TRALAC - Trade Law Centre

AGOA creates goodwill for US – SA trade minister Davies

Sunday, 04 May 2014 Published: | Peter Fabricius

Source: Business Report (South Africa)

The government will consider giving some US producers the same access to the local market as the EU, if that’s what it takes to save its African Growth and Opportunity Act (Agoa) benefits.

Trade and Industry Minister Rob Davies believes President Barack Obama plans to make this proposal at the first US-Africa summit, which he is convening in August. Agoa offers South Africa and most other African countries duty-free access to the US market for most of their goods. They do not have to reciprocate.

Agoa has substantially boosted South African exports to the US, especially of manufactured goods such as cars, which has also helped the government’s industrialisation and job-creation strategies.

But Agoa is due for renewal by the US Congress next year and some influential legislators are under pressure from their constituency companies to withdraw Agoa benefits from South Africa because it has done so well out of them.

Some legislators are also unhappy that South Africa has increased tariffs on imports of US foodstuffs such as beef, pork and chicken, even as it enjoys tariff-free access to the US market under Agoa. And they are complaining that they are being beaten in the South African market by their EU competitors, which have a reciprocal free trade agreement with South Africa that lets in EU goods at lower tariffs.

Davies in an interview last week said that Agoa would be discussed at the US-Africa summit where the Obama administration would present a proposal for Agoa’s renewal. The US government had done several studies on Agoa, including on its use by South Africa, he said.

He did not know for sure what the Obama administration’s proposal was. “But I’ve heard a few voices in the US say we must ‘MFN-ise’ if that’s the word, some of the things we’ve done towards the EU.”

MFN stands for Most Favoured Nation and an MFN agreement with the US on some products would mean that the tariffs on imports of those products into South Africa could not be higher than anyone else’s – including those of the EU.

Davies stressed that South Africa believed Agoa was fine as it was and so there was no need to fix it. He had told the US that it gave America goodwill – unlike the reciprocal Economic Partnership Agreements (EPAs) that South Africa and other countries are negotiating with the EU, which were unpopular. But he said: “If somebody came to us and said, ‘you do this and you keep Agoa’, we’ll have to make an assessment. No one’s done that yet. It won’t be for every single product either.”

Davies also threw light on what EU ambassador Roeland van de Geer recently called the “difficult dossiers” in relations between the EU and South Africa.

One of these are the bilateral investment protection treaties with some individual European countries, which South Africa has declined to renew, drawing criticism from those governments.

Davies noted that the single investment protection bill with which his government is proposing to replace all the individual investment treaties is still being circulated for comment. He said the environment for the debate on bilateral investment treaties was changing rapidly.

The EU was discussing the merits of bilateral investment treaties in its negotiations with the US for a Transatlantic Trade and Investment Partnership (TTIP) agreement. The EU was, for example, grappling with the implications of Australia being dragged into litigation by foreign tobacco companies who were arguing that its decision to ban branding on cigarette packets violated their rights under bilateral investment treaties.

“So the health policy decision will be subject to the investment treaty, could be changed or invalidated as a result of it. I think many people around the world think that’s outrageous. That’s an extreme example of intrusion into policy space.”

Davies repeated that the discontinuation of the bilateral investment treaties with EU countries did not mean their investments were in jeopardy. “There is absolutely no intention by South Africa to expropriate anybody’s investment,” he said.

Davies also expressed concern about another “difficult dossier”, the EU’s threat to ban imports of South African citrus infected by the black spot fungus. He noted that the fungus did not affect consumers, and scientists from both sides were still investigating whether it could infect European orchards. There was no evidence so far that it could.

But last year, the EU intercepted more than five shipments of citrus with the black spot and had stopped all citrus imports from South Africa. Because that had happened near the end of the season, it had had little commercial impact. But it could have a major impact in the coming season, as South Africa is the largest exporter of citrus to the EU and about 60 000 jobs are at risk.

Davies said the black spot issue showed how “the real game in international trade, particularly agricultural trade, is now becoming standards, phytosanitary and sanitary standards. South Africa believed the black spot restriction was a form of trade protection under another name, he indicated.

Another “difficult dossier” are imports of frozen chickens and frozen potato chips from the EU. South Africa has launched an anti-dumping inquiry into these imports.

Davies said that the overall trade figures with the EU explained why South Africa had taken that action. In 2008, South Africa had exported e22 billion (R320bn) of goods to the EU and imported e20bn, earning a e2bn surplus. But in 2012, South Africa exported only e20bn to the EU, while imports from the EU increased to e25bn, creating a e5bn deficit for South Africa.

Davies said European companies invested in South Africa had been making frozen chips with South African potatoes. But now South Africa was importing those chips. Meanwhile, frozen chicken imports had rocketed about a hundred-fold, from about R3 million to R300m a year.

Yet another difficult dossier was the export taxes that South Africa was proposing to impose on raw materials. The EU has complained that these taxes are an unwarranted protective measure for local buyers of raw materials. The issue is being thrashed out as part of the protracted negotiations for a SADC-EU EPA.

Davies said the EU’s interest was not in helping other countries develop resources, but about ensuring the EU was not deprived of access to raw materials. The proposed taxes were designed as an incentive to companies to invest in the beneficiation of raw materials in South Africa so they could export processed materials.

The SADC EPA negotiations are the most difficult dossier of all between the EU and South Africa – as well as the other SADC members in the proposed EPA – Botswana, Namibia, Swaziland, Lesotho, Mozambique and Angola.

Davies said “we are beginning to approach the end game”, in the negotiations, with another technical round of negotiations coming soon, and then one with ministers after the elections but before the new administration comes in.

Another “difficult dossier” is geographical indications, or the geographic trade names for products, which may only be used by producers in the areas concerned.

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