Unpacking why SA could lose R23.4bn of US exports

Source: Rene Vollgraaff and Tshepiso Mokhema – Fin24, 01/10/2015

Johannesburg - South Africa is fighting to retain duty-free access for
exports to the US worth as much as R23.4bn a year in a dispute that
pits farmers in the two nations against each other.


The US is reviewing South Africa`s status as a full beneficiary of a
preferential trade pact known as the African Growth and Opportunity
Act (Agoa), which eliminates import levies on more than 7 000 products
ranging from textiles to manufactured items. Agoa was renewed in June
for another 10 years, benefiting 39 African nations.


At the heart of the dispute are American chicken and cattle farmers
who want the South African government to remove trade restrictions
imposed to protect the local industry from a flood of cheaper imports.
While Trade and Industry Minister Rob Davies said on September 29 that
South Africa had done all it can to retain access to Agoa, the US
government says there are still major unresolved issues.


"South Africa needs to take concrete steps towards eliminating
barriers to US trade and investment, a key criterion to be eligible
for Agoa trade benefits," Trevor Kincaid, a spokesperson for the
office of the US Trade Representative in Washington, said in an
emailed response to questions on Wednesday. "Ultimately, South
Africa`s Agoa eligibility is in South Africa`s hands."


No sooner had the two countries reached an agreement over American
chicken imports to South Africa in June, a new dispute emerged
relating to import restrictions following an outbreak of avian flu in
the US. Veterinary experts from the two nations met last month to
discuss health concerns around the shipment of chicken, beef and pork
to South Africa.


The risk of South Africa losing its Agoa benefit is not "based so much
on the realistic assessment of the value of the South Africa market,
it`s more about politics in America," Christopher Wood, a researcher
in the economic diplomacy department at the South African Institute of
International Affairs, said by phone from Johannesburg.


"The chicken caucus within the US Congress is particularly strong."
South African Poultry Association CEO Kevin Lovell said he expects the
US government and farming industry to "adopt a more equitable and
reasonable approach".


The US embassy in Pretoria said on September 16 that eliminating
barriers on American poultry and beef exports will address concerns
raised by the industry.


Agoa has enabled South Africa to more than double its exports to the
US since 2000, with vehicles and agriculture products benefiting the
most. Shipments under Agoa accounted for more than a fifth of the
nation`s exports to the US last year, according to data compiled by
the Tralac Trade Law Centre, based in Stellenbosch, near Cape
Town.


Eliminating barriers
To remain a beneficiary of Agoa, African countries are required to,
among other things, eliminate barriers to US trade and investment,
operate a market-based economy, protect workers` rights and implement
economic policies to reduce poverty.
South Africa is accused of restricting US businesses with plans to cap
foreign ownership of private-security companies at 49%. If the law is
passed, ADT, based in Boca Raton, Florida, will be required to
relinquish control of its South African unit.


African nations that no longer qualify as beneficiaries under Agoa
include the Democratic Republic of Congo, Gambia and South Sudan.


Swaziland lost its access in January because of an alleged
lack of protection of workers` rights, while Zimbabwe and Sudan aren`t
eligible.


"South Africa is the key player under Agoa and neither side would want
to see South Africa graduated out of the programme - the economic and
political fallout would be big," Eckart Naumann, an independent
economist and associate at the Trade Law Centre, said in an emailed
response to questions.


"There is a decent chance that South Africa may just scrape through."