TRALAC - Trade Law Centre

South Africa has 60 days before Obama revokes certain AGOA privileges

Friday, 06 November 2015 Published: | Simon Barber

Source: Business Day (South Africa)

US President Barack Obama has given South Africa 60 days to show it is meeting the requirements of the African Growth and Opportunity Act (Agoa) before he imposes normal tariffs on South African agricultural products.

Mr Obama said on Thursday that South Africa had until January 4 to satisfy him that it was complying with the eligibility requirements to enjoy duty-free access for its agricultural products under Agoa.

Losing the duty-free status afforded by Agoa could affect US orders for South African citrus, which were valued at $57m through the first nine months of this year; macadamia nuts, worth $43m in 2014; and wine, worth $33m in 2014.

According the US International Trade Commission’s website, the "normal trade relations" duty on shelled macadamia nuts is $0.05/kg; on citrus, $0.019/kg; and on wine, $0.063 a litre.

However, the weakness of the rand against the dollar could mitigate the effect of duties on the competitiveness of those products in the US market.

"I am taking this step because South Africa continues to impose several longstanding barriers to US trade, including barriers affecting certain agricultural exports," Mr Obama said in a letter announcing his decision to Congressional leaders.

"I have determined that South Africa is not making continual progress toward the elimination of barriers to US trade and investment as required by section 104 of Agoa."

In renewing Agoa for 10 years last June, Congress ordered the office of the US Trade Representative to undertake an "out of cycle review" of whether South Africa, by far the largest user of Agoa benefits, was eligible to continue enjoying them.

This was primarily on the initiative of senators from states with large poultry interests chafing against the antidumping duties South Africa imposed on US chicken wings and drumsticks in 2000.

The senators, Chris Coons of Delaware and Johnny Isakson of Georgia, encountered no opposition, reflecting broader bipartisan concern about South Africa’s treatment of US exporters and investors.

Without going into detail, Mr Obama did not limit his reasons for threatening suspension of SA’s Agoa benefits to what the US sees as foot-dragging on undertakings to open the South African market to US chicken, beef and pork.

US officials have indicated that if President Jacob Zuma were to sign the Private Security Industry Regulations Amendment Act as it stands, South Africa could lose Agoa privileges on the grounds that US companies would face de facto expropriation.

In a separate statement, the US Trade Representative focused exclusively on the meat issues. It said the president would reimpose normal duties on currently tariff-exempt South African farm products "unless South Africa meets certain benchmarks to eliminate barriers" to US exports of the three meats.

In Paris in July a deal was struck under which US exporters were to be allowed to sell South Africa 65,000 tonnes a year of the contentious chicken parts before punitive antidumping tariffs kicked in.

The agreement was subsequently undermined by ongoing South African bans on imports of US all poultry, plus beef and certain pork cuts, on grounds of animal health and food safety — grounds the US regards as specious.

The US Trade Representative said that following the launch of the eligibility review on July 21, South Africa had "committed to benchmarks on poultry, pork and beef that it would need to meet in order to demonstrate compliance" with Agoa.

"South Africa failed to meet October 15 benchmarks related to US poultry, including finalising an avian influenza trade protocol for the export of US poultry meat, as well as a US Department of Agriculture export certificate for poultry to enable poultry shipments to occur by the end of the year."

Mr Coons and Mr Isakson, in a statement hailing Mr Obama’s announcement, said South Africa had been slow to meet commitments it made in Paris.

"South Africa does not deserve to receive benefits under Agoa as long as they refuse to drop unfair trade policies that have effectively slammed the door on American chicken imports for over a decade.

"There is still time to address these issues, and we hope the president’s action today spurs South Africa to open their market to American poultry immediately."

In renewing Agoa, Congress gave the US Trade Representative and the White House the option — which they are now threatening to exercise — of suspending noncompliant countries’ benefits on a product-by-product basis. Previously, countries were either in or out.

The US Chamber of Commerce and other US business groups have urged the US Trade Representative to keep South Africa in Agoa despite some of their members’ frustration with South African policy.

Ahead of the US move, Trade and Industry Minister Rob Davies told Parliament’s trade and industry portfolio committee that South Africa had sent the US proposals to settle outstanding issues and was awaiting a response.

The US has now responded.

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