Agoa: A dangerous game of chicken

If poultry industries in South Africa and the United States cannot strike a deal on exports soon, other important sectors in the domestic economy, such as vehicles, citrus and wine, will face the real danger of being excluded from a preferential trade agreement with one of the world’s largest economy. The loss would amount to billions of rands annually, with thousands of jobs at risk.

The African Growth and Opportunities Act (Agoa) was first extended in 2000 under the Clinton administration to sub-Saharan economies, including South Africa. It allows liberal duty-free and quota-free access to the US market for more than 6 000 product lines.

A number of industries, including motor, edible fruits and wine, have flourished because of this. Exports to the US were $8.5-billion in 2013 and thousands of jobs have been created.

But these jobs could be on the line if South Africa and the US cannot find common ground on some issues. A South African delegation made its way to Washington last week in a bid to iron them out and secure South Africa’s place in the trade agreement, which is up for renewal in September.

In a background briefing by the US embassy this week, two US officials, who were not named, said the primary issue was for poultry companies on both sides to come to an agreement, which required urgent action from the South African government.

SA exclusion
South Africa will almost certainly be excluded if a solution to the problem is not found. It involves the blocking of US chicken imports for the past 15 years, which followed a court case in 1999 that was won by the local industry, which accused the US of dumping chicken in the local market. A decision to uphold this judgment is hotly contested by US officials and industry.

The domestic automotive industry, which produces vehicles and components for export, has perhaps benefited the most from the Act – a dedicated shipping line has even been established to ferry the products. After the European Union, the US is the second largest market for South Africa’s automotive exports.

Under the Act, which affords South Africa a 2.5% tariff preference on vehicles alone, automotive exports to the US almost quadrupled, and grew from R4.7-billion in 2001 to R17.1-billion in 2014, according to figures provided by the National Association of Automobile Manufacturers of South Africa (Naamsa).

US automotive exports to South Africa have also benefited, and trade, often using the same shipping line, grew from R2.37-billion in 2001 to R11.8-billion in 2014.

The local vehicle manufacturers industry employs 30 000 people and the component manufacturers 83 000.

“The contribution of Agoa has been substantial,” the chief executive of Naamsa, Nico Vermeulen, said this week. “From a Naamsa point of view, we certainly hope Agoa will be extended to South Africa again.”

US exports
According to estimates from the Citrus Growers’ Association of Southern Africa, exports to the US have amounted to $700-million to date, or an average of $60-million a year.

In 2014, South African oranges worth $41-million and citrus juice worth $58-million entered the US.

“It is estimated that the development of the US market for summer citrus has generated 5 000 new, permanent jobs in those areas approved for shipment to the United States and 3 000 temporary positions supporting 25 000 dependents,” according to a report by the association.

The industry believes it has the potential to double exports in the next five years, and triple them over the next decade, if South Africa is included in the renewed Act and there are no new conditions.

“This export growth will have a tremendous impact on job creation in South Africa, but also at the US ports of entry. These export numbers will influence upward skills mobility, export earnings, direct foreign investment in the citrus industry and societal benefit,” the report said.

“The development of the US market for South African citrus has been a sound diversification strategy for the industry. The reauthorisation of Agoa is critical to the extension of that strategy.”

Wine industry
The wine industry could also feel the pinch as the US is a growing export market. Millions of litres are exported each year.

If Agoa was not in effect, the industry would be paying an additional $0.63 a litre in duties.

Swaziland was excluded from Agoa in June last year for different reasons, mainly to do with worker rights, and has lost 2 500 textile worker jobs as a result.

The poultry industries in South Africa and the US have been left to negotiate directly, but striking a deal to salvage a place in the Act will seemingly have to come at the expense of the local poultry industry, the chief executive of the South African Poultry Association (Sapa), Kevin Lovell, said.

The total number of direct employees in the South African broiler industry, which excludes eggs, is 48 118.

Bargaining chip
Technically, the poultry issue has little to do with the Act, although the agreement is being used as a bargaining chip.

“This had nothing to do with Agoa,” Lovell said. “What they are doing is not proper or moral, but it is perfectly admissible.”

