TRALAC - Trade Law Centre

South Africa lobbies to retain US trade access as risks grow

Thursday, 31 July 2014 Published: | Rene Vollgraaff

Source: Bloomberg

South Africa is pushing the US to keep open preferential access for exports ranging from cars to oranges in the face of opposition from American farmers and investors.

African leaders meeting with President Barack Obama in Washington on Aug. 5-6 are seeking to renew the African Growth and Opportunity Act, a preferential trade accord that expires next year. South Africa will lobby to remain a beneficiary as it seeks a 15-year extension of AGOA, as the law is known, Trade Minister Rob Davies said on July 28.

South Africa more than doubled its exports to the U.S. since 2000, when AGOA was implemented, while at the same time having no obligation to provide duty-free access to U.S. goods and in some cases restricting American trade through anti-dumping duties. The National Chicken Council and other U.S. farming groups have argued that South Africa should be excluded given its unfair advantage.

“South Africans are operating under an assumption that they would be automatically included and I don’t think that they understand that the dynamic has changed,” Rosa Whitaker, a former assistant U.S. trade representative for Africa and now the chief executive officer of trade consultancy The Whitaker Group, said by phone from Washington on July 30. “They are fighting against a tide and when I speak to South Africans they don’t seem to realize that there’s a tide forming against them.”

AGOA, which was extended in 2004, eliminates import levies on more than 7,000 products ranging from textiles to manufactured items. Only countries that meet conditions, such as respect for property rights, combating corruption and reducing poverty, qualify for the benefits.

Qualifying Nations

About 40 sub-Saharan African nations are currently beneficiaries. The Democratic Republic of Congo and Mali are among those that no longer qualify, Swaziland’s access will end in January because of a lack of protection of workers’ rights, and Zimbabwe and Sudan aren’t eligible.

AGOA-favored exports accounted for 90 percent of the $38 billion in total shipments to the U.S. last year, according to the Trade Law Centre, a research group based in Stellenbosch, near Cape Town. Oil and gas made up almost 80 percent of shipments to the U.S. under AGOA in 2013, with Nigeria the biggest exporter, the data shows.

South Africa has been a major beneficiary because it exports a more diversified set of goods than most African countries, Catherine Grant Makokera, the program head of economic diplomacy at the South African Institute of International Affairs, said by phone from Johannesburg on July 29.

‘Golden Child’

“South Africa is the golden child of AGOA and to remove South Africa from AGOA would really take away a lot of the value that AGOA has provided to the continent,” she said.

South Africa is facing a backlash for plans to force private-security companies, such as Boca Raton, Florida-based ADT Corp. (ADT), to relinquish control of their South African units as the government restricts foreign ownership of the industry.

“Undermining the potential of South Africa to be included again is that the investment climate and domestic legislation is perhaps considered not sufficiently conducive to allow U.S. companies to participate fully,” Eckart Naumann, an independent economist and associate of the Trade Law Centre (tralac.org), said by phone on July 29. One of the conditions of AGOA is that a beneficiary country may not obstruct U.S. investment and “what is happening in the private-security industry could reasonably be constituted as a barrier,” he said.

Jobless Growth

Davies told reporters in Pretoria this week the security-industry proposals haven’t been signed into law yet and that “the U.S. itself doesn’t have a complete free-for-all in terms of foreign ownership” in the sector.

South Africa’s economy is struggling to gain traction following a 2009 recession, undermining job creation in a nation where one in four people are unemployed. Promoting exports is a key focus of the government’s economic policy.

Removal from AGOA “would mean that there would be jobs and capacity in some part of our economy that would be adversely affected because of a lack of market opportunities in the U.S.,” Davies said.

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