SA-US trade deal reaches beyond Agoa

South African exporters have used Agoa to expand their exports to the American market, writes Mzwandile Masina.

The US government through the Office of the US Trade Representative is currently seized developing a report on “Deepening and Broadening the Trade and Investment Relationship between Africa and the US”.

Over the years, the US has been one of South Africa’s key trading partners. Such relations were supported by a number of government-to-government platforms.

Among many, an important platform between the two countries was the Binational Commission (BNC), which was launched during President Nelson Mandela’s tenure. The BNC has since been replaced with the SA-US Annual Bilateral Forum and the SA-US Bilateral Strategic Dialogue.

Three forums

The economic relations between South Africa and the US are conducted through three forums, namely: (1) South Africa-US Trade and Investment Framework Agreement (Tifa); (2) Africa Growth and Opportunity Act (Agoa); and (3) Southern Africa Customs Union (Sacu) – US Trade, Investment, Development and Co-operation Agreement (Tidca).

The issues of interest on the bilateral trade and investment agenda are discussed through the Tifa led at a ministerial level. Total two-way trade between South Africa and the US increased from R57 billion in 2001 to more than R141bn in 2014. The bilateral trade has surpassed the pre-crisis figure of R127bn in 2008, which had declined to R83bn in 2009. In 2014, for the US, South Africa ranked as the second-largest market after Egypt in Africa, accounting for about 17 percent of US exports to Africa.

Our exports to the US are largely commodity based, approximately 52 percent are mineral products, and base and precious metals. This does not take away the fact that the US provides market access for exports from South Africa, such as cars, wines, citrus, macadamia nuts, live animals and chemicals that account for more than 36 percent of total exports to the US.

South African exporters have used Agoa to expand their exports to the US market and also build co-operative business networks and technological linkages, that have benefited both countries. We therefore welcome the extension of Agoa for the next 10 years until 2025.

Agoa contributed to the development of regional value chains on the continent, albeit from a low base. For South Africa, Agoa has been critical to a growing intra-industry trade in the automotive sector between South Africa and the US. For its part, South Africa has worked with the US to ensure safe trade in exports of pork, beef and poultry from the US into the South African market. The first shipment of US chicken has already been cleared.

On the poultry side, a protocol to secure continued exports of poultry from those states in the US that are not affected by avian flu has been concluded. In addition, South Africa and US vets finalised a Poultry Veterinary Health Certificate (VHC). A “side-letter” on salmonella that clarifies South Africa’s existing standards and procedures was agreed on in January.

On the pork side, South African vets negotiated a list of pork cuts to ensure safe trade free from at least three diseases, namely, trichinella, porcine reproductive and respiratory syndrome and Aujesky disease.

A side-letter has also been negotiated for the treatment of shoulder cuts. For direct unrestricted trade, the US has agreed to remove risk materials, such as lymph nodes and connective tissue. An agreement on both the VHC and pork side-letter were also finalised in January.

Challenge

The concern has really been about how we maximise the benefits of Agoa to change the structure of our trade with the US. This is a challenge not only for South Africa but for all the Agoa beneficiary countries. In the latest statistics, the US chamber indicated that 86 percent of exports by African countries to the US are still crude oil. Even for South Africa, a significant portion of our exports (52 percent) are still minerals and metals. Therefore, there exists an asymmetrical relationship between Africa and the US. The imports from the US comprised largely of value-added products.

The key areas to improve utilisation of Agoa as a way of enhancing the Africa-US trade and investment relations include, among others: (1) increased US investments to assist with creating productive capacity in the continent; (2) increased US investment in infrastructure; (3) capacity building to meet the US standards; and (4) the expansion of the product coverage under Agoa to include products of export interest to African countries.

Total bilateral investments between South Africa and the US increased from R1.2 trillion in 2012 to about R2trln in 2014. There are more than 600 US companies that have invested in South Africa. Equally, there are a growing number of South African companies that are investing in the US, with one of the largest investments coming from Sasol, investing in coal to liquid facility in Louisiana.

In order to improve the trade and investment environment between South Africa and US, the two countries have the Tifa platform to discuss issues of interest, such as those relating to policy issues and market access. The next Tifa meeting is expected to be hosted in South Africa later this year.

All these market access issues are being discussed, taking into account the interests of both countries, and we have stood very firm in all major platforms where we engage with US Representatives in defending our sovereignty and territorial integrity. With this being said, South Africa is open for business.

* Mzwandile Masina is the South African Deputy Minister of Trade and Industry.

** The views expressed here do not necessarily reflect those of Independent Media.

BUSINESS REPORT