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US trade stalemate pregnant with possibility

US trade stalemate pregnant with possibility
Mario Oriani-Ambrosini, MP
Published date:
Tuesday, 12 March 2013

South Africa faces an international trade dilemma that may determine its international geopolitical placing and its economic growth modalities for decades.

In 2015, the US's African Growth and Opportunity Act (Agoa) will expire. Agoa enables most South African-manufactured products to be imported in US markets without duties or quota limitations. Agoa has supported the expansion and survival of our textile and automotive industries, among others. Its lapsing will have disastrous effects on our industry.

When she visited South Africa, Hillary Clinton said President Barack Obama’s administration was committed to renewing Agoa, but the decision rests with Congress, where many congressmen have voiced their unwillingness to sacrifice jobs in the US to protect jobs in a country such as South Africa, which is not poor but has severely unequally distributed income. Their voice is strengthened by a provision of law that bars the president from extending any special trade benefit to any country that does not offer the US the "best nation treatment" status. This provision did not apply to the enactment of Agoa but it is understood that, at policy level, it should bind Congress in point of its renewal, which is more administrative in nature.

The US government has repeatedly complained that we are not giving the US our best trade treatment, as we have a free trade agreement (FTA) with the European Union (EU). The South African government has offered to negotiate a FTA with the US and has pointed out that, under World Trade Organisation rules, there is no other way for South Africa to reciprocate to the US the trade benefit the US extends to South Africa with Agoa.

The Obama administration has indicated it wants to finalise a FTA with the EU by 2015, which is the same time frame for the renewal of Agoa. It has also suggested that, as a result, it does not have the resources and time to engage in a parallel FTA negotiation with South Africa.

This dilemma offers a historical opportunity, which ought not to be missed. We should urge the US to include South Africa in its talks with the EU and urge the EU to allow our trade negotiators to be part of that process. The fact that we have an FTA with the EU does not make us part of the EU but makes our market sufficiently contiguous to the EU’s to justify it.

The objective of this exercise would be to extend the resulting US-EU agreement to South Africa. This process is unprecedented, but nothing bars it from happening. Most of history-making is unprecedented.

The US should see strategic and trade value in this approach. It will allow South Africa to remain in the new western geopolitical and economic area, which the US-EU agreement will progressively consolidate, rather than sliding ever further within the area of Chinese influence. It will also create an area of negotiation to address US trade issues not addressed by Agoa, such as the importing of US chickens into South Africa and the preferential supply of rare-earth strategic minerals to China.

For South Africa, this would mean overcoming the legal problems standing in the way of Agoa’s renewal and being able to negotiate its own issues with the US, such as the importing of its citrus fruit into the US market. It will also enable it to go beyond the strict local-content limitations of Agoa to access the US market with goods partially manufactured in South Africa, enhancing our potential as a transfer point.

However, more important, the successful outcome of this process would place South Africa in a magnificent trade position almost akin to its geographical position as the middle point of many trade routes from East to West. If routed within the forming western trade bloc, South Africa’s increasing participation in Brics and closeness with China will enable it to play a growing economic and geopolitical role, which will foster our economic growth immensely.

In Parliament I will be asking Trade and Industry Minister Rob Davies to answer the suggestion made in this article and say why he should not at least try to push this approach. South Africa may be seen as too small to sit at the US-EU trade banquet, but there is no harm in asking. He has often stated his willingness to receive and act on positive suggestions, even when they come from the opposition benches. This will be a good opportunity to test his intent in this regard, as well as to determine how much priority he gives trade and our economic growth, which are the sole responsibilities of his portfolio, over ill-conceived countervailing foreign policy games or affectations sponsored by some of his Cabinet colleagues.

Oriani-Ambrosini is an MP and the Inkatha Freedom Party’s spokesman on trade and industry

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