31 October 2008

South Africa: Concerns Raised About U.S., African Trade

Johannesburg — AS ELECTION fever spreads in the US, the future of the African Growth and Opportunity Act (Agoa) has come under scrutiny.

Conceived under former president Bill Clinton, and signed into law by President George Bush, Agoa has enabled sub-Saharan African countries to export more than 1800 tariff line items duty-free to the US - over and above the 4600 tariff-free items listed under the Generalised System of Preferences.

At a forum in Johannesburg this week to discuss the upcoming US election, a panel debated whether the two presidential candidates - Democrat Barack Obama and Republican John McCain - would continue supporting the initiative despite the global economic crisis.

Questions raised included whether a Obama win would be a threat to tariff-free access to the US market, particularly as some of his supporters were from manufacturing industries such as the textile sector, which was affected by Agoa.

The US consul-general in Johannesburg, Andrew Passen, said Agoa was a basic US foreign policy that was unlikely to be changed. Under Bush, billions of dollars had been approved for African imports and were still committed for the next three years .

Fulbright scholar Donald Goodson predicted much closer relations between the US and Africa if Obama won. He said there was no way it would be business as usual for the US with a man at the helm with such close African ties. Obama would surely influence US foreign policy to be more favourable to countries in Africa and South America.

A senior researcher at the Centre for Policy Studies Francis Kornegay said even under McCain Agoa would remain a road map for the US that would enable sub-Saharan Africa to stimulate their economic growth and trade, enhance democracy and good governance, and combat HIV/AIDS.

There has been excitement at the US embassy in Pretoria about recent figures that show the US has become SA's major trading partner after reaching $9,1bn last year. Britain used to be SA's major trading partner. Figures also show that this may be a growing trend throughout the African countries that benefit from Agoa.

Craig Allen, a senior officer for the commercial section of the US embassy in Johannesburg, said although SA accounted for a mere 0,46% of the US's total trade, the billions worth of trade between the two countries was significant in light of SA's objective to grow its economy beyond 6%.

Allen said although US exports to SA grew 23,75%, amounting to $5,5bn last year compared with $4,46bn in 2006, the deficit was still in SA's favour, with about $3,5bn last year and $3bn in 2006. Allen said 98,1% of SA's exports to the US were now duty-free.

"Of course, there are those who wanted the US to open more opportunities for the industries that have been excluded from the Agoa programme," he said.

Sub-Saharan Africa accounts for slightly more than 1% of US merchandise exports and for slightly more than 3% of US merchandise imports, of which about 81% are petroleum products. Similarly, sub-Saharan Africa accounts for a little more than 1% of merchandise exports and imports with the European Union (EU).

According to the International Monetary Fund's Direction of Trade Statistics Yearbook 2007 figures, the US became Africa's largest single country market, purchasing 29,5% of the region's exports in 2006. China came in second at 12,6% and Britain third at 6,2%. However, the EU collectively purchased 32,0% of sub-Saharan Africa's exports in 2006, down from 34,6% in 2005. China, however, had increased its share of African exports almost 2% to a 12,6% share in the same period.

Allen said the US was also satisfied there were growing opportunities for its companies to venture into southern African markets, particularly SA. These companies were taking advantage of SA's infrastructural development projects and preparations for the 2010 Soccer World Cup.

Allen further attributed this growth in trade to work done by the US trade hub office in Gaborone, Botswana, which had been promoting the export of products from the Southern African Development Community to the US.

This was being done in various ways, including by inviting South African companies to various trade shows across the US to showcase their products.

The trade office also helped by linking potential US counterparts to become agents for southern African products in the US market.

"The US government has not done this for other countries, but in the case of Africa this macro-level active promotion and exposure of some countries to our market has been a growing trend," Allen said.

According to the latest US/African Trade Profile, the US's total trade with sub-Saharan Africa increased 15% in 2007, as both exports and imports grew.

The US merchandise trade deficit with sub-Saharan Africa continued to widen last year to $53bn, from $47bn in 2006. Nigeria, Angola, SA and the Republic of Congo accounted for 90% of the US trade deficit with sub-Saharan Africa last year.

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