Trade concerns grow after US questions corruption in Africa
• SA fears for the future of Agoa after Trump team queries benefits of backing corrupt regimes
Recently, President Donald Trump succeeded in withdrawing the US from the Trans-Pacific Partnership (TPP).
On the back of that decision, questions have since been raised over the future of the African Growth and Opportunity Act (Agoa), which was meant to expire in 2015. However, after robust negotiations in 2014, the Obama administration decided to extend it to 2025, allowing it to continue for 10 more years.
Since Trump fulfilled a campaign pledge to withdraw from TPP, Agoa beneficiaries like SA are speculating that this could be a sign of worse things to come, especially following his scourge of attacks on the US trade deals during his election campaigns.
Fuelling this concern may also be attributed to the realisation that there has not been anything of substance mentioned by the Trump administration relating to Agoa since he took office.
Adding to the doubts about the future of Agoa is the fact that Trump’s transition team recently sent the state department four pages of questions about Africa, which reveal an administration sceptical of US engagement on the continent on several issues, which include trade deals.
One of the questions posed by Trump’s team particularly probed the use of Agoa, which gives some products made in Africa duty-free access to the US. The question was phrased as follows: “Most of Agoa imports are petroleum products, with the benefits going to national oil companies. Why do we support that massive benefit to corrupt regimes?”
There may be nothing wrong with the phrasing of the question, however, the tone of it is somewhat concerning.
The question clearly disregards the fact that since its creation in 2000, Agoa has created more than 300,000 jobs and 120,000 in Africa and the US respectively. It also does not emphasise the positive impact Agoa has had in people’s lives and the platform it created for trade relations. The US paints Africa as a continent ruled by corrupt governments.
Between 2001 and 2014, the total two-way trade between SA and the US increased from R56.7bn to R141bn. South African exports during the same period to the US grew from R30bn to R69.8bn while those from the US to SA grew from R26.6bn to R71bn.
There are other noticeable mutual benefits gained between the US and oil-exporting countries, mainly Angola and Nigeria — and to a lesser extent Chad and the Republic of Congo — but this question ignores all of that.
Agoa is without a doubt good for Africa and SA in particular has used it reasonably well compared with other beneficiaries in sub-Saharan Africa who all have access to Agoa but do not have the capacity to export, mainly because they produce few commodities.
The oil producers have used it, but non-oil producers have used it mainly for exporting clothing and textiles, however, the quantum of exports has been very small.
SA is the most significant non-oil Agoa beneficiary as its exports are relatively diversified across extractive and manufacturing sectors.
Motor vehicles have been the largest export in this category, which includes steel, chemicals, agricultural goods (mainly wine, citrus, macadamia nuts and processed foods).
If Agoa under the Trump administration is revised or scrapped, these industries could be hurt greatly and that could lead to job losses.
While Agoa remains very important for SA, the current situation of uncertainty about its future is one of major concerns for the country.
At this stage, no one knows what is going to happen with Agoa and trying to read or predict what is going to happen might be risky.
However, it is important to consider all the possible scenarios that the Trump administration might explore and how SA, in response to that, can better position itself in the market.
Business likes certainty and predictability — anything SA can do to bring certainty in the market is of great importance and it will be greatly welcomed by business. With that in mind, it would be wise for this country to start exploring the options available, one of which is to consider going into some form of long-term bilateral trade relationship with the US, which should be built upon the strong ties that already exist between the two countries.
Most importantly, when negotiating trade agreements, SA must clearly articulate a vision of what it is it wants to see in a reciprocal trade deal (whatever it may be).
That vision must speak to the National Development Plan, ie it must help stimulate economic growth, which is a prerequisite for job creation.
Sub-Saharan Africa remains the largest and most important destination for South African exports, especially agriculture, and SA remains a gateway for some African countries to the US markets.
Therefore, whatever SA brings forward must also support regional integration in line with the 2063 AU Agenda which states that “by 2063, African countries will be amongst the best performers in global quality of life measures. This will be attained through strategies for inclusive growth; job creation; increasing agricultural production; investments in science and technology; research and innovation; gender equality; youth empowerment and the provision of basic services including health, nutrition, education, shelter, water and sanitation.”
SA IS A SIGNIFICANT NON-OIL AGOA BENEFICIARY AS ITS EXPORTS ARE DIVERSIFIED ACROSS EXTRACTIVE AND MANUFACTURING SECTORS
WHEN NEGOTIATING TRADE AGREEMENTS, SA MUST ARTICULATE A VISION OF WHAT IT IS IT WANTS TO SEE IN A RECIPROCAL TRADE DEAL