TRALAC - Trade Law Centre

US set to reimpose tariffs on SA goods

Monday, 04 January 2016 Published: | Simon Barber and Linda Endsor

Source: Business Day (South Africa)

US President Barack Obama is set to announce as early as Monday that he is suspending duty-free treatment of South African agricultural products under the African Growth and Opportunity Act (Agoa).

SA exports at risk, which include citrus, macadamia nuts and wine, were valued in the first 10 months of last year at more than R2bn, according to US trade data.

Mr Obama’s expected move reflects deep frustration with what the White House and members of Congress, including long-time allies, see as Pretoria’s failure to meet mutually agreed benchmarks for lifting bans on US poultry and beef, nominally imposed to protect the health of SA consumers and livestock.

Agoa, first adopted in 2000, grants African countries privileged access to the US market on certain conditions, including that they make "continual progress" towards eliminating barriers to US trade and investment.

On November 5 last year Mr Obama told Congress he had determined SA was not making sufficient progress and that unless Pretoria could prove otherwise within 60 days he intended to reimpose tariffs on SA farm exports that had been exempted under Agoa.

When the deadline expired at midnight on December 31, "outstanding issues" had not been resolved, Trevor Kincaid, spokesman for the office of the US Trade Representative, said.

Talks had continued late into New Year’s Eve.

On Sunday Trade and Industry Minister Rob Davies was reluctant to say anything about SA having missed the December 31 deadline imposed by Mr Obama ahead of a media conference today with Agriculture Minister Senzeni Zokwana and Health Minister Aaron Motsoaledi.

He conceded, however, that the progress in the negotiations had been too slow. Questioned as to whether he was concerned about the failure to conclude an accord with the US, Mr Davies said "yes and no", adding that he would clarify his views today.

From the US perspective, the major unmet benchmark was US chicken on South African shelves by the end of last year.

SA did agree to rebate prohibitive antidumping duties on a 65,000 tonne annual quota for US chicken portions and to admit US poultry sourced from regions deemed free of avian influenza. However, Pretoria is now demanding that US chicken imports be certified free of salmonella, a common bacteria destroyed by cooking.

The US says it exports chicken to 160 other countries without meeting this standard and that the standard itself is not "science-based" as required under World Trade Organisation rules. As one official put it: "Nobody eats chicken sushi."

Also unresolved is SA’s ban on US beef, originally imposed to prevent the spread of bovine spongiform encephalopathy (BSE) — mad cow disease. Cabinet lifted the ban in August, decreeing the risk was negligible, but a new sticking point has emerged.

US herds contain cattle imported from Canada and Mexico, which SA has yet to declare negligible risks for BSE. SA wants assurances that meat from these animals will not be included in imports from the US. The US says this is not possible.

US imports of SA citrus between January and October last year were valued at $60.2m, up from $51.9m over the same period in 2014. Growers have told US agriculture officials they fear they will not be able to compete with exports from Peru, Uruguay and Chile, should Agoa preferences be suspended.

Once announced, the suspension would go into immediate effect and would affect all relevant goods not yet landed in the US, including those in transit.

Early last month Mr Davies signed off on a report by the International Trade Administration Commission. The commission fast-tracked the process of considering public submissions on its proposed regulations for the rebate on the imported chicken quota.

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