The planned free trade deal with the United States might not turn out to be a boon for South Africa, argues a prominent economist who also has reservations about the existing African Growth and Opportunity Act.
Minister of Trade and Industry Alec Erwin announced at the weekend that South Africa is to enter negotiations for a free trade pact between the US and the Southern African Customs Union, also including Botswana, Lesotho, Namibia and Swaziland.
The agreement is expected to entrench trade benefits currently enjoyed under the Act — but will go on to open local markets to US exports. South Africa is to consult other customs union members and talks are planned for early next year.
Signed into law in May 2000 by former US president Bill Clinton, the Act gives 35 African countries duty-free access to US markets. Goods covered range from textiles and apparel to agricultural products and vehicles.
However, Mike Samson of the Economic Policy Research Institute this week described the Act as ”a free lunch with a catch” — implying that the free trade deal with the US was the long-term price South Africa would pay for the Act’s benefits.
”My concern is that we will restructure industry to take advantage of the Act, which falls away in 2008. The question is how the law will have changed our position then.”
Last year Swaziland exported $14,8-million worth of goods under the Act. Samson said as 2008 approached, African countries would have to ”start giving something” to continue enjoying the privileges under the Act.
That would probably entail opening up markets, which ”involves painful restructuring”. The threat is of factory closures and job losses as companies move to more capital-intensive production.
Trade liberalisation typically produces winners and losers — ”and usually the poor country becomes the loser”.
Outgoing US trade representative for Africa Rosa Whitaker lauded the the Act as a highlight of her tenure. During the first half of this year non-fuel imports to the US from Africa increased by 155%, largely due to a 245% rise in clothing imports and a 131% increase in vehicle sales.
Trade department deputy director Victor Mashabela conceded that the lapsing of the Act in six years has created uncertainty. Another weakness is that it allows US interests to lobby for the exclusion of products or the raising of tariff barriers.
Mashabela acknowledged that there is a trade-off and that South Africa will have to open its markets to the US.