He said the poultry industry was willing to negotiate because of the repercussions for other industries reliant on the agreement.

“We don’t mind supporting it. We acknowledge it is good thing for South Africa. That is why we are prepared to make concessions.

“But we know, as poultry, we can only lose. There is nothing in it for us. The question now is how much can we afford to lose?”

David Wolpert, the chief executive of the Association of Meat Importers and Exporters (South Africa), said if the market was reopened, increased supply could create competition, bring down prices and raise standards, which would benefit the South African consumer.

New offer
Lovell said his association had made a new offer to the US poultry industry last week, which would allow 50% more tonnage of US chicken imports a year to be exempt from anti-dumping duties, but the offer was rejected.

But Jim Sumner, the president of the USA Poultry & Egg Export Council, described the offer as “very, very limited”.

“Sapa, with the support of their government, appears determined to keep all foreign poultry out of their market with the various dumping cases they continue to bring all over the world,” he said.

“It gives an indication that we are very far apart in our attempt to find common ground. Our proposed solutions and our negotiations have somewhat stalled because of our differences.”

Sumner said the US industry would like to see their access to the South African market restored to a level they felt it would be at had the dumping case not been imposed 15 years ago.

“We are prepared to make concessions, but are the Americans prepared to be more reasonable?” asked Lovell. “If so, we can walk out of here with an agreement.”

Urgent situation
The unnamed US officials stressed the urgency of the situation.

“We are working with Congress to have the renewal happen earlier rather than later,” one said. He added that Congress was working on draft trade legislation and it was uncertain when they would move ahead with it, but “it’s clear all of us are working against the clock”.

“Part of our problem is Congress has a number of important trade legislation to deal with. It must move on them … Remember, what Congress has to do is not a simple Agoa renewal. They have to rewrite the legislation and they can add or subtract any other privileges or conditions.”

In response to Mail & Guardian‘s questions, the department of trade and industry said Agoa contributes to regional integration and enhances the development of regional value chains. It has also “generated a lot of goodwill for the United States in the continent”.

Further, the department said estimates are that Agoa created 100 000 jobs in the US and around 62 000 jobs in South Africa. “South Africa continues to be the largest market for US goods in Africa comprised mainly of value-added products. In addition, intra-industry trade, in particular in automotive industry, has been on an upward trend.”

South African ambassador to the United States Mninwa Mahlangu has joined a delegation African ambassadors this week who will spend most of their time on Capitol Hill encouraging Congress to renew Agoa timeously, according to the department.

It said the poultry industries in each country are “fully engaged on the matter and we expect an agreement to be reached soon”.

These are unprecedented times, and the role of media to tell and record the story of South Africa as it develops is more important than ever. But it comes at a cost. Advertisers are cancelling campaigns, and our live events have come to an abrupt halt. Our income has been slashed.

The Mail & Guardian is a proud news publisher with roots stretching back 35 years. We’ve survived thanks to the support of our readers, we will need you to help us get through this.

To help us ensure another 35 future years of fiercely independent journalism, please subscribe.


Odd drop in how Covid-19 numbers grow

As the country hunkers down for a second week of lockdown, how reliable is the data available and will it enable a sound decision for whether South Africans can leave their homes on April 16?

Mail & Guardian needs your help

Our job is to help give you the information we all need to participate in building this country, while holding those in power to account. But now the power to help us keep doing that is in your hands

Press Releases

New energy mix on the cards

REI4P already has and will continue to yield thousands of employment opportunities

The online value of executive education in a Covid-19 world

Executive education courses further develop the skills of leaders in the workplace

Sisa Ntshona urges everyone to stay home, and consider travelling later

Sisa Ntshona has urged everyone to limit their movements in line with government’s request

SAB Zenzele’s special AGM postponed until further notice

An arrangement has been announced for shareholders and retailers to receive a 77.5% cash payout

20th Edition of the National Teaching Awards

Teachers are seldom recognised but they are indispensable to the country's education system

Awards affirm the vital work that teachers do

Government is committed to empowering South Africa’s teachers with skills, knowledge and techniques for a changing world

SAB Zenzele special AGM rescheduled to March 25 2020

New voting arrangements are being made to safeguard the health of shareholders