The beginnings of a trade war have erupted between South Africa and the US as the Americans threaten to cancel citrus imports from South Africa if there isn’t some rapid breakthrough in allowing US chicken, pork and beef imports into the country again.

US President Barack Obama on Thursday evening issued an ultimatum to the department of trade and industry.

He instituted a 60-day notice period, after which he will revoke a part of South Africa’s eligibility for duty-free access to the US market under the African Growth and Opportunity Act (Agoa).

It would principally affect the export of oranges and mandarins to the US, which totalled about 47 500 tons, worth R374 million last year.

Other significant agricultural exports, such as macadamia nuts and wine, do not qualify under Agoa.

The move comes only days after South Africa finally put a deal in writing to allow an annual quota of US chicken pieces into the country.

The US, however, wants this finalised and wants sanitary measures against other meat products lifted as well.

Trade and Industry Minister Rob Davies called a press conference at short notice on Friday to deny Obama’s claims that there had been little progress on reallowing US poultry, pork and beef into South Africa.

This relates to bans on these products due to outbreaks of avian flu and mad cow disease in the US, among other things.

According to Davies, the exact opposite is true: South Africa and the US basically just need to dot the i’s and cross the t’s on most of the disputes.

“We take the letter seriously as a warning,” he said.

The notice is also “reversible at any stage”, said Davies.

He attacked the insinuation that there was a political impasse, saying he could not interfere with the technocratic work of South Africa’s government veterinarians.

The veterinary authorities had the final say on permitting animals into South Africa, he said.

“I don’t know what avian flu looks like; I don’t pretend to be an expert on that... those vets have got to do their due diligence and satisfy themselves that what is going to be given a certificate will mean there is not going to be a risk to the local poultry flock.”

Efforts were being made to expedite the process of clearing US chicken, he added.

As far as beef and pork were concerned, the certificates needed to appease the US had already been issued, he explained.

Davies also slated suggestions that South Africa should have simply given the US whatever it wanted in the negotiations around chicken.

“When someone says jump, you don’t just say ‘how high?’. What you do is negotiate.”

A deal to exempt 65 000 tons of US chicken pieces per year from antidumping duties was released for public comment last week.

American poultry lobbies hoped for a quota double the size of the chicken deal. Half of the import quota is also going to black-owned companies, which may result in much of it not being used at first due to the lack of black players in the poultry industry.

Davies said this issue was also being addressed and there would not be a reduction in the effective quota for US chicken because black importers could not be found.

“We’ve had to make a concession we didn’t have to make before under the previous Agoa. We’ve done it in a way that is doable, and I think that is not a record one needs to be ashamed about at all.”

The action against South Africa represents the US’s first use of the new powers written into Agoa after the 2000 act was amended and extended this year.

Among the amendments was a system for “out-of-cycle” reviews, such as the one South Africa has been subjected to. Another amendment was the sanction now being used against South Africa – revoking only part of a country’s Agoa benefit instead of the blunt instrument of totally excluding them.

The amendments make Agoa a far sharper tool for getting trade concessions out of African countries.

In hindsight, these amendments seem to have been designed specifically to allow the US to punish South Africa without destroying Agoa’s major advanced manufacturing success story – vehicle exports from South Africa.

Apart from the special “out-of-cycle” review of South Africa’s Agoa eligibility, the US last week kicked Burundi out of the scheme entirely.

The normal annual review of all African countries’ Agoa eligibility was taking place parallel to the South African review.

Burundi’s crackdown on political opposition is cited as the reason for the country’s eviction.

Swaziland was ejected in the previous review due to its suppression of trade unions.

Tit-for-tat

The vast majority of South African exports to the US do not qualify for Agoa benefits. The key sectors that do qualify are citrus fruit and cars.

Of South Africa’s roughly R70 billion in exports to the US last year, about 27% benefited from Agoa.

These exports consisted mostly of R12 billion in BMWs, but oranges and mandarins formed an important labour-intensive second stream of Agoa-related exports.

This year has seen a spectacular decline in South African imports of US animal products that are actually allowed here.

At least some of this is probably related to the strengthening dollar, which has made all US products far more expensive than they were last year.

The major group of animal products imported from the US is “guts, bladders and stomachs”, used for the casings of sausages. Imports fell from R130 million last year to only R16 million in the first three-quarters of this year.

The sanitary trade barriers on pork and beef have been around for a long time, but were expanded with a ban on chicken imports this year due to a bird flu outbreak in the US.

