/ 10 August 2012

Car-makers lobby US on trade deal

Ninety-eight percent of South Africa’s exports enter the US market duty- and quota-free under the Act.
Ninety-eight percent of South Africa’s exports enter the US market duty- and quota-free under the Act.

Growing concern about possible exclusion has prompted the government and private sector to join forces to lobby for continued inclusion in the African Growth and Opportunity Act (Agoa) preferential trade programme with the United States.

The Act was signed into law under the Clinton administration in May 2000 and provides beneficiary countries in sub-Saharan Africa with liberal duty-free and quota-free access to the US market for more than 6000 product lines.

Ninety-eight percent of South Africa’s exports enter the US market duty- and quota-free under the Act.

“Africa is eagerly lobbying for its extension beyond 2015 [when it will expire],” said Minister of International Relations and Co-­operation Maite Nkoana-Mashabane following discussion with US Secre­tary of State Hilary Clinton this week.

Wake-up call
But the automotive industry feared the Act would not be extended following a beneficiaries conference last Friday, said Nico Vermeulen, director of the National Association of Automobile Manufacturers of South Africa.

“It served as a wake-up call from government to the private sector. There is the very real risk South Africa will graduate from [the Act].”

Although Clinton has made it clear that the Obama administration favours the continuation of the programme under the Act, the decision lies with the US Congress and will be made only early next year following the US elections.

“It is not clear what the US Congress will decide to do,” said Sidwell Medupe, spokesperson for the department of trade and industry. “This being the case, it would be wiser to rely on our own lobbying efforts to generate enough understanding among congressmen [to convince them] of the need to extend [the Act] beyond 2015 and to include South Africa.”

A look at automobile trade figures underscores what is at stake. In 2001, a year after South Africa first began to benefit from the Act, vehicle and component exports to the US totalled R4.7-billion.

Last year, the amount was R19-billion. The iron and steel, chemicals, edible fruits and beverages sectors are also major beneficiaries.

Economic activity
Data from the US department of commerce shows that South Africa is one of the top five beneficiaries and the 37th US export partner out of 236.

Medupe said the programme had led to the creation of value chains on the continent, and if South Africa was excluded suppliers on the continent would also suffer.

“Let’s take leather seats, for example. Some of that leather is sourced from Botswana,” Vermeulen said. “And in the case of catalytic converters, some of that platinum is sourced from Zimbabwe.”

An increase in economic activity in South Africa as a result of exports to the US had also generated demand for machinery and other imports such as locomotives from the US, he said. “Thus, the Act is a win-win initiative for sub-Saharan Africa and the US.”

Vermeulen said US companies such as Ford and General Motors benefited greatly from South African-made components at low cost and had to be mobilised to lobby Congress as well.

But Medupe said the US had complained about the disadvantaged status of its exports to South Africa compared with those from the European Union.

Eckart Naumann, an associate at the Trade Law Centre for Southern Africa, said the chance of South Africa remaining a part of Agoa was 50-50 at best.

“It is not unlikely that a future Act will be more restrictive by providing eligibility to fewer poorer countries,” he said. But Naumann said the two countries would put in place systems that could smooth the path to a more reciprocal bilateral relationship.