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South Africa's official opposition DA party urges US legislators to keep SA in AGOA trade pact

South Africa's official opposition DA party urges US legislators to keep SA in AGOA trade pact
Published date:
Sunday, 09 July 2023

The DA has urged US legislators to keep SA as a member of a trade pact that gives African countries preferential access to US markets, saying its removal will have unintended consequences for both countries.

This comes ahead of the US government’s virtual hearings, starting on July 24, when 35 sub-Saharan countries, including SA, are expected to make oral representations in a bid to retain trade benefits under the African Growth and Opportunity Act (Agoa). Written submissions were due on July 7.

The DA submission to US trade representative Katherine Tai come amid concern that SA could be removed from Agoa due to the government’s stance on Russia’s war on Ukraine, which has irked its Western trade partners, including the US.

This comes after a bipartisan group of US legislators wrote to secretary of state Anthony Blinken and other senior US government members last month, asking for the coming Agoa forum to be hosted in a country other than SA. The forum, scheduled to be hosted in SA later this year, is intended to map the way forward for trade relations between the US and SA.

Business Day has seen the DA letter to US legislators, dated July 7, in which DA finance spokesperson Dion George says that keeping SA in Agoa is also in the best interests of the US because of SA’s political influence in Africa and global affairs, US reliance on SA mineral resources used in the manufacturing sector, particularly for hi-tech goods and green technologies, and the growing consumer market in SA, which could be beneficial for US companies.

“If SA were to become unstable, due to a strained relationship with the West, it would have far-reaching consequences for the entire region. With the ongoing rise in immigration from unstable and poor countries to the West, an unstable Southern Africa region might create another frontier for immigrants. This stability also aligns with the US’s interest in maintaining global peace and security,” George says.

“As income levels rise, the continent is becoming an increasingly important consumer market. American companies stand to benefit significantly from this growth, but only if they maintain a strong presence on the continent. SA, with its well-developed infrastructure and relatively stable political environment, is a key gateway to this market.”

SA qualifies for preferential trade benefits under Agoa, which permits SA to export more than 7,000 goods to the US duty-free. The US is SA’s third-largest trading partner with more than 600 US companies operating in SA.

Foreign direct investment in SA from the US was valued at R116bn in 2019, a 6.8% increase since 2018. US direct investment in SA is led by manufacturing, finance, insurance and wholesale trade. SA’s foreign direct investment in the US was valued at R59bn, up 1.2% from 2018.

George says that should SA be removed from Agoa, SA exporters to the US would suffer loss of market access and revenue to the tune of R59.9bn.

“This duty-free access to the US market has been instrumental in maintaining our trade surplus, which stood at R150.89bn in 2022,” George says.

“The tariff benefit of Agoa for exports of autos to the US is about 10%, equating to a saving of around R3bn. Without Agoa, these savings would be lost, pricing SA cars out of the US market and hindering our industrial growth.” 

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