Minister of Trade, Industry, and Competition Ebrahim Patel warned Parliament last week that South Africa could be “graduated” out of a preferential trade agreement with the United States as the country has gained enough from the agreement.
Patel said in terms of creating the Africa Growth and Opportunity Act (AGOA), the US could conclude that South Africa has gained enough from the trade agreement and end the country’s participation.
In effect, South Africa can be “graduated” out of AGOA if it has developed and grown to a point where it no longer needs preferential access to the US market.
Technically speaking, South Africa, as a middle-income country, was not meant to be a part of AGOA as the Act is specifically aimed at low-income countries.
However, the main reason why South Africa’s preferential access to the US market is at risk is the country’s ties to Russia and alleged support of its war effort.
Four congressmen wrote to US trade representative Katherine Tai and Secretary of State Antony Blinken asking for the AGOA summit to be moved away from South Africa later this year.
The congressmen pointed out South Africa’s ties to Russia as a reason to move the summit.
“South Africa’s actions call into question the country’s eligibility for trade benefits under AGOA,” their letter read.
AGOA states that the US can unilaterally end any trade relationship with the African participating states if they engage in activities that undermine US national security or its foreign policy objectives.
South Africa’s stance on the war in Ukraine, alleged support of Russia’s war effort, and joint military exercises with Russia and China were pointed to as examples of South Africa undermining US national security and foreign policy goals.
Patel is set to lead a high-level delegation to the US to present to US trade representative Tai why South Africa should remain part of AGOA.
The minister said that he would make a case to remain in AGOA and that it is in the country’s best interests to remain within the trade agreement.
According to the Trade and Industrial Policy Strategies think thank, in the fourth quarter of 2022, the US surpassed China to become South Africa’s top export market.
It accounted for 9.9% of the total export value, amounting to R47.4bn. Earlier research showed 38% of South Africa’s exports to the US went through AGOA.
Falling out of Agoa would mean an increase in the applicable tariffs for products going into the United States. It does not mean the products would no longer be exported to the US.
However, an increase in price due to higher applicable tariffs would undoubtedly hurt South African export industries as it would make the exports uncompetitive.