That the US Congress will vote to extend the African Growth and Opportunity Act any day now apparently brings no joy to the heart of Sandile Tyini, Trade and Industry Minister Rob Davies’ man at the Washington embassy.
At a gathering of African Union ambassadors on Monday, Mr Tyini lamented the new “conditionalities” in the reauthorization bill, attendees said.
This, they also said, elicited no sympathy from the ambassador of Gabon, who was chairing the session, or other African colleagues. They want to see the bill enacted promptly. Uncertainty has been killing export orders.
Strictly, the language adopted by both Senate Finance and House Ways and Means Committees last month imposes no extra eligibility requirements. It simply makes it easier for interested parties to complain if beneficiaries are non-compliant and lets the US government apply the screws in more calibrated ways.
For most, the threat of greater scrutiny is a small price to pay for 10, as opposed to 5 or 3, more years of privileged access to the US market. But not, it seems, for SA.
The ANC government has always been iffy about AGOA’s ifs. When the original bill was still in draft and fighting for its life, President Mandela himself was reluctant to back it citing the “conditionalities”.
Some in government, jealous of their sovereignty, have found it hard to understand that trade preferences like AGOA are a unilateral gift and that the country giving them has great latitude in deciding what strings to attach.
If recipients don’t like the strings, they need not take the gift. If they prefer, they can negotiate a reciprocal arrangement, as the SA has done with the EU. The US was keen to cut a similar deal with SA, but the talks failed in 2006. The US thinks that was because SA was only too happy to keep enjoying AGOA’s benefits without giving anything in return.
With the price of oil down and the US buying less and less from Nigeria and other Africa producers, South Africa’s exports to the US are dwarfing those of its African partners, accounting for a fully a third of the AGOA country total so far this year.
That, and the fact SA’s deal with the EU is keeping a significant array of US goods out of the SA market, has convinced Washington things need to change. As David Thorne, a special adviser on trade and investment matters to Secretary of State John Kerry, put it at the embassy’s Freedom Day reception last week:
“We are very happy that SA has been a leader in taking advantage of AGOA, with automobile makers, fruit farmers, and wine producers directly benefitting from increased exports to the United States…
“But…there is a clear sense that we need to look beyond AGOA to a more reciprocal and balanced trade relationship. SA has recently taken this step with Europe, and it is time for SA to move forward with the United States.”
Congress wants the US Trade Representative (a term that refers both to the office and the man, Michael Froman, who runs it) to use AGOA’s “conditionalities” to get SA to “look beyond AGOA”. This isn’t, and never really has been, simply about market access for US frozen chicken quarters.
South African employers and workers cannot expect to enjoy the benefits of AGOA if what guides their government’s policy is not the National Development Plan but the National Democratic Revolution.
Within a month of President Obama signing the AGOA bill, USTR must enquire into whether SA remains eligible as “a market-based economy that protects private property rights, incorporates an open rules-based trading system, and minimizes government interference in the economy.”
In its official gloss on the bill, the Ways and Means Committee says it is worried by SA’s “deteriorating investment climate”, possible “nationalisation of existing investments”, the “termination of bilateral investment agreements” and “proposals to limit foreign ownership”.
Frans Cronje of the SA Institute for Race Relations has been telling audiences here that Davies, a senior member of the SACP, might actually prefer SA dropped from AGOA altogether rather than have to comply with its ideologically irritating terms. That would be odd, given that the US is the only major economy with which SA enjoys a surplus.
Should it happen, the bill’s drafters have tried to minimize the consequences for SA’s neighbours. Goods finished in SA would still be able to enter the US duty free if 35 per cent or more of their value came from elsewhere in the region.