/ 1 May 2018

United States refuses South Africa import exemption over ‘national security’ fears

Done deal: BHP Billiton benefited from an agreement with Eskom to power the Hillside Aluminium Smelter.
Done deal: BHP Billiton benefited from an agreement with Eskom to power the Hillside Aluminium Smelter.

The United States has imposed steel and aluminium tariff hikes on South Africa because it believes imports of these products could “impair” its national security.

The South African department of trade and industry (DTI) said Minister Rob Davies had written two submissions to his US counterparts arguing that South Africa should be exempt from the steel and aluminium tariff hikes partly because of the impact it would have on local jobs.

But on March 8, the DTI said, US President Donald Trump signed a proclamation that imposed a 10% ad valorem tariff on aluminum imports and a 25% ad valorem tariff on steel imports. The ad valorem tariff means that the duty is calculated as a percentage of the product’s value.

“The proclamation followed reports from the Secretary of Commerce that imports of these products threaten to impair United States of America (US) national security,” DTI spokesperson Sidwell Medupe said in a statement on Tuesday.

In February, the US commerce department recommended that Trump increase steel and aluminium tariffs because the imports of these products affect national security.

“[T]he Secretary of Commerce concludes that the present quantities and circumstance of steel imports are ‘weakening our internal economy’ and threaten to impair the national security as defined in Section 232,” the US commerce department said.

Section 232 in US trade legislation allows the president to impose tariff hikes to protect national security.

The US commerce department also recommended at the time that tariff hikes also be imposed on China, Hong Kong, Russia, Venezuela and Vietnam

Medupe says the US has granted exemptions to Canada, Mexico, European Union, South Korea, Australia, Argentina and Brazil, despite the fact that some of those countries amount for greater imports in the US than South Africa.

Collectively, he said, those nations accounted for 58% of total steel imports into the US in 2017, and 49% of aluminium imports in the same period.

The DTI says it is “disappointed” and “concerned” about how the US made its decision to not grant South Africa an exemption.

“South Africa is therefore not a cause of any national security concerns in the US nor a threat to US industry interests and is not the [cause] of the global steel glut. Instead, South Africa finds itself as collateral damage in the trade war of key global economies,” Medupe said.

“South Africa is concerned by the unfairness of the measures and that it is one of the countries that are singled out as a contributor to US national security concerns when its exports of aluminium and steel products are not that significant.”

Job losses

At a briefing in March, Davis stressed how South Africa is not a major player in the steel and aluminium export market to the US.

We are a small part of US markets. Our products are not a major part of the overall export market,” he said.

In his submissions to the US, he noted South Africa only accounted for 1.6% of total aluminium imports to the US, and 0.98% of steel imports to the US per annum.

Despite the small contribution South Africa makes to this US import market however, the tariff hikes are expected to take a toll on local jobs.

“However, due to these measures, SA will be disproportionately affected both in terms of jobs and productive capacity,” Medupe said.

The department is yet to say how many jobs could potentially be affected, but the work involved in the steel export to the US amounts to 7500 jobs.

South Africa now worries that the US treatment of its other trading partners could impact on which imports it chooses to keep.

“In addition, SA notes with concern the different treatment of trading partners which will have an effect on the competitiveness of SA steel and aluminium products in the US and is likely to displace SA products out of the US market in favour of the exempted countries,” Medupe said.

Medupe says the department will continue to engage on this issue and come to a resolution on whether the US went against World Trade Organisation principles in its handling of the tariffs.

“South Africa remains open to engage US authorities towards finding a mutually acceptable outcome,” Medupe said.