Donald Trump and the Democratic nominee Joe Biden South Africa needs to start thinking about what it stands to lose – or gain – from the new administration’s stance. This is especially so in the area of economic...

02 June 2020

Former US negotiator: US-Kenya deal could spur regional value chains

A trade deal with the U.S. could help both Kenya and its neighbors in the East African Community by fostering the development of regional value chains, a former U.S. trade official tells Inside U.S. Trade. “I think it’d be really fascinating as we go forward with this U.S.-Kenya FTA to see what’s going to be possible not just for Kenya but for other African countries in various sectors,” Florie Liser, a former assistant U.S. Trade...

10 February 2020

South Africa GSP country review hearings: programme and witness list

EXECUTIVE OFFICE OF THE PRESIDENT OFFICE OF THE U.S. TRADE REPRESENTATIVE PUBLIC COUNTRY PRACTICE HEARING U.S. GENERALIZED SYSTEM OF PREFERENCES (GSP) Held at the Office of the U.S. Trade Representative 1724 F Street, N.W. Washington D.C., Rooms 1 and 2 January 31, 2020 Program and Witness List - Final Welcome and Introduction 10:00 am Ms. Laura Buffo, Deputy Assistant U.S. Trade Representative for GSP and Chair of the GSP...

29 January 2020

South Africa will caution Trump on ‘premature’ trade review

South Africa’s government will tell President Donald Trump’s administration that its review of a preferential trade agreement that could put as much as $2.4 billion in exports at risk is premature and potentially damaging for both economies. The U.S. Trade Representative will start public hearings on Thursday [see submissions and hearing schedule here] to review the nation’s duty-free access to the U.S. market under the...

29 January 2020

SA business organisation asks president to delay enactment of two Bills to ensure continued US trade benefits

Business organisation Sakeliga has requested President Cyril Ramaphosa to delay the enactment of two Bills of Parliament, which it says could potentially jeopardise 40% of South Africa’s exports to the US. The relevant Bills are the Copyright Amendment Bill (B13B-2017) and the Performer’s Protection Bill (B24B-2016). Sakeliga’s open letter on Monday follows an announcement made last week by the Office of the US Trade...

28 October 2019