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AGOA review could see South Africa lose on trade benefits

AGOA review could see South Africa lose on trade benefits
Cape Town, South Africa
Published date:
Tuesday, 21 July 2015
Simon Barber

The Obama administration is launching a sweeping "out-of-cycle" review of South Africa’s trade practices and commitment to market principles which could result in the country losing some, or all, of its benefits under the African Growth and Opportunity Act (Agoa).

Among issues to be considered are complaints by US exporters that their products are being shut out of the South African market as a result of the South Africa-European Union trade, development and co-operation agreement.

The scope of the review, to be announced by the office of the US Trade Representative in the Federal Register, is broader than that mandated by Congress when it extended Agoa for 10 years last month.

The review will examine whether South Africa still qualifies for benefits under the US generalised system of preferences, eligibility for which is a precondition for enjoying Agoa preferences.

The generalised system of preferences is the core programme under which developing countries get preferential access to the US market.

It is governed by the 1974 Trade Act, whose section 502 requires exclusion of any country that "affords preferential treatment to the products of a developed country … which has, or is likely to have, a significant adverse effect on US commerce".

In addition, the US Trade Representative will examine South Africa’s compliance with all of section 104 of Agoa, not just sub-section 104A specified in the renewal legislation.

This, according to the Federal Register notice, "includes requirements that the country is making continual progress toward establishing, inter alia: a market-based economy; the rule of law, political pluralism, and the right to due process; the elimination of barriers to US trade and investment; economic policies to reduce poverty; a system to combat corruption and bribery; and the protection of internationally recognised worker rights.

"In addition, the country may not engage in activities that undermine US national security, foreign policy interests or engage in gross violations of ... recognised human rights."

The US Trade Representative is inviting submissions from interested parties, the deadline for which is August 5, and will hold a public hearing on August 7. Based on these inputs the US Trade Representative will forward recommendations to President Barack Obama.

Should he decide South Africa is out of compliance, he now has the option of denying Agoa treatment for specific products rather than excluding the country completely.

In the normal course of events, the generalised system of preferences and Agoa eligibility are reviewed annually. Congress’s call for an out-of-cycle review grew out of complaints that South Africa was improperly using antidumping duties to block imports of US frozen chicken parts. However, the chicken dispute — resolved by South Africa agreeing to give US exporters an annual quota — was only one of a much broader range of issues.

These include concerns about the possibility of expropriation and the weakening of intellectual property protections, as well as a desire, frustrated in 2006, to move toward a reciprocal free trade agreement.

Trade and Industry Minister Rob Davies has warned that the chicken quota will be voided if South Africa is dropped from Agoa.

It has not passed unnoticed in Washington that Mr Davies is a member of the central committee of the South African Communist Party, in whose name the African Communist recently published a "political report" declaring the Agoa eligibility conditions an "imperialist" effort to impose "neo-liberal policies".

The US, the article said, is "pushing South Africa very hard".

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