Bloomberg | 15 February 2021
Biden faces South African push to extend trade concessions
By S’thembile Cele and Loni Prinsloo
South Africa is apprehensive about striking a new trade deal with the U.S. and would rather maintain existing relations with the world’s largest economy, the nation’s top trade official said.
South Africa is currently party to the so-called Generalized System of Preferences and the African Growth and Opportunity Act, or AGOA, which together allow most sub-Saharan African countries duty-free access to the American market for almost 7,000 products. AGOA is due to expire in 2025, while Richard Neal, the chairman of the House of Representatives’ Ways & Means Committee, has called for the GSP — the U.S.’s oldest and largest trade-preference program for the world’s poorest economies — to be updated.
“We are hoping we can keep the current unilateral agreement in place,” Lionel October, the director-general of South Africa’s Department of Trade, Industry and Competition, said in an interview last week. “We are working more on continuing GSP preferences, hopefully getting an extension to AGOA, even though we might have to give some concessions. But rather that than a full-blown trade agreement” that may take four to five years to negotiate, he said.
Trade in goods and services between South Africa and America was valued at $17.8 billion in 2019, while $2 billion of exports from Africa’s most-industrialized economy were cleared under the GSP and AGOA, according to U.S. government data.
South Africa’s preferential market access to the U.S. is under review. That’s after the U.S. Trade Representative accepted a complaint from the International Intellectual Property Alliance — a U.S. private-sector group that represents companies including the makers and distributors of books, films, music and video games — that alleges the country’s Copyright Amendment Bill and Performers’ Protection Amendment Bill fail to “provide adequate and effective protection” of U.S. copyrights. If the outcome of the review is negative, South Africa could lose its preferential market access under both the GSP and AGOA.
South African officials plan to meet their American counterparts early next month to discuss trade relations under President Joe Biden’s administration, according to October.
“We are planning to put a lot of effort into our relationship with the U.S.,” he said.
While Kenya is negotiating a bilateral trade deal with the U.S., a country-to-country deal isn’t an option for South Africa because it is part of a regional customs union with Botswana, Lesotho, Eswatini and Namibia. The government also fears that any new accord could be accompanied by conditions that would prejudice local industry, October said.
Here are other key issues addressed by October:
The government will need to maintain some form of protection for South African manufacturers if it is to build up local production capacity and create employment, according to October. “We have been relying on our mining and finance sector to drive growth,” he said. “Countries only become successful if they have manufacturing and agriculture. That is where the high-paid jobs are, it is where the mass employment is. We need protection when it is needed. Obviously you can’t become uncompetitive.”
Africa’s largest auto-making nation is experiencing an investment boom, with the world’s biggest vehicle producers adding to manufacturing capacity. Expansion plans being implemented by Ford Motor Co. will generate investment totaling 33 billion rand ($2.3 billion) and see the construction of 13 new factories and the overhaul of a rail link between Pretoria, the capital, and the southern coastal city of Port Elizabeth by 2025. Toyota is ramping up production of its hybrid cars, while Isuzu Motors Ltd. is reviving an old General Motors Co. plant in the south of the country. The government is now reaping the fruits of a 20-year effort to build up the industry, which generates almost 15.5% of the nation’s exports and employs more than 100,000 skilled workers, according to October.
The steel industry lies at the heart of the country’s industrialization drive and a master plan to encourage output will be announced soon. Demand has already been picking up, driven by an infrastructure-development drive and an expanding mining industry, with investments being made in furnaces and plants being modernized. The government wants to substantially increase local participation in the steel industry, including taking up a bigger stake in Arcelor Mittal SA’s South African unit, October said.
A new continental free-trade accord that came into effect this year will increase African countries’ market access, encourage regional trade and promote industrialization — a goal that has been beyond the reach of most small African nations, October said. South Africa intends to step up trade with Kenya, Ghana, Nigeria and Egypt, and work with them to make in-roads in the automotive sector.