US to suspend South Africa duty-free agricultural trade status

US to suspend South Africa duty-free agricultural trade status

Bilateral Trade by Sector: United States - South Africa

Value ('1000 dollars) / Year-to-date to September

Friday, 06 November 2015 ~ Nicole Gaouette and Billy House

The U.S. plans to suspend trade benefits on agricultural goods from South Africa, intensifying a dispute over that country’s restrictions on farm imports that had pitted farmers in the two nations against each other.

The action follows a U.S. review of South Africa’s status as a full beneficiary of a preferential trade agreement under the African Growth and Opportunity Act, or AGOA, which eliminates import levies on more than 7,000 products ranging from textiles to manufactured items.

The U.S. determined that South Africa has continued imposing barriers to U.S. trade, including American agricultural exports, according to a letter President Barack Obama sent to the Congress on Thursday. The suspension will become effective in 60 days, according to the notice. 

The value of duty-free South African farming exports to the U.S. market was $176 million in 2014, just a fraction of its $1.7 billion of trade under AGOA, according to U.S. Department of Commerce data. While that proportion may be low, the suspension threatens to strain trade relations between the nations.

The trade program has helped South Africa more than double its exports to the U.S. since 2000. Shipments under the agreement accounted for more than a fifth of the nation’s exports to the U.S. last year, according to data compiled by the Trade Law Centre, based in Stellenbosch, near Cape Town. Total two-way trade between South Africa and the U.S. was about $14 billion last year.

Pact Assessment

"I will continue to assess whether South Africa is making continual progress toward the elimination of barriers to U.S. trade and investment in accordance with AGOA eligibility requirements, as well as whether this suspension of benefits is effective in promoting compliance with those requirements," Obama said in the letter.

South Africa has ignored U.S. concerns about blocking U.S. beef, chicken and pork for years, said Representative Ed Royce of California, the Republican chairman of the House Foreign Affairs Committee, in a statement on Thursday.

"It is important for the South African economy, and our continued strong relationship with the people of South Africa, that they resolve these problems and regain AGOA eligibility," Royce said.

AGOA, renewed by U.S. lawmakers in June, benefits 39 sub-Saharan African nations. To remain a beneficiary, countries are required to eliminate barriers to U.S. trade and investment, operate a market-based economy, protect workers’ rights and implement economic policies to reduce poverty.

Trade Restrictions

At the heart of the dispute between the U.S. and South Africa were American chicken and cattle farmers who wanted South Africa’s government to remove trade restrictions imposed to protect the local industry from a flood of cheaper imports. South African Trade and Industry Minister Rob Davies said in September that his country had done all it could to retain access to AGOA.

“We are not too sure what is going on because the message we got from the poultry industry is that things are running well and that it was all systems go, but obviously that was not the case,” Johan Pienaar, deputy chief executive officer of Agri SA, the biggest representative of the nation’s agriculture industry, said by phone on Friday. “It came as a surprise to us and this is a pity. We will have to pull out all the stops as of today and engage with the department and hopefully with the minister as well.”

South Africa’s poultry industry won’t change its requirements unless the government says it should, Kevin Lovell, CEO of the country’s Poultry Association, known as SAPA, said by phone.

African nations that no longer qualify as beneficiaries under AGOA include the Democratic Republic of Congo, Gambia and South Sudan. The U.S. announced last week Burundi will be expelled from the trade pact after deadly violence connected to a political crisis in the East African nation. Swaziland lost its access in January because of an alleged lack of protection of workers’ rights, while Zimbabwe and Sudan aren’t eligible.

South African Trade and Industry spokesman Sidwell Medupe declined to comment when reached by mobile phone late Thursday.

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