Chinese premier's visit tests textile strains in SA

South Africa’s trade relations with juggernaut China will be put to the test this week when Premier Wen Jiabao jets into Cape Town for talks centred around China’s mighty textile industry.

The South African economy, the biggest in Africa, has been hit hard in its own textiles sector by cheap imports and ready-made products from China and President Thabo Mbeki’s government has come under increasing pressure to deal with the problem.

Clothing companies and unions agree that about 25 000 jobs have been lost over the last two years as a result in a country with an official unemployment rate of 26%, but that experts say is closer to 40%.

Analysts say the answer to South Africa’s trade conundrum with China did not lie in protectionism. South Africa should look at liberalising trade with China and try to attract more investment, they said.

“The clothing issue will no doubt be one of the major points on the agenda,” said Peter Draper, an expert on trade with Asia at the South African Institute for International Affairs (SAIIA).

“Further to this, there would certainly be talks on progress towards a Free Trade Agreement between the two countries. They [China] want to see progress,” he told Agence France-Presse.

South Africa must try to negotiate with China to try to cushion the blow from its economic clout, added Johannesburg-based economic analyst Reg Rumney.

“There is really not that much to be done.
South Africa should rather engage with China than try and shut them out. There’s no doubt about it that we cannot compete against China in certain areas head-on,” he said.

Earlier this month, China committed itself to restricting textile exports following similar deals with the United States and the European Union, local papers reported.

The deal would involve restrictions on textiles sales to South Africa as well as an agreement to focus on higher-priced goods and higher-priced quality products and limiting credit to the country’s textile industry.

No details of the deal or how it would be enforced were given. But Chinese ambassador to South Africa Liu Guijing has played down the furore over the textiles issue.

“The impact of textile exports to Africa is not that serious,” Liu said in an interview.

He said a draft agreement had been reached in December with Pretoria but that the main labour federation, the Congress of South African Trade Unions (Cosatu), had raised questions about some of its provisions.

“We have entered a new round of dialogue, talks and negotiations and we are optimistic that we can find a solution,” Liu said.

“If China stops our exports of textiles and garments to Africa, that gap will be filled immediately by other developing countries so that might not be good for low income consumers,” he added.

Also of concern to South Africa is its huge trade deficit with the Asian giant. South African exports to China amounted to R5,5-billion ($801-million) while it imported more than R18-billion in manufactured goods in 2004, according to government statistics.

Even though there are more than 80 Chinese companies in South Africa, foreign direct investment here amounted to $130-million as opposed to R400-million invested by South African companies in China, according to Deputy Foreign Minister Aziz Pahad.

There are 14 major South African companies including beer giant SABMiller and petroleum giant Sasol operating in China with large investments, as opposed to those Chinese companies in South Africa.

Business between Africa and China however was booming, reaching €29-billion in 2004 at a growth rate of 59% over the previous year.

Said Rumney: “South Africa should try to woo more Chinese investment, as it is a country that’s rapidly becoming wealthier.” - AFP

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