South Africa has been warned to avoid “complacency” ahead of deliberations by US lawmakers on whether or not to extend the Africa Growth and Opportunity Act (Agoa) beyond September 30, 2015 – the Act offers highly favourable, unilateral trade terms for African products entering the world’s largest economy.
In fact, South African ambassador to the US Ebrahim Rasool has called for a broad-based coalition of government, business and labour to develop a strategy designed to ensure the extension of Agoa benefits for a “reasonable period” of up to ten years.
He is particularly concerned with safeguarding South Africa’s continued participation, which is being questioned by some observers, who believe that the country’s relative development should disqualify it from Agoa’s duty-free access to the US on 6 400 tariff lines.
In 2011, US-South Africa trade recovered to a record $16.7-billion, following slumps in 2009 and 2010 – the trade balance was in favour of South Africa, which exported around $9.4-billion to the US last year and imported $7.25-billion in return.
Rasool, whose engagements with domestic Agoa beneficiaries were held to coincide with Secretary of State Hillary Clinton’s recent tour of a number of African countries, has indicated that a “war room” has already been established to deal with the issues and that the strategy is being led by his Washington DC embassy staff.
But the former Western Cape premier has also called for the creation of a public-private “war chest” to enable South Africa to undertake targeted lobbying and advocacy initiatives with members of Congress and the Senate, key US government departments, as well as with influential policy think-tanks.
“If we wake up on October 1, 2015, without the Agoa provision . . . the consequences for our companies and our country would be enormously unfavourable,” Rasool avers. “That is why we are ringing the alarm bells early.”
Intense advocacy is being planned for the period between late January 2013, when the new administration and the country’s new lawmakers would be in place, and ahead of the “Spring recess” of July 2014, in a bid to ensure there is no uncertainty over the Act’s future ahead of the 2015 deadline.
US ambassador to South Africa Donald Gips warns that, while there is strong support for a roll-over of the Act’s benefits within the current President Barak Obama-led administration, South Africa and Africa will need to convince lawmakers that the scheme’s continuation is in both Africa’s and America’s interests.
Gips, Rasool and US Chamber of Commerce VP for African affairs and international operations Scott Eisner all highlight the difficulty experienced in gaining the reauthorisation of the ‘Third Country Fabric Provision’ of the Act as an indication of current political reticence on the issue. Senate approved the provision, which was due to expire in September and whose delay had already resulted in some order cancellations, on August 2.
The “positive story of Agoa needs to be told and told well”, Gips argues, while confirming that South Africa’s integration into the ‘Brics bloc’ of Brazil, Russia, India and China has some politicians questioning whether South Africa should remain eligible for preferential trade treatment.
There is particular anxiety, Eisner and Gips say, over the fact that rival products from the European Union currently enter the South African market on more favourable terms than is the case for US products.
But Trade and Industry Minister Dr Rob Davies is keen to shift the conversation to the opportunities being presented for US business in Africa’s newfound growth momentum and to the “goodwill” that flows to the US firms as a result of the Agoa preferences.
He is less keen on the conversation being stymied by like-for-like market access comparisons, saying that such a narrow analysis is inadequate in understanding the value of using Agoa to entrench a competitive advantage that has been built up on the continent.
Rasool argues that this goodwill is already evident in Gallup findings that show that sub-Saharan Africa’s approval of the performance of US leadership is far ahead of the results from other regions.
South Africa will seek to elaborate on Agoa’s “virtuous circle” of benefits for Africa and the US through a research project that will be undertaken jointly by government and business in the coming months.
Business Unity South Africa trade and investment promotion executive Mfundo Hlatshwayo says the study will seek to highlight Agoa’s benefits to the US and the South African economies, as well as highlight the risks associated with its termination.
Rasool says economic diplomacy, with a focus on the Agoa extension, is currently the embassy’s primary focus. “We have inverted the usual relationship between political and economic diplomacy. Today, fighting for Agoa, trade and investment and tourism constitute 60% of our diplomacy in the US.”
Davies says that, while South Africa would even be keen to extend additional benefits, its main priority is to secure the country’s full participation in an extension under the prevailing Agoa architecture. There is “little appetite”, he says, to divert that focus with attempts at restarting free-trade-area negotiations.
“We have an arrangement that has yielded positive results, an arrangement that can continue to yield positive results and an arrangement which, I argue, is both in the interests of South Africa, Africa and the US.
“If we look more strategically, we look above the ‘irritants’ . . . I think that we have a very positive basis on which to expand and build a stronger and deeper partnership.”