Opinion: AGOA Dispute Not Really About Chickens, Not Just About Trade

By Staff Published: January 6, 2016, 1:49 pm
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Editorial from BusinessDayLive.

Just as the dispute over chicken imports from the U.S. was not really about chickens, so South Africa’s likely suspension from the benefits of the African Growth and Opportunity Act (AGOA) is not entirely about trade.

Rather it is a case of the U.S. saying to South Africa that it cannot have it both ways. Pretoria cannot line up with the BRICS (Brazil, Russia, India, China) bloc on foreign policy issues and bad-mouth Washington — while still demanding privileged access to U.S. markets.

It cannot take measures that frustrate trade and investment flows from the U.S. and Europe — but still expect special favors from these regions.

Most of all, if South Africa cannot get its act together to meet the deadlines in a trade dispute, it should not be surprised if it is punished for its incompetence, or perhaps arrogance.

And even if South Africa gets away with the kind of poor conduct we’ve seen in recent weeks as it ignored benchmarks U.S. President Barack Obama set out in early November, the outcome can only damage its credibility as a trading partner.

Trade disputes are commonplace, as are concerns about health and phytosanitary issues. South Africa was not necessarily wrong to put up a fight.

However, South Africa cannot afford to be arrogant or just tardy in its trade talks at the moment. World trade is growing at just 2 percent annually, down from about 8 percent in the boom years between 2003 and 2007. Every country is competing fiercely for market share for its exports.

South Africa should be doing the same.

The U.S. should be a particular target market because, as the latest trade figures show, by far the bulk of our trade is still going to Asia and Europe, both of which are starting to slow down. The U.S., by contrast, is a growth market, and still by far the world’s largest consumer market. And South Africa has since 2000 been gifted with privileged access to that market thanks to AGOA. Pretoria had a special concession even though South Africa’s economy is way more developed than the rest of the continent, which AGOA was meant to assist.

But the U.S. made clear that South Africa had to earn the concession. All of which makes it harder to understand why South Africa hadn’t made sure its conduct in the negotiations was impeccable and that it did everything possible to stay in AGOA.

South Africa’s exports of citrus, wine and macadamia nuts to the U.S. have grown to well more than 2 billion rand ($126 million US) annually. These are the kinds of high-end agricultural products South Africa should surely be trying to promote internationally at a time when commodity exports and prices are tanking. Without the AGOA tariff dispensation, however, South Africa has no particular advantage in the U.S. market and is likely to lose out to competitors from Chile, Uruguay and Peru.

It is hard to see how that loss is outweighed by whatever South Africa may gain by imposing more stringent rules on U.S. chicken imports than 160 other countries to which the U.S. exports.

The U.S. is by no means a major poultry exporter to South Africa — more than half our imports come from Brazil, with almost all of the rest from Europe.

South African imports of chicken from the U.S. are negligible for the South African market.

But the long dispute over chickens has become a lightning rod for South Africa’s attitude to trade and investment.

The U.S. is still affronted by the draconian rules South Africa sought to introduce on foreign investment in the private security industry, just as European investors have been angered by South Africa’s cancellation of bilateral investment treaties to replace them with the Promotion of Investment Bill.

These measures have sent the wrong signals to countries that wanted to do business with South Africa and to politicians who in the past had been willing to go out of their way to ensure a good deal for South Africa.

We are a small, open and vulnerable economy in a very tough world — and our conduct needs to take that into account.

Read more at BusinessDayLive.

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