Expropriation without compensation puts preferential access to US markets at risk
US President Donald Trump is a deeply odious man, but one whose ire you want to avoid. Particularly if you are a country at the southern tip of Africa that has preferential access to US markets, to which you export R112bn worth of goods and services every year. Expropriation without compensation is just the kind of issue to excite US rhetoric to damage SA’s interests and put that trade at risk.
The US is one of the few countries that SA has a strong trading surplus with. We export 80% more to the US than we import from it. It is our thirdlargest export market after Germany and China. But 36% of those exports are covered by the Africa Growth and Opportunities Act (Agoa), a Bush-junior policy that allows designated African countries to export to the US without any of the usual trade restrictions, until 2025.
Many SA industries take advantage of Agoa, from our vehicle and components industry (R18.5bn worth of qualifying exports in 2017) to agricultural products (R3.9bn).
US exports tend towards higher value-added products that create more jobs and economic activity in SA, compared to the raw materials that typically make up our export basket.
But given Trump’s predilection to use trade policy as a political weapon, this huge piece of economic activity is vulnerable. Republican politicians have already cited SA as an example of unfair trade. SA is a member of the G-20 and not the microeconomies that Americans think of as African nations in need of preferential trade access.
Agoa also provides an easy escape clause for the Americans. It allows a country to be designated as eligible, provided it “has established, or is making continual progress toward establishing” a “market-based economy that protects private property rights” among other criteria. The anti-Agoa political lobby in the US could use this clause to argue SA should be axed, given the ANC’s policy of expropriation without compensation. While the ANC’s version of the policy is an election tactic and won’t amount to a fundamental debasement of property rights, the opposite interpretation could easily be argued by US legislators.
Already Fox News, the rightwing praise singer of the Trump presidency, has described expropriation without compensation as a “racist land grab”. Tucker Carlson, a conservative commentator on the channel, called for the cancellation of $350m (R4.9bn) of aid over expropriation without compensation back in March, proclaiming that the ANC is “turning SA into Zimbabwe by attempting to crush the minority in that country”.
Carlson zeroed in on aid, a dog-whistle issue for the US right, and displayed an astounding ignorance of basic African geography. But a more considered conservative lobby would focus on Agoa’s property rights clause as a mechanism to cancel Agoa and shift the trade balance with SA. And you can be sure that the likes of AfriForum, which has strong links with US conservative groups, will be on hand to help the Americans think through the issue.
TRICKY TOPIC
Expropriation without compensation is a tricky topic for the ANC to spin. The party seems to believe that the policy is an effective campaign strategy for the 2019 election, taking the wind out of the EFF’s sails. But it has to manage the negative consequences including damaging domestic investor confidence and global diplomatic alarm.
Political actors on the ANC’s right can use the issue to gain mileage of their own. Former finance minister Trevor Manuel has already said that communicating on the issue has been a big challenge in his mission to woo foreign investors.
Agoa is already absorbing a lot of political time. In July, trade & industry minister Rob Davies was in Washington to argue that Trump’s steel tariffs are damaging SA exports. He also lobbied over a US investigation into levying tariffs on vehicle and component imports into the US. So far he has not had to deal with expropriation without compensation, as yet another problem for SA’s trade access to the US, but it is easy to predict that it will become one.
Agoa has already been used to push the US’s views on other SA policy issues including intellectual property rights protection and rules over ownership in the private security industry. It played a decisive role in 2016 in forcing SA to open its markets to duty-free US chicken.
The ANC needs to worry how expropriation without compensation plays out in foreign media. Much as it sticks in the craw to have to concern oneself with the insanity of Trumpism, we have little choice.
Axing SA from Agoa would be devastating, at a time when the economy is already under severe strain. President Cyril Ramaphosa has promised 3% economic growth in 2018, and the first half has failed to come anywhere near that. Another strong exogenous shock would ensure that the underperforming economy becomes an even bigger election issue.
In expropriation without compensation, the ANC has birthed a many-headed beast that could implant its teeth in the party’s own backside. And one of those heads bares the loathsome visage of Trump.