Removing duty free exports from South Africa to the United States will probably have an unintended adverse effect on US companies and employees. More than $700-million of goods exported from here, including meat, fruit, vegetables and precious metals, are currently covered under the US’s Generalised System of Preferences (GSP).
The GSP is a trade scheme designed for developing nations to be excluded from import tariffs on certain goods. This means their goods are cheaper than those from other countries. The US considers a country to be eligible for benefits if its global share of trade is 0.5% or less.
The US has been taking countries such as India off the GSP system, with South Africa the latest target. South Africa’s trade and industry department has made submissions to the office of the US trade representative saying why the country should be kept in the GSP.
In a January submission, it said: “By lowering costs for consumer goods and food products, many of which are not available in the United States, GSP increases product choices and helps American families stretch paychecks further.”
Ferrosilicon manganese crops up repeatedly in the South African submission; this country is the second biggest exporter of the metal after Georgia. Together, the countries account for half of US imports. Removing South Africa from the GSP would make ferrosilicon more expensive, a cost the US steel industry will have to carry.
Research on 125 US companies by the GSP Action Committee, (a group set up by American companies) and published last year found that 90% of products are likely to cost more if the GSP was cancelled. Investments would have to be put on hold and 40% of the companies were expected to lay off workers. Conversely, 70% of the companies had hired new workers and increased wages because of the cheaper prices that came with importing goods through the GSP system.
Despite these findings, the US revoked India and Turkey’s eligibility for the GSP. But South Africa’s January submission said that those economies are “thriving” because the US-China trade war has meant even higher tariffs on Chinese goods, offsetting the more expensive Indian and Turkish imports.
Of the $7-billion of goods imported by the US from South Africa between January and November last year, only $703-million claimed tariff-free status under the GSP.
The South African fight to retain GSP is also tied to the country’s access to benefits under the African Growth and Opportunity Act (Agoa).
“In the past, when the US has had issues with Agoa, they have not threatened the unilateral exclusion of South Africa,” according to independent economist and trade policy analyst Tinashe Kapuya.
He says that under the Obama administration the US trade representative would revise benefits, taking away tax-free status for some goods instead of threatening to exclude the whole country from all benefits.
Earlier this week the US announced that South Africa was on an extensive list of countries that are no longer preferred nations for trade. This will make exports to the US less competitive. The removal of GSP status — with a decision to likely be made in March — would have an even greater negative effect.
Kapuya says that US President Donald Trump is unpredictable and could use the removal of South Africa from the GSP as a way to gain favour with his constituencies because he is seeking a second term as president this year. “The US is in an election cycle. It’s possible that they [the US trade representative] might not take any action because they don’t want to affect the politics. They also might do something to South Africa to show their constituencies that they are serious.”
Thando Maeko is an Adamela Trust business fellow at the Mail & Guardian
Copyright Bill a threat to duty-free exports
The United States decided to review South Africa’s eligibility for the Generalised System of Preferences after a complaint laid by the US-based International Intellectual Property Alliance (IIPA), according to the Office of the United States Trade Representative.
The IIPA says South Africa does not provide adequate protection to intellectual property rights for US products.
The IIPA lodged the petition after South Africa’s Copyright Amendment Bill was passed last year. The Bill, which has yet to be signed into law by President Cyril Ramaphosa, aims to bolster the rights of the creative industry.
The US investigation would look into whether the country’s copyright laws contravene the provisions of the African Growth and Opportunity Act, according to the US trade representative. The trade agreement requires the elimination of barriers to US trade and investment, including the protection of intellectual property.
Collen Dlamini, of the Copyright Coalition of South Africa, agrees that the Bill should be sent back to Parliament to be reviewed. Among other issues raised by the coalition is the Bill gives the minister of trade and industry “unfair powers” to control the royalty rates of those in creative industries.
On the other hand, ReCreate South Africa’s Tebogo Sithathu says the law would give artists the right to own their published works. This would help the “creatives, who are often shortchanged by publishing companies”, to get royalties directly, Sithathu says.