US President Barack Obama yesterday released a letter in which he announced his intent to suspend the duty-free treatment for all South African AGOA-eligible exports in the agricultural sector within 60 days from the date of his letter.

The reason for this drastic step is South Africa’s continuous non-compliance with the eligibility requirements of AGOA. In particular the US authorities feel that South Africa is not doing enough to remove existing trade barriers still being applied to US agricultural exports to South Africa. US business interest groups are particularly unhappy with the anti-dumping duties that are applied by SA to US poultry exports, which has effectively kept US poultry exports out of the SA market for more than 10 years. Apart from the duties, South Africa has also had an ongoing ban in place on US beef, pork and poultry exports on animal health and food safety grounds due to outbreaks of certain animal diseases such as avian flu in the US.

The US authorities feel that these anti-dumping duties on poultry and the import ban on meat exports are being applied unfairly and in breach of South Africa’s international trade obligations. While not particularly highlighted in the President’s letter, the US is also concerned about recent policy changes by the SA government. An example of this is the Private Security Industry Regulations Amendment Act that if signed into law would result in an unlawful expropriation of US business interests in SA.

The poultry issue was a cause for great concern when AGOA was renewed recently, as the US industry was lobbying for SA to be excluded from AGOA as a whole unless it opens up its market to US meat exports. This led to South Africa agreeing to allow a quota of 65 000 tonnes a year of US poultry exports into SA free of the anti-dumping duty. This deal ensured SA’s inclusion under the extended AGOA, however, a special review mechanism for SA’s continued participation was inserted in the AGOA text. SA also agreed to negotiate further with the US on putting the necessary protocols in place to allow imports of US beef, pork and poultry from regions not affected by the disease outbreaks, which would bring SA into compliance with the AGOA requirements. Click here to read our recent article on the deal between SA and the US. 

The US President points out that while SA continues to express its willingness to address the US’s concerns, it has not made sufficient progress on the agreed steps for removing the trade barriers faced by US exporters. Unless SA satisfies the US within the next 2 months that it is taking the necessary steps to address their concerns, SA agricultural exports will become subject to normal US import duties. This effectively means that many SA exporters of agricultural products will no longer be competitive in the US market, which could lead to them losing the market completely. According to the US Department of Trade, SA’s agricultural exports to the US under AGOA amounted to more than $170 million dollars in 2014.

Even more importantly, continued non-compliance by South Africa could lead to the total exclusion of South Africa from AGOA which will affect billions of dollars of exports from SA in many other areas apart from agriculture such as clothing and textiles, chemical products and the automotive industry.

Click here to view Rian Geldenhuys' analysis of the announcement following Minister Rob Davies press conference on SABC. 

Click here to listen to Niel Joubert's analysis on RSG.