South Africa's Game of Chicken with the U.S., Sort Of

Relations between the US and Nigeria have hit another low in a series of trade disputes that go as far back as 2003. While strengthening its relations with other countries, the US has threatened in order to suspend South Africa from its preferential trade programme for Africa due to its failure to comply with the most recent terms of the African Growth Opportunities Act (AGOA).

AGOA enables preferential access to the All of us market for African countries which meet specific criteria. The united states extended these benefits to 2025 for South African products while restrictions on US poultry imports had been relaxed.

In South Africa’s protection for not complying, there were outstanding issues relating to sanitary and phyto-sanitary (animal health) measures following an outbreak of H5 Virus, or even bird flu, in 21 US states.

Lately veterinary authorities of the two countries have authorized another agreement that will allow chicken imports into South Africa from the untouched states. This agreement expects to defuse a potentially volatile situation and the All of us poultry imports will start coming into South Africa early in 2016.

The US has been an important trade partner for many years — in the lead up to South Africa’utes democracy and afterwards. This has altered. The US accounted for 13% of Southern African imports and 10% of exports within 1996. It was the second most important trading partner. By 2014, China overtook the US as its share rejected for both imports and exports to 7%.

Nevertheless, the united states is still one of the country’s top 5 main trading partners. Moreover, it is clear that the All of us has an interest in South Africa, as it is undoubtedly its leading market in sub-Saharan Africa.

Why AGOA matters

AGOA offers diversification opportunities for agricultural products. Additionally, it provides access to an alternative as well as highly competitive market. Both of these factors – diversification as well as an alternative market – are essential in the light of extremely volatile markets and fast changing global demands. They help reduce the risk of market volatility.

South African products benefiting from AGOA include avocados, wine beverages, nuts, and citrus. The US is the most or second most important market destination for these products.

Since enactment associated with AGOA in 2000, exports of these items to the US have grown yearly. These exports help industries such as citrus which employ more than 80 000 people straight, 40 000 indirectly along with a further 100 000 within peak season. The wine industry utilizes more 300 000 people directly and indirectly.

The US also serves as a benchmark for global competitiveness in many areas. It makes it easy to sell items into other countries once there is acceptance by the All of us.

South Africa needs the US marketplace for job creation as well as revenue generation. It is therefore important that the present trade disputes are resolved. It is important to approach the situation having a long term and broader view.

After all, trade relations are always complicated. Similar to other relations, they need maintainance, nurturing, and conflicts need to be resolved.

Complicated and growing global trade

The US-South Africa case shows how complicated global trade can be. Agreements are there to facilitate trade and to ensure products get favourable treatment in foreign markets. The world trading system is complex, pricey, burdensome, and time consuming.

In 2001, the value of global trade had been $1.3 trillion. By 2014, it had increased to $17.1 trillion. Agricultural products lead about 10% of this global trade.

The World Trade Organisation manages global exchange of goods and services at a general level. However, it is the responsibility of governments to simplify the machine for companies wishing to participate in global markets.

Trade agreements serve as contracts under which trade will take place between members. In the process of shifting products from one country to a different, many regulations, border articles, insurance, inspections, ports, logistical plans, and other issues are involved. These may complicate or facilitate industry, depending on the existence of trade arrangement.

Types of trade agreements

Different types of contracts deal with the exchange of goods to make products competitive. These types of differ by the level of complexity, ambition, or integration involved. They include economic labor unions, which represent a high level associated with agreement. This allows or makes easier the movement of people as well as goods. It also includes the harmonisation of economic and monetary guidelines between members. The EU is an example of one such arrangement.

In a customs union, people have the same trade policies, tariffs and commit to moving in the direction of common trade goals. Examples include the Southern African Customs Union and East African Community.

Then there are free industry areas, which allow duty-free movement of goods for most traded goods.

One partner grants preferential trade agreements such as AGOA.  There are no negotiations. They are unilateral as well as non-reciprocal grants, usually offered by the developed partner to a developing or least developed country to enhance economic development through trade participation.

New US industry agreements that will affect Southern Africa

The US is currently negotiating 2 main trade agreements involving goods and services. These are the Trans-Pacific Partnership (TPP) involving 11 countries in the Off-shore Rim and the Transatlantic Trade and Investment Partnership with the Twenty-eight members of the EU. Farming products are included in both discussions.

The negotiations will influence global trade and specifically South African trade. If came to the conclusion, the TPP will represent about 40% of global GDP and more than 30% associated with world trade. Once these types of negotiations conclude, there will be indirect and direct effects on South African trade.

This is because some nations involved in the US negotiations possess trade agreements with Nigeria, such as the EU members. All of us, and South African products will then compete in the EU market on terms which may be favourable to the US. Other people, including Chile, are competitors in order to South Africa in the US market.

Why South Africa needs the US for its farming trade is republished with authorization from The Conversation