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South Africa views itself as ‘collateral damage’ in global trade war

US President Donald Trump

US President Donald Trump

2nd May 2018

By: Terence Creamer

Creamer Media Editor

     

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Department of Trade and Industry (DTI) believes South Africa has become “collateral damage in the trade war of key global economies” after the country was excluded from a list of countries exempted from tariffs imposed by the US on steel and aluminium imports.

While insisting that the country remained open to engaging with US authorities “towards finding a mutually acceptable outcome”, the department questioned the fairness of the actions taken by the American authorities, suggesting that they contravened World Trade Organisation (WTO) principles.

“South Africa notes with concern the different treatment of trading partners, which will have an effect on the competitiveness of South African steel and aluminium products in the US and is likely to displace South African products out of the US market in favour of the exempted countries,” the department said.

“South Africa is also concerned that the measures are implemented in a way that contravenes some of the key WTO principles.”

The department also encouraged South African steel and aluminium exporters to engage with US buyers of their product so as to request them to consider applying for product exemption under a process conducted by the US Commerce Department.  

South Africa’s exclusion came despite several interactions with the US authorities since President Donald Trump’s March 8 proclamation imposing a 10% ad valorem tariff on imports of aluminium articles and a 25% ad valorem tariff on imports of steel articles.

The protection was imposed on the basis that the imports threatened to impair US national security. However, Canada, Mexico, the European Union (EU), South Korea, Australia, Argentina and Brazil were granted temporary exemption on the initial date of implementation on March 23.

In an effort to secure exemption, South Africa offered to restrict exports to a quota based on 2017 exports level.

However, April 30, Trump signed proclamations excluding South Africa from a list granting permanent country-exemptions to a select number of countries and extended by one month the Section 232 steel and aluminium tariff duty exemptions for some.

Trump postponed the imposition of steel and aluminum tariffs on Canada, the EU and Mexico until June 1 and reached deals for permanent exemptions for Argentina, Australia and Brazil. He also granted a permanent exemption on steel tariffs to South Korea as part of a revised free trade pact.

South Africa expressed disappointment, noting that some of the exempted countries were among the biggest exporters of steel and aluminium to the US.  The countries granted exemption collectively accounted for 58% and 49% respectively of total steel and aluminium imports into the US in 2017.

By contrast, South Africa aluminium exports equated to only 1.6% of total US aluminum imports, while its steel exports comprised less than 1% of total steel imports to the US in 2017.

Nevertheless, the department said the 330 000 t of steel exported to US represented 5% of South African production, which equated to roughly 7 500 jobs in the steel supply chain.

South Africa insisted that, while its exports posed no threat to US national security, the measures would disproportionately affect its domestic metals industry “both in terms of jobs and productive capacity”.

“The imposition of the duties will have a negative impact on productive capacity and jobs in a sector already suffering from global steel overcapacity,” the DTI said in a statement.

The Steel and Engineering Industries Federation of Southern Africa (Seifsa) confirmed that it was worried about the impact the US’s decision could have on the broader South African metals industry.

Seifsa chief economist Michael Ade said it was a "travesty" that US rejected South Africa's formal application for exemption, adding that the proclamation could cost South African exporters roughly R3-billion-worth of steel revenue and R474-million-worth of aluminium products revenue.

Edited by Creamer Media Reporter

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