TRALAC - Trade Law Centre

US and South Africa set for AGOA clash

Friday, 21 August 2015

Source: Citizen Newspaper (South Africa)

The United States is growing increasingly impatient with South Africa over its apparent foot-dragging allowing American meat products into the country.

South Africa’s continued participation in the African Growth and Opportunity Act (AGOA) – which allows millions of dollars of South African exports into the lucrative US market duty-free — largely depends on it lifting health restrictions on US beef, pork and chicken imports.

The US Congress earlier this year extended AGOA – which was due to expire in September – for another ten years for the 38 other eligible African countries. But it specifically made South Africa’s continued participation dependent on lifting the restrictions on US meat imports and also dropping legislation that would force foreign owners of security companies to sell at least 51% of the companies to South Africans.

South Africa has until September 30 to effect these changes or risk losing some or all of its AGOA benefits which have been highly beneficial to many South African exporters, especially auto manufacturers.

Citing concerns about outbreaks of various diseases in US livestock, South Africa has banned all chicken imports for 15 years, all pork imports for 12 years and all beef imports for three years. But the US claims these fears are exaggerated.

After long negotiations South Africa agreed, in Paris early in January this year, to accept an annual quota of 65,000 tons of American chicken.

Laird Treiber, economic counsellor at the US embassy in Pretoria, said that his government expected South Africa to take a few months to implement this agreement. But nearly eight months later it has still not done so, and is now citing new concerns about an outbreak of avian flu in some US states as a reason not to lift the ban.

On Friday August 11, several US government agencies held a public hearing in Washington, as demanded by Congress, to determine whether South Africa had met the conditions of Congress for continuing participation in AGOA.

South Africa clearly did not satisfy the US government. US officials demanded concrete evidence and not just the assurances which South African officials gave.

Treiber explained in an interview later that the US wanted to see the meat imports actually entering South Africa before the Administration reported to Congress on September 30 on whether South Africa should remain in AGOA.

He said that the US wanted the SA ban on poultry imports to be “regionalised” — i.e. restricted to the few areas where outbreaks of avian flu had occurred.

“South Africa’s position has been that if there is one sick bird anywhere in the country, it will refuse to accept birds from anywhere in the US.”

But there was no reason to suspect an outbreak of avian flu in California would affect poultry across the country in New Jersey, he said.

The international standard for quarantine areas was 20 square miles around an outbreak – not the whole state and certainly not the whole country.

“More than 100 countries accept all our birds while about 20 have regionalised their imports.”

At the hearing in Washington, US officials noted that SA had this year already accepted poultry from 10 European Union (EU) countries despite an ongoing outbreak of (avian flu) within the EU, where trade was “borderless”.

They asked why SA was not treating the US the same as the EU. Business Day reported South Africa’s ambassador to the US, Mninwa Mahlangu, as replying that South Africa would be ready to consider accepting imports from disease-free areas if there were no further cases of avian flu in the US over the next six weeks.

But other officials said his testimony was inconsistent with what SA veterinarian officials had told the US on July 27, that South Africa was not ready to “regionalise” and insisted that it would import no US poultry at all as long as there was an outbreak anywhere in the US.

Treiber said the US had also not been given complete health certificates on pork or beef.

He said the South African government would only accept a limited number of different types of frozen cuts of pork and not the whole animal. The US had proposed 100 different cuts but SA had accepted only ten.

“We said ‘really? Let’s have a number that would really mean opening the market and for cuts that people really want to buy, like pork shoulders. We are the world’s biggest exporter of pork and more than 100 countries accept the whole animal. No one has ever complained of disease.”

According to Business Day, the US government officials on the panel repeatedly asked representatives of the US chicken and pork trade industries giving testimony whether South Africa was giving US exporters a harder time than those of other countries.

Courtney Knupp, of the National Pork Producers Council, told them that “no other country has the same restrictions.”

Mahlangu told the panel that Cabinet had agreed to lift the ban on US beef imposed to prevent the spread of mad cow disease. But sceptical US officials demanded to see a copy of this Cabinet decision.

Treiber said the US was also looking for concrete proof of assurances given by South African officials that the Private Security Industry Regulation Amendment Bill would be amended to remove the requirement that foreign owners of security companies must divest at least 51% ownership to South Africans.

Mahlangu told the Washington hearing that President Jacob Zuma had sent the bill back to Parliament unsigned. This has raised hopes that the majority local ownership requirement would be removed.

Treiber said US security company owners were concerned that if the provision was not removed, they would be forced to sell their shares at “firesale prices”.

He said several US government agencies were now preparing their report to the US Administration which would be submitted to Congress by September 30. That was the deadline for South Africa to demonstrate its commitment to implementing its assurances.

He added that his government was “on training wheels” about how it would handle the assessment of South Africa as this was the first time a country had been given provisional extended participation in AGOA, subject to review.

He said South Africa could either be wholly excluded from further participation in AGOA, or only from certain benefits, if the US was not satisfied with its performance.

He added that he was telling South African officials that after two or three years of negotiations, they were now so close, “let’s at least close the gap on one or two of these things”.

All the potential meat exports under discussion were worth about US$100 million in total. It was not worth South Africa jeopardising the $20 billion total trade relationship between the two countries for that.

At an online briefing for African journalists this week about the annual AGOA Forum to be held in Gabon next week, US Assistant Secretary of State for Africa, Linda Thomas-Greenfield, said she thought the chances were good that SA would comply and so remain in AGOA.

“We’re working very, very closely with the Government of South Africa, with their ministry of trade, with their industry, to ensure that they meet the requirements that have been placed in the new law.

“We know that they take it seriously. We take it seriously. And we don’t see anything that will block South Africa participating in the future. They’re committed to ensuring that, and we’re committed to working with them.”

However, other US official sources warned that her assurances should not be taken as a guarantee that SA’s continued participation in AGOA was assured. That was still seriously under review as the US had not yet seen any movement by South Africa on any of the four issues of concern to Washington – the imports of chicken, pork and beef and the local ownership requirement of the private security company bill.

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