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New spaces open to SA amid AGOA trade threat

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Picture: Jacoline Schoonees/DIRCO/August 8, 2022 – Minister of International Relations and Co-operation, Dr Naledi Pandor hosts US Secretary of State of the United States, Mr Antony Blinken, for the SA-US Strategic Dialogue. The US is a major export market for South Africa and a significant source of foreign direct investment (FDI). Trade and investment relations take place under the auspices of the African Growth and Opportunity Act (AGOA), which recently has come under strain.

By Ashraf Patel

The current trade threat that South Africa faces in 2023 on its African Growth Opportunity Act (AGOA) non-renewal is not new but part of the ‘ebb and flow’ of a mix of issues – ranging from geopolitics to the power of industry lobby groups in the US.

There is no doubt that the post Covid pandemic and current Ukraine-Russia conflict has put multiple pressure on a world order, and geopolitical fractures in particular. This has come to signify severe punishments and threats for nations that have chosen a non-aligned position such as South Africa.

The case of Walmart’s takeover of Massmart a few years ago is instructive. Today, despite the investment, many branches of Walmart-Massmart face closure (i.e., disinvestment) with huge job losses in store and union SACCAWU fighting tooth and nail to retain jobs and benefits.

Yet more than 20 years ago, the US and South Africa signed a Trade and Investment Framework Agreement (TIFA) in 2012. In addition, the US and the Southern Africa Customs Union (SACU), which includes South Africa, signed a Trade, Investment, and Development Co-operative Agreement (TIDCA) in 2008. The TIDCA establishes a forum for consultative discussions, co-operative work, and possible agreements on a wide range of trade issues, with a special focus on customs and trade facilitation, technical barriers to trade, sanitary and phytosanitary (SPS) measures, and trade and investment promotion.

So let us unpack core areas of US-SA trade in context.

Picture: Gary Cameron/REUTERS/August 4, 2014 – The current trade threat that South Africa faces in 2023 on its African Growth Opportunity Act (AGOA) non-renewal is not new. But undoubtedly, the Ukraine-Russia conflict has put multiple pressure on a world order, and geopolitical fractures in particular. This has come to signify severe punishments and threats for nations that have chosen a non-aligned position such as South Africa, the writer says.

Covid Nationalism, Western Pharmaceutical Behaviour

During the height of the Covid pandemic, vaccine nationalism-racism by the North has shown up the real nature of trade and investment, and that it is the interest of Western nations and their citizens that trumps everyone else. Not only was Africa denied vaccine access and doses, South Africa’s health system and many in the developing world procured the bulk of its vaccines from Western and US pharmaceutical corporations, which made billions of profits on vaccines during the pandemic. At the height of the pandemic, nations including South Africa and India lobbied at the WTO for IP access to vaccines, only to be denied this right.

Pressure from IP and Entertainment Industry Lobby

In 2019, at the height of the contested Copyright bill process, one heavily lobbied by US tech giants Google, Disney et al, was the focus of another punitive sanction threat. This time the US Copyright Entertainment, lobby MPAA et al pushed the US government to strong arm South African legislators to push the bill in a direction that favoured their Big tech companies business model. Here the AGOA threat was invoked to push the SA Copyright Bill into a particular line palatable to this powerful lobby, to the detriment of our creative industry.

The organisation’s Generalised System of Preferences (GSP) enabling clause requires that programme criteria be “generalised”, “non-reciprocal” and based on the development interests of the grantee, not the grantor. This principle of GSP has not been followed by the US.

Poultry Industry Dumping and Job Losses

South Africa’s poultry industry has been eroded due to the tariff free access into. Poultry is dumped by nations US, Brasil, Belguim and other EU nations to the detriment of the local industry and jobs.

“If the AGOA agreement is cancelled or South Africa is excluded, it may have a positive effect on the local poultry industry. South African farmers won’t have to compete with the dumped product and imports will decline.” (CEO of the South African Poultry Association, Izaak Breitenbach)

Hence the latest AGOA withdrawal spat should be seen in context and how it is used by various trade industry bodies as well as the US government at certain moments to arm twist nations into taking particular decisions.

As the case above has shown, in this unequal trade relationship with the US South African hardly gains and in fact the real value extraction in the trade and service value chains – from both agriculture to IP – already favours the US side.

Powerful industry lobbies have long bullied SA into taking specific policy directions, hence the US trade representative’s further threat of ending AGOA and access to US markets is a storm in a teacup and not new. As argued by Poultry SA, it may be better not to participate in the AGOA process as the supposed gains are marginal and net negative, and gaining access in one domain (i.e., duty free tariffs), means that SA must make concessions in other domains (i.e., IP and copyright etc).

South Africa – learning from the Covid vaccine years and poultry dumping and even the citrus case blockage into the EU market – is now taking its own national interest position. According to DTIC presentation to parliament in May 2023, SA’s trade policy aims to support industrial development, sustainable economic growth, decent work and economic inclusion, and seeks to improve its trade performance by increasing exports of higher value-added manufactured goods, and to strengthen national industrial capabilities, promote trade and resilience, taking an Africentric perspective.

In Africa, SA has worked to advance continental economic integration and industrialisation and our non-Africa engagements must support this; must correct manufacturing deficit in our trade profile. At a global multilateral level, it commits South Africa to adopt a developmental approach by seeking to address existing imbalances in the rules such as loss and damages fund at COP 27 etc.; and to secure policy space to pursue industrialisation and ensure new challenges (e.g., pandemic, environment) are addressed fairly and equitably.

In any event and in the final analysis, the global economic and geopolitical power is shifting East and South, with the collective GDP of BRICS nations now exceeding that of the G7. South Africa’s number one trade partner is in fact China, both in terms of exports (11 percent) and imports (23 percent) and it seeks to diversity into the global South.

As BRICS and other regions start to offer better trade, investment and development finance models, the AGOA trade issue and access must be viewed against this backdrop – SA now has more options in a world where the Global South and Africa and Latin America and others are becoming more prominent on the international stage; and SA can get better terms in intra-trade deals in goods, services, and even more equitable cultural relations.

The world is indeed multipolar and varying risks such as trade wars and punitive sanctions can be mitigated. South Africa should act in its interests as it navigates these global geopolitical headwinds.

Ashraf Patel is a Senior Research Associate at the Institute for Global Dialogue (IDG)