US considers suspending SA’s membership of AGOA, ending billions in exports

Tweak the tiger’s tail for long enough and it will eventually turn around and bite you. South Africa’s disdainful attitude towards the US is becoming a living example. President Jacob Zuma’s deepening public friendship with globally ostracised Russian counterpart Vladimir Putin won’t have gone unnoticed in Washington. Similarly a continuous anti-business creep in laws proposed and enacted by Zuma’s socialist-inspired Government. On top of that, US multinationals operating in SA have been complaining about being coerced into giving away chunks of equity to an already wealthy elite. Insiders say that as a result, most of multinationals are re-assessing their long-term commitment to the country. Such decisions are sure to be hastened if SA’s duty free access to US market is removed. The country is currently the major beneficiary of the African Growth and Opportunities Act (AGOA), enacted in the year 2000 by President George W Bush. But this insightful article from the Financial Times of London reveals, when agreeing to a 10 year extension earlier this year, the US added a codicil specifically relating to SA. The frustrated Americans are now talking openly about suspending SA’s membership. Were that to occur, the fallout in a range of sectors would be considerable, particularly employment-rich motor vehicle manufacturing. – Alec Hogg

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by Shawn Donnan in Washington and Andrew England in Johannesburg

The US is threatening to suspend South African trade privileges under a recently renewed agreement in a potential blow to carmakers such as BMW that export to the US from South Africa.

Congress this summer renewed the African Growth and Opportunity Act, which gives African countries preferential access to the US market, for 10 more years. The Act aims to boost African trade by offering eligible countries duty-free access to US markets.

But included in the renewal was a clause that required US officials to carry out a special review of South Africa’s trade policy and what Washington contends are unfair and longstanding barriers to US beef, poultry and pork imports. Officials in Pretoria reject the charges.

The review is yet to be completed. But after a summer of negotiations US officials say they have grown frustrated with what they see as foot-dragging by South Africa. As a result they are now considering suspending South Africa’s Agoa membership.

Read also: Chicken Tarriffs: US Senators threaten to attack SA’s access to AGOA

“A resolution on unfair barriers to US exports is urgently needed,” said a spokesman for Mike Froman, US Trade Representative. “Without swift action, South Africa risks losing important tariff benefits under Agoa.”

The move, which comes ahead of the annual “strategic dialogue” between the two countries in Washington next week, has the backing of the powerful US poultry industry and its caucus in Congress.

Senator Chris Coons, a Democrat from the poultry-producing state of Delaware, said: “US poultry representatives negotiated an agreement on exports with their South African counterparts in good faith, and while I remain hopeful that this agreement will be implemented, I am concerned that we are not seeing enough progress and that market barriers persist.

“Congress has made clear that the United States should not allow other countries to enjoy trade benefits under Agoa while actively undermining our trading interests.”

But rather than chickens, the main victim in the spat may be South Africa’s car industry. Producers such as BMW, Ford and Volkswagen have expanded their operations in the country in recent years, partly because of South Africa’s preferential trade agreements with the US and EU. BMW, for example, exports 75 per cent of the 3-series cars it makes in South Africa, with the EU and US the two biggest markets.

According to US official data, the US imported $1.3bn in light vehicles from South Africa last year, which made up 74 per cent of the $1.75bn in imports covered by Agoa preferences. Altogether the US imported $8.3bnin goods from South Africa in 2014.

South African officials insist they have done nothing wrong and say they are close to resolving the meat and poultry issues.

South Africa has imposed anti-dumping duties on “bone-in” US chicken products for 15 years after accusing US producers of selling unwanted chicken parts in South Africa below cost. It also has a broader ban in place on US poultry imports as a result of avian influenza outbreaks on American farms.

Read also: SA poultry producers’ shares down as US deal kicks in

It has similar health-related restriction on US pork imports and introduced a ban on US beef after BSE was detected in the US in 2003, although South African officials insist that has now been lifted.

Sidwell Medupe, spokesman for the South African Department of Trade and Industry, said Rob Davies, the trade minister, held talks with Mr Froman at an Agoa summit in Gabon last month to discuss the outstanding issues. He said both “expressed satisfaction” on South Africa’s progress in resolving market access for US pork and beef products.

Avian influenza was the main outstanding issue, he said, adding that South African veterinarians wanted to be sure the US industry had been free of cases of the disease for at least six months. The vets are due to meet their US counterparts next week in a bid to get clarity on the issue.

“Once our guys are happy with the information, then things will move [forward],” Mr Medupe said. “We have done whatever is supposed to be done for us to remain in Agoa.”

Copyright The Financial Times Limited 2015

(c) 2015 The Financial Times Ltd.

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