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US and South Africa reach deal on AGOA

iStock 000006626163XSmallMinister of Trade and Industry Rob Davies announced to Parliament this week that South Africa has managed to reach agreement with the United States on a long-standing trade dispute on US chicken imports into South Africa, which threatened to derail South Africa's continued inclusion under the renewed African Growth and Opportunity Act (AGOA).

AGOA is a unilateral programme providing for the duty-free access of thousands of products from designated African countries into the US market. It was first signed into law in 2000 and initially covered a period of eight years, but it was subsequently extended in 2004 until 2015. The most recent renewal extended the programme for a further 10 years. AGOA expands the (duty-free) benefits previously available only under the US Generalised System of Preferences (GSP) programme to qualifying African countries, ensuring duty-free access to the US market for approximately 7 000 product tariff lines. This includes products such as clothing and textiles, wine, motor vehicles and components, various agricultural products, platinum and diamonds, iron and steel products and many others. AGOA is very important for South African exporters. According to the Department of Trade and Industry South Africa's exports under AGOA was worth $3.6bn in 2014.

The extension of AGOA beyond 2015 has therefore been a very important issue for South Africa. Various US lobbying groups, however, has opposed the inclusion of South Africa under the extension of AGOA. The main opposition to South Africa's continued inclusion has been the US poultry industry, which has been unhappy with the anti-dumping duties imposed by South Africa on chicken imports from the US. US chicken imports into South Africa also have to compete with EU imports entering the South African market in terms of the TDCA, the Free Trade Agreement (FTA) between South Africa and the EU. While the US negotiated a FTA with South Africa as part of SACU for several years, it was never concluded. While the US can take legal action at the WTO if it feels that South Africa's anti-dumping duties violates international trade rules, it has not instituted any such action. South Africa insists that these duties are applied in accordance with WTO rules, which allow WTO members to use this trade remedy to protect their markets from unfair trade.

The extension of AGOA, however, provided the US poultry industry with a very powerful bargaining chip for ensuring better market access into South Africa. South Africa eventually had to agree to extend an import quota for US chicken of 65 000 tonnes a year in order to ensure that it can continue to benefit under AGOA. While the agreement between the US and South Africa is welcome news for many exporters under AGOA, South Africa is still not absolutely guaranteed to benefit from AGOA for its full 10 years. Special provisions have been inserted in the renewed AGOA text providing for a special review mechanism for South Africa's continued participation. Many US lobbying groups feel that South Africa as a more advanced African economy should be graduated from AGOA. Importantly, as AGOA is a unilateral programme the US also attaches various conditions to countries' continued participation. At a time when the US has expressed concern about a number of South Africa's policies, such as its proposed restriction of foreign ownership in the private security industry, South Africa might yet face further challenges to its inclusion under AGOA in the near future.

Niel Joubert
©Trade Law Chambers 2015

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