Business Day

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

- Hamlet Hlomendlin­i Hlomendlin­i is senior economist at Agri SA

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

 ??  ?? New stance: US President Donald Trump will review trade deals with Africa.
New stance: US President Donald Trump will review trade deals with Africa.

Newspapers in English

Newspapers from South Africa