Time for EC to stand up and catch Obama’s eye

SOUTH Africa may feel it is at a beauty contest, as it woos United States president Barack Obama for the title of most favoured African nation.

SA and US ties are firm and today’s visit by a large American political and business delegation should go a long way to cementing those. And any long term economic benefits will impact the Eastern Cape as well, already the major source of exports to US markets under the Africa Growth and Opportunity Act.

But it is not a fait accompli that this country will continue to hold its own in the face of rampant economies to the north of us, a number of which may well also aspire to a more prestigious relationship with the world’s biggest economy.

When he meets President Jacob Zuma, Obama must find an African leader who understands the mutuality of interests inherent in our bilateral relationship, on the political, economic and social fronts.

Obama’s visit has been underplayed because it is happening in the second and final term of his presidency, and also given American domestic challenges and the circumstances surrounding the health of former president Nelson Mandela.

Yet, there are crucial issues to be discussed between the two leaders, not least matters of bilateral trade which will have a direct bearing on the economy of the Eastern Cape.

Last year, South African companies exported just under $9-billion (about R90billion) to US markets, of which $3.6-billion in trade was duty-free under the AGOA ambit of concessions on duty on goods.

East London’s Mercedes-Benz plant contributed the bulk of the over $2-billion in vehicles and components exported to the US. It must be a source of pride that high quality, high-powered vehicles manufactured by residents of Buffalo City have been crisscrossing the 50 American states for a number of years now.

Other exports from SA to the US included chemical products, machinery and minerals.

The US has signalled its commitment to enhancing and strengthening the ties between American businesses and African businesses. It has acknowledged the enormous economic growth across subSaharan Africa, even as the global economy continues to struggle.

With seven of the world’s 10 fastestgrowing economies in this region, these emerging markets present enormous opportunities not only for local inhabitants, but also for American businesses.

AGOA, signed into law by former president Bill Clinton in May 2000, remains the cornerstone of America’s trade and investment policy with sub-Saharan Africa and this country is allowed to trade under the AGOA framework.

AGOA provides for substantial trade preferences that, along with those under the Generalised System of Preferences (GSP), allow duty-free and largely quotafree access to the US market for approximately 7 000 products produced in AGOA-eligible countries.

AGOA has been extremely effective in expanding trade between the US and Africa and creating jobs on both continents.

That success is closely tied to AGOA’s Third Country Fabric (TCF) provision, which was set to expire on September 30 last year, but which was extended after votes in both the House and the Senate.

As a result, thousands of jobs in the US and Africa – which were on the line with this legislation – remain protected.

But South Africa needs to ensure that its voice is heard firmly in discussions on extending trade concessions.

All South Africans must also take note of the dangers of being complacent in how we fulfil our obligations as a major trading partner; any faltering in the quality of the goods we produce and in meeting deadlines, or cost pressures which price us out of the market will simply open the door to other African countries.

The sectors in which South Africa exports dominated within the total mix of AGOA supported exports – chemicals, minerals and metals, machinery, transportation equipment and electronics, with market shares ranging from 88.4% to 99.9% – have a combined share of just 6.46% in the GSP and AGOA trade.

Clearly, there are areas where we can grow our export capacity relative to our African neighbours. In the energy-related products sector, which accounted for 90% of total AGOA trade, South Africa had a 0.002% market share.

This points to an opportunity to increase our value-adding exports in this sector, especially by leveraging our geographical positioning relative to crude oil producers in the region and our strategic positioning in the bulk maritime transport system.

The Southern African Customs Union has signed a Trade, Investment, and Development Cooperative Agreement (Tidca) with the US.

The Tidca establishes a forum for consultative discussions, cooperative work, and possible agreements on a wide range of trade issues, with a special focus on customs and trade facilitation, technical barriers to trade, sanitary and phytosanitary measures, and trade and investment promotion.

East London’s success as a supplier to the global Mercedes-Benz network sets us apart as a key feature in SA’s ongoing relations with the Americans.

It is questionable whether the city or, indeed, the province, will play any role in the meetings which will be held over the next two days. We should be present, promoting our region as a cog in the US trade network and arguing firmly for extensions to the provisions of the trade benefits under AGOA and other regimes.

It is not in our interests for South Africa to relinquish any bit of its prestigious relationship with the US.

There is much to take note of in Obama’s sortie across Africa this week. Ray Hartle is a journalist based in the Eastern Cape