TRALAC - Trade Law Centre

'Obama eager to extend AGOA'

Monday, 03 December 2012 Published: | Business Report (Independent Newspapers, SA)

Source: Business Report (Independent Newspapers, SA)

US President Barack Obama has made it clear that he supports the "reauthorization" of the African Growth and Opportunity Act (AGOA) beyond its expiry in 2015, but it also requires a congressional green light, according to US undersecretary of commerce for international trade Francisco Sánchez (pictured).

Speaking on the sidelines of a trade promotion event by the Western Cape agency Wesgro this weekend, Sánchez said the House of Representatives and Senate “have a lot of discretion” and it would be “nice and neat” to provide a new time period. He hoped their decision would promote certainty for business.

The legislation, passed during president Bill Clinton’s term, has helped boost the US to become South Africa’s third-largest trading partner.

While Obama was “very supportive” and US Secretary of State Hillary Clinton had made an “unequivocal” statement of support for the continuation of Agoa during a recent visit to South Africa, Sánchez noted that some members of Congress were concerned about benefits accruing to South Africa. “They would like to see trade preference parity with Europe.”

The support of Congress is required for an extension of the legislation which offers non-reciprocal trade preferences to qualifying countries from sub-Saharan Africa, giving qualifying African countries duty-free access to the largest market globally.

Pressed on whether the extension was a political problem, as the House of Representatives was still controlled by the Republicans while the Democrats controlled the Senate after last month’s elections, he said it was in fact a bipartisan issue. “Representatives of both parties (have) expressed concern about finding parity on trade”.

It is understood that many US businesses are opposed to South Africa being granted special Agoa benefits.

Wesgro chief executive Nils Flaaten said he could not overemphasise the impact of the opportunity that could be lost to South Africa. “The Obama administration has been very clear in its interaction with us that they don’t want us to be migrated out of it [Agoa] because of [arguments about] our size and sophistication.”

But there were politicians who wanted South Africa “to migrate out”. He told Sánchez’s business delegation: “We need to put a lobby together to ensure this does not happen.”

The preferential access to the US applies to about 7 000 scheduled products, including clothing, agricultural products and motor vehicles.

Trudi Harzenberg, the director of Stellenbosch University’s Trade Law Centre (Tralac), said “quite an array” of products benefited from duty-free, quota-free access. Agoa had, in particular, benefited the automotive value chain.

Eckart Naumann, a Tralac Associate, reported (see Related Document) that South African vehicles accounted for 3.2 percent (in 2009) of total US imports within the 1 500cc to 3 000cc engine category, up from 2.9 percent in 2008. In 2009, about 90 percent of US fruit and fruit juice imports from Africa came from South Africa.

Agoa had boosted trade between the Southern African Customs Union (Sacu) and the US. Sacu’s exports to the US had grown over 15 years and by 2008 had increased almost fourfold to $11 billion (R97.9bn) before dropping to $6.7bn, due to the financial crisis. US exports to Sacu grew from $3.1bn in 1996 to $6.9bn in 2008 before falling to $4.8bn in 2009.

While Sánchez would not say whether the US was considering re-establishing the bi-national commission with South Africa, he said the Obama administration was committed to reducing tariff and non-tariff barriers to trade.

 

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