Why underutilised Agoa matters

2013-08-25 14:00

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Despite the rumblings about ‘graduating SA’ out of the scheme, there is ‘wide agreement’ that Agoa cannot be changed as it will create ‘the same problem we have with the EU’

South Africa is trying to “avoid repeating the mistake” it made by signing a trade deal with the European Union when it comes to the Americans, says Xavier Carim, the country’s top trade diplomat.

The African Growth and Opportunity Act (Agoa) is up for review before expiring in 2015.

In the US there have been rumblings about demanding concessions from African countries – and of “graduating” South Africa out of the scheme due to its relatively advanced economy and its more reciprocal trade deal with the EU.

Despite being touted as the US’s signature trade deal “with Africa”, in reality only five countries on the continent actually make use of Agoa to any significant degree. (see graphic)

The real value of Agoa lies in the fact that it created a single trade regime between the US and most of the African continent, Carim, the deputy director-general for trade in the department of trade and industry, told City Press after last week’s annual Agoa forum in Ethiopia.

Retaining the common trade relationship with the world’s largest economy is likely more important than the largely unused concessions Agoa offers.

This is a lesson learnt from South Africa’s major trade deal with the EU, the Trade, Cooperation and Development Agreement, which was signed in 1999.

The agreement is now a serious problem for South Africa’s neighbours in the Southern Africa Customs Union (Sacu) because the trade preferences given to the EU by South Africa in effect give Europeans the same access to their markets – with nothing in return.

Namibian Trade Minister Carl Schlettwein has been a vocal critic of this situation.

“The Namibians are correct, but now we have an agreement and must keep on negotiating as a bloc,” says Carim.

“We started negotiating our deal with the EU in 1995 when we had no idea what was going to happen in the region. The current Sacu treaty only came along in 2002,” says Carim.

“If there is no consistent regime, it becomes harder to integrate.”

Despite the rumblings about “graduating South Africa” out of the Agoa scheme, there is “wide agreement” that Agoa cannot be changed, says Carim.

If Agoa is changed, especially by taking South Africa out of it, it will create “the same problem we have with the EU”, he says.

According to Carim, it could “inhibit or block” regional supply chains.

South Africa is incidentally also by far the largest beneficiary of Agoa.

“Without Agoa, we could lose a lot of our car and component exports. If we were graduated out of the scheme, it would have serious negative effects,” says Carim.

Agoa is set to expire in September 2015, but the Americans have promised a “seamless” renewal on various occasions, most recently at this month’s forum in Ethiopia.

US trade representative Michael Froman gave a speech at last week’s forum, claiming that these exports have created “hundreds of thousands” of jobs, but that Agoa can be improved.

“We should drill down into the thousands of tariff lines under Agoa and ask if they are appropriate for eligible exporters.

“Let’s ask which Agoa countries should qualify to export certain products and why? Should there be graduation for sectors or countries? How should we treat African export sectors that are globally competitive versus those that are just starting out?”

Froman also suggested that the US and the Agoa countries “learn from” the acrimonious trade talks between African countries and the EU, which last month involved harsh public criticism of South African industrial policies by visiting EU trade negotiators.

The EU and South Africa, among other African countries, have been at loggerheads about the level of “asymmetry” in their trade deals – meaning the extent to which the EU grants more new market access than it gets in return from Africa.

Froman also repeated one of these criticisms of “bad policies”, singling out “rigid localisation requirements”, which are becoming an important part of South Africa’s industrial plans.

South Africa’s duty minister of trade, Elizabeth Thabethe, in her speech at the forum, got straight to her department’s major concern with a possible reconfiguration of Agoa – the “graduation” of South Africa from the scheme.

“The US should avoid any action that would fragment Africa’s integration effort, including the graduation.”

Instead, Agoa should “be developed into a programme that supports more directly Africa’s integration agenda”, Thabethe said.

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