AGOA BENEFITS OF CRITICAL VALUE FOR SA
THE growing protectionist stance of the US administration has potentially negative implications for trade welfare in many African countries, including South Africa.
The loss to South Africa of trade benefits under the current African Growth Opportunity Act (Agoa) of 2000, which will expire in 2025, would be devastating for many sectors that have benefited under the act, with profound social impacts.
South Africa’s wine exporting industry, for example, which has direct links to tourism in regions including the Western Cape, has enjoyed the largest export growth to EU countries under the Economic Partnership Agreement (EPA) and to the US under Agoa. Losing Agoa benefits would have a direct negative impact on this sector, estimated to have directly contributed around R32.7 billion to gross domestic product last year (according to the World Travel and Tourism Council). As many as 310 000 jobs of mostly unskilled and semi-skilled workers would be endangered.
Agoa is a developmental market access preferential trade programme that is enshrined in US legislation under the Trade and Development Act of 2000. It is non-reciprocal in nature and currently afforded to 49 sub-Saharan
“The aim of Agoa is to promote two-way trade flows between qualifying sub-Saharan African countries and the US
Africa countries, and South Africa.
The main aim of Agoa is to promote two-way trade flows between qualifying sub-Saharan African countries and the US. In the absence of Agoa or any other agreement, South African exports would face reciprocal tariffs in the US as laid down by the World Trade Organisation in the form of Most Favoured Nation tariffs.
South Africa’s eligibility for Agoa preferential treatment was challenged in 2015 when the country’s meat producers and the South African government were threatened with an “out of cycle” review by the US Congress.
This came about when US producers of poultry, pork and beef protested that South Africa was violating Agoa by blocking US meat imports. To avoid such a review, the South African government addressed the concerns by, for example, removing anti-dumping quotas for US meat products.
These developments illustrate that Agoa benefits to South Africa are not in any way guaranteed and can always be reviewed, driving home the urgency for policymakers and the public to plan for possible future trade scenarios.
Further to this, there is increasing “protectionist” rhetoric from the US administration that poses an additional threat. Agoa benefits are not included in any negotiated trade agreement between the US and any of the Agoa countries and essentially form a part of the developmental aid to sub-Saharan Africa. Agoa’s sustainability relies mostly on decisions made by the US government.
Recently, President Trump called for a six-month review of all US trade agreements and arrangements, and it was reported that the US administration raised questions concerning the US’s African developmental policy.
It is critical that the South African government makes sure that the country remains eligible for developmental support, like Agoa from the US, and preferential treatment from the EU. Given that the EU is the biggest market for many South African exports, including wines, the EPA would serve as a potential buffer to any trade losses from unfavourable trade with the US.
Mbatha is a professor at the Unisa Graduate School of Business Leadership with a speciality in natural resources economics and international trade, among others.