South African imports of US live chickens, about 91 000 in total, were worth R34 million last year. In the first three-quarters of this year, it was zero.

South African imports of R17 million in chicken offal from the US fell to R1.3 million early this year before stopping altogether.

Turkey imports likewise fell from R33 million last year to nothing this year.

These products are separate from the “bone in” chicken pieces about which there has been a long-running dispute after South Africa imposed antidumping duties more than a decade ago.

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South Africa’s Statement on the African Growth and Opportunity Act (AGOA)

In a letter dated 5th of November 2015, President Obama, warned South Africa that if the negotiations on the outstanding issues related to the poultry SPS issues are not resolved by the 31st December then the US would suspend South Africa’s Duty Free Treatment of SA’s Agricultural goods into the US.

South Africa’s negotiators have been well aware of this authority to suspend a country’s trade benefits in terms of the AGOA Extension and Enhancement Act where the US believes that a beneficiary of AGOA is “not making continual progress toward the elimination of barriers to United States trade and investment”.

However, South Africa wishes to submit that it has been making continual progress during the past few months to implement the agreement reached in Paris on the 6th and 7th of June this year. The main issues to be resolved are the opening of the South African market to US exports of the three meats: poultry, beef and pork.

At the Paris meeting South Africa agreed to open the South African market to the US for 65 000 tons of bone-in chicken pieces through a rebate facility. In this regard the International Trade and Administration Commission has already issued a draft regulation on the 30th of October, 2015. The process of creating this quota is envisaged to be concluded well before the 31st of December 2015.

In addition, as Minister Davies did indicate to the Parliamentary Committee on Trade and Industry on the 3rd of November, South Africa’s Vets have been continuously engaged with the US Vets during the past few months on the drafting of the necessary trade and animal Health protocols for poultry, beef and pork.

Significant progress has been made in this regard and the work is almost complete. The reason the work has not been completed is due to the fact that both sides have had to engage on the documentation and negotiate the texts. Both sides have had to consider and evaluate these texts carefully before making submissions and proposals.

These issues are about animal health and are very complex – a balance has to be found between trade opening and animal health. In the case of the poultry issue the negotiation has been more complex because the US is seeking an agreement on the health standards/regulations that would obtain if/when there is another outbreak of Avian Influenza in the United States. The US requires South Africa to keep the market open to US poultry from those US States that are not affected during such an outbreak.

Notwithstanding this complexity South Africa’s Vets have been fully engaged on the detailed drafting of a trade protocol and animal health protocol for poultry. A draft trade protocol and animal health protocol is almost complete with some t’s to cross and some i’s to dot. A meeting of the Vets from the US and South Africa is taking place today – the 6th of November to attempt to close all the remaining technical issues. South Africa believes that it is “on track” to meet the December 31st deadline to resume imports of US poultry into South Africa.

On beef, the Cabinet approved the lifting of a ban on boned beef from several countries which had Bovine Spongiform Encephalopathy (BSE) including the United States on the 24th of June, 2015. South Africa has submitted a draft health certificate to facilitate trade from the US and is open to discussing these issues on an expedited basis.

On pork, the Animal Health Authorities of both governments have been undertaking the necessary technical work to ensure safe trade from at least three diseases, namely, Trichinella, Porcine Reproductive & Respiratory Syndrome (PRRS) and Aujesky. South African Vets have made significant progress and have been able to approve a list of pork cuts. South Africa has submitted a draft pork health certificate to the US. South Africa remains ready to address any other concerns of the US.

At the bilateral meeting today – the 6th of November – between the US and South African Vets the outstanding issues will be discussed with a view to finalizing the technical issues. It remains to be said that these are matters of animal health and have to be dealt with accordingly in a scientific and objective manner by the Vets.

South Africa’s Message to the US on AGOA remains:

• AGOA has contributed significantly towards building a mutually beneficial partnership between the USA and South Africa.

• South Africa is a vital part of the regional integration and development process underway in Africa and removing South Africa from AGOA would substantially diminish the significance of AGOA for sub-Saharan Africa and the United States.

• The breakthrough made at the June 6-7th meeting in Paris on the poultry issue and the progress made on the SPS issues related to poultry, beef and pork offer significant opportunities for the US and South Africa to increase their trade in Agriculture.

• South Africa is a relatively open economy and trade and investment relations between South Africa and the United States have continued to grow and deepen during the period under AGOA

• Bilateral mechanisms, such as TIFA, have provided an excellent forum for the resolution of trade and investment concerns