Willemien Viljoen, tralac Researcher, asks whether there has been any movement on the trade concerns surrounding South Africa’s continued AGOA eligibility

The extension of the United States (US) African Growth and Opportunity Act (AGOA) in May 2015 included provision for an out-of-cycle review of South Africa’s AGOA eligibility, and this review was launched at the beginning of August 2015. Thus far the US Congress has extended South Africa’s AGOA benefits conditional on positive findings by the review. According to the written and verbal submissions made to the office of the US Trade Representative (USTR) South Africa’s permanent inclusion under the AGOA currently hinges on four main trade concerns: lifting restrictions on the imports of chicken, pork and beef and the removal of the local ownership requirement in the Private Security Industry Regulation Amendment Bill. Although South Africa’s ambassador to the US, Mninwa Mahlangu has stated that South Africa has made significant progress on these issues, the US Congress, USTR and producer organizations are more sceptical; asking for actual evidence of progress made to resolve the outstanding matters. With 30 September set as the date by which South Africa needs to effect all agreed upon changes, implementation seems to be moving at a snail’s pace which can have detrimental effects when the deadline date is reached.

Has there been any movement on the trade concerns or are US officials justifiably sceptical?

Anti-dumping duties on chicken imports

In January 2015 South Africa and the US reached an impasse on the merits of the anti-dumping duties implemented on chicken imports and decided to find a mutually agreed solution to the problem. This led to the acceptance of a quota system for frozen bone-in chicken pieces imported from the US. In June the industry-to-industry agreement was drafted which allows for 65000 tons of US chicken to be imported annually into South Africa free of anti-dumping duties. This quota will also be increased based on an annual growth factor. The agreement was circulated among the relevant parties and comments have been received, but it is yet to be implemented. According to the Economic Minister to the South African embassy in the US, Sandile Tyini, implementation is awaiting the finalisation of the agreement by the respective poultry industries and the establishment of guidelines and administrative procedures to implement the deal. Expectations are that the agreement will only be implemented sometime at the beginning of 2016.

The recent outbreak of Avian Flu has further complicated the matter. US poultry producers have requested for regionalised chicken imports, something South Africa has been practising for years for chicken imports from Europe. South Africa’s ambassador to the US, Mninwa Mahlangu has indicated that South Africa will start regionalising if there are no further outbreaks within the next six weeks. Something which seems to be contradicting the recent statement by South African veterinary officials which states that South Africa is not geared for regionalisation and that all US chicken imports will be refused access as long as there is any Avian Flu present in the US market.

Ban on beef imports due to Bovine Spongiform Encephalopathy (BSE) risk

The Department of Trade and Industry (Dti) has stated that Cabinet has approved a decision to lift the ban on boned beef imports from several countries, including the US, which have a historical record of BSE. According to the statement released after the Cabinet meeting held on 24 June 2015 ‘Cabinet approved that the relevant international standards and other scientific measures be implemented with a view to ensuring adequate risk management is applied when importing cattle and bovine products. This alignment of South Africa’s import requirements with international scientific guidelines will strengthen the county’s position in international trade. This will broaden access to sufficient, safe and nutritious food for people and animals through strategic sourcing and will increase job creation through importation of beef products intended for further processing in South Africa.’

Ban on pork imports due to various health concerns

Discussions regarding the import restrictions on US pork products are ongoing. These restrictions have been in place since June 2013 and are seen as unjustified due to the neglible risk of transmission from US products, and the fact that South Africa imports products from other countries with a similar risk profile. During the discussions the US producers requested market entry for approximately 100 pork cuts of which the South African Animal Health Authorities have only agreed to market access for 10 of these cuts. The slow progress along with the view that South Africa is implementing these import restrictions in a discriminatory way have prompted a petition by the US Pork Producers Council to the USTR for the revocation or limitation of South Africa’s AGOA preferences.

Local ownership requirement in the Private Security Bill

The Bill has not been signed by President Jacob Zuma, and has been sent back to Parliament for reworking. However, US officials have asked for proof that the requirement for foreign owners of security companies to divest at least 51 percent ownership to South Africans will be permanently removed from the Bill. Thus far none such assurances have been given and the precise nature of the rework is currently unknown.

The limited and slow progress thus far, that is frustrating the US Congress, USTR and US producer organizations might be a signal that come 30 September South Africa may either be wholly excluded from AGOA preferences or loose certain benefits. If the latter is the case South African export products that have already been identified as contenders for the loss of duty-free access include wine, citrus fruits, macadamia nuts and passenger vehicles. This can have a significant impact on the competitiveness of these products in one of their most important destination markets with possible dire consequences for the agro-processing and manufacturing sectors in South Africa.

Tell us what you think.

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Sources:

Politicsweb (http://www.politicsweb.co.za/);

South African Department of Government Communication and Information System (http://www.gcis.gov.za/);

Business Day (http://www.bdlive.co.za/);

Presentation by Minister Rob Davies (https://www.thedti.gov.za/parliament/2015/AGOA_04082015.pdf)