TRALAC - Trade Law Centre

US commerce body goes to bat for South Africa

Thursday, 23 October 2014 Published: | MARK ALLIX

Source: Business Day (South Africa)

The American Chamber of Commerce in SA has travelled to Washington DC twice in recent months to meet leaders of the US Senate and House of Representatives, asking them to lend support to the renewal of the African Growth and Opportunity Act (Agoa) for SA.

AGOA allows more than 98% of South African exports to enter the US duty-free, the chamber says. It was approved by the US Congress in May 2000, to assist the economies of sub-Saharan Africa and to improve economic relations between the US and the region. Initially, the legislation was to expire in 2008 but Congress passed the Agoa Acceleration Act of 2004, which extended it to 2015.

US trade data show that SA’s exports to the world’s largest economy were worth $3.6bn last year. The US is the second-largest destination for South African exports after China, accounting for 7% of all exports. It is by far the largest destination for SA’s automotive manufacturing sector, making up 21% of all vehicle exports and 42% of car exports.

The US is also SA’s largest portfolio investor and the country’s third-largest trading partner after the European Union and China.

The chamber’s executive director, Carol O’Brien, says the body met members of the US Congress, the House of Representatives committee on ways and means, the special assistant to the president, the office of senators, House foreign affairs committee, and think-tank the Brookings Institution. "We also met SA’s ambassador to the US, Ebrahim Rasool," she says.

"The chamber is very supportive of having Agoa renewed for SA, even though American companies don’t benefit from it directly. To ensure that it gets renewed … we want to show the US that SA is giving something back to the US that will benefit American business," Ms O’Brien says.

It is mainly German car brands exported by SA that benefit from Agoa. "The quid pro quo is that the servicing and spare-parts market of these exports employs about 100,000 persons in the US," Ms O’Brien says.

She says the chamber will conduct a survey among member companies to see how they benefit indirectly, to add strength to their lobbying efforts.

In US visits, the chamber discussed what is perceived as impeding doing business in SA. "Like the ownership element of black economic empowerment, local content requirements, labour laws (more specifically, strikes) and lack of policy cohesiveness among different government departments," Ms O’Brien says.

US ambassador to SA Patrick Gaspard said last week at a forum in Sandton on US-Africa trade and investment that the relationship between business, labour and the government in SA appears to be rooted in the past.

"SA sometimes seems to be 40 years behind the times when it comes to labour relations," Mr Gaspard said, saying that workers in the platinum mining industry agreed to essentially the same terms that were offered two weeks into their five-month strike.

Mr Gaspard said there was often a "dialogue of the deaf" during strikes in SA, and the government was slow to get involved in resolving them.

Ms O’Brien says that should Agoa be renewed, and SA be included, the length of the renewal "will be the variable". "Business needs five-plus years to plan, and any period that caters for less than this time will impact investment decisions.

"Unfortunately, we cannot predict what Congress is going to do, but the persons we spoke to understand that should Agoa not be renewed for SA, it could result in a shift in trade patterns as the manufacturing input in the region comes from SA."

Jeff Nemeth, the chamber’s president and CEO of Ford Motor in SA, says SA is the manufacturing hub of the continent and Agoa promotes regional trade, which feeds into the global value chain. The chamber in SA is affiliated to the US Chamber of Commerce, the world’s largest business federation, representing about 3-million American businesses of all sizes. It is based in Washington DC.

Scott Eisner, the vice-president of African affairs in the international division of the US Chamber of Commerce, says SA needs foreign direct investment (FDI) but some government policies may impede this, including new legislation for oil and gas development and regulations impeding the import of critical skills.

"We are asking how domestic policies are going to shape or impede FDI." He says investors worry about investment protection, the possible expropriation of land and the fracas around SA’s security industry. "Put that together, it’s the perfect storm and can be perceived as a very protectionist (economic) model."

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