TRALAC - Trade Law Centre

Opinion: AGOA is of mutual benefit to SA and US

Tuesday, 17 March 2015 Published: | Faizel Ismael

Source: Independent Media Online (SA)

During the week of March 2 to 6, I led a South African delegation to the US to make the case for the African Growth and Opportunity Act (Agoa) to be extended by a further 15 years. Agoa was passed by the US Congress in May 2000 to facilitate trade between sub-Saharan African countries and the US.

It was intended to assist African countries to improve their export performance, enhance economic development and reduce poverty. It provides duty-free access to the US market for 6 400 products from about 40 countries.

While some African countries have been able to use this preference to attract foreign investment and increase their production and exports of mainly clothing and textiles, most African countries have not been as successful.

South Africa has been a significant beneficiary of Agoa as it has been able to utilise these preferences to expand its exports in significant high value growth sectors of the South African economy, such as vehicles, wine and citrus.

However, this success of South Africa must be seen in the context of a structure of US-South Africa trade relations in which about 70 percent of South Africa’s exports are made up of commodities, while the US exports mainly high value-added manufactured products to South Africa.

Africa is poised to become the next global platform for the exports of clothing and textiles. South Africa is vital to the emerging regional value chains from which African countries can build their industrial development and exports.

Parts of the South African clothing and textile industry have begun to move to other African countries.

Agriculture

In agriculture, South African farmers and agro-processing companies offer significant investment and expertise to other African countries to produce high quality agriculture products and meet the stringent health standards in the US and other developed country markets. South Africa’s continued inclusion in Agoa would be of benefit to all of sub-Saharan Africa. African ambassadors that we met in Washington provided their full support for our continued inclusion in Agoa.

While there are some perceptions in the US that South Africa is more developed and should be graduated out of Agoa, the reality is that almost half of South Africa’s population live below the poverty line, and more than 25 percent are unemployed.

While in Washington, we did not detect any significant opposition to South Africa’s continued inclusion in Agoa. Senators Chris Coons and Johnny Isakson have been the main champions of Agoa since its inception in 2000.

These senators have threatened to block South Africa’s inclusion in Agoa unless the US poultry industry’s demand for increased market access into South Africa is addressed. The US states of Delaware and Georgia, which are represented by the two senators, respectively, are the home of the US poultry industry.

Our discussion with both senators last week was warm and friendly. They urged us to make progress on finding the “sweet-spot” of compromise between their industry and ours.

With the encouragement and urging of Trade and Industry Minister Rob Davies, the South African Poultry Association (Sapa) has been in dialogue with the USA Poultry and Egg Export Council (USAPEEC) to agree on improved market access for US bone-in chicken into our market.

Sapa made a second improved offer to USAPEEC for a quota US bone-in chicken pieces, while we were in the US. The gap between the two offers remains significant.

In the meeting with the senators, we also urged them to help us to bring their industry round to the “sweet-spot” by reducing their demands to a reasonable number.

The reason for the high duties (anti-dumping), which the US industry has been complaining about, is due to the peculiar nature of the US consumer market. US consumers prefer the white meat (chicken breast) and so they pay a premium price for this. The brown meat (chicken legs) becomes a surplus product.

The South African industry thus complained that imports of US bone-in chicken pieces were undercutting their prices, resulting in loss of production and jobs. However, notwithstanding this challenge, Sapa has agreed to engage with USAPEEC with a view to agreeing to an acceptable level of imports of US bone-in chicken.

These discussions are further complicated by the current ban on US chicken into South Africa due to an outbreak of avian flu in the US. Our Department of Agriculture has agreed to work with the US officials to assess the possibility of allowing US exports of chicken from those states that are free from avian flu.

There are several other issues related to animal health that South Africa is considering to allow the imports of US beef and pork to South Africa. These sanitary and phytosanitary issues can be very complex, as health standards have to be met to prevent the outbreak of disease that can destroy large herds of animals.

For our part, South Africa has issued the US about 38 veterinary health certificates during the past few years, while the US has issued South Africa with four certificates for our agricultural products.

There are of course continuous US-South Africa discussions that are reviewed annually by our two governments at the annual Trade and Investment Forum. The many bilateral trade issues that both South Africa and the US have on their regular agenda should not become gateways for the implementation or suspension of Agoa benefits.

Such an approach will lead to increased trade friction. South Africa is committed to making every effort to address the poultry issue. In addition, South Africa will attempt to undertake the necessary processes to allow for the exports of US beef and pork into South Africa.

Agoa is of mutual benefit for the US and South Africa. A US study undertaken by the Brookings Institute found that Agoa has created 100 000 jobs in the US and a local study has found that 62 000 jobs were created in South Africa.

Without South Africa, Agoa would be significantly diminished and its value to Africa much reduced. Agoa has created goodwill, not only in South Africa but also in sub-Saharan Africa, and is an excellent platform for the future of US-Africa relations.

Narrow vested interests should not be allowed to undermine this. Extending Agoa by a further 15 years will provide the much needed certainty and incentives for US and other investors to remain and expand their investments in Africa.

 

  • Ambassador Faizel Ismail is South Africa’s Special Envoy on Agoa.

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