Johannesburg - The United States is putting the screws on South Africa to open its poultry market to US imports by threatening to suspend the benefits that South African agricultural products receive under the African Growth and Opportunity Act (Agoa).
The loss of these benefits could place hundreds of millions of rand in export revenue and thousands of jobs at risk.
Last week, US President Barack Obama threatened to halt certain agricultural products from the trade deal within 60 days unless the dispute over US meat imports was resolved.
The dispute between the US and South Africa is over demands by US meat farmers that South Africa remove trade restrictions that were imposed to protect the local industry from cheaper imports.
The US push to gain local market access is threatening the local poultry industry.
South Africa earlier this year agreed to a quota of 65 000 tons of US poultry imported into the country. These imports could destroy 6 500 jobs if this quantity is in addition to existing volumes.
Peter Draper, the managing director at Tutwa Consulting, said the US’s use of strong-arm tactics signified a new level of estrangement between the two countries. “Even if this issue goes away, the US would still keep South Africa on a short leash,” he added.
Draper said it was possible that ultimately the US could dump poultry in South Africa and together with US farm subsidies, as opposed to none in South Africa, this constituted unfair competition.
“If you allow it, it could be catastrophic to the marketplace,” he added.
South Africa’s failure to retain its Agoa preferences would have a “devastating” impact on the economy, said Carol O’Brien, the executive director of the American Chamber of Commerce in South Africa, which represents about 250 US businesses.
“It’s brinkmanship; it’s politicking,” O’Brien added.
Loss of revenue
According to Anthea Jeffery, the head of policy research at the SA Institute of Race Relations, South Africa’s pending loss of Agoa benefits reflected broader unhappiness in the US about South Africa’s policy direction and increasing tendency to prioritise relations with China and Russia.
The SA Chamber of Commerce and Industry (Sacci) said on Friday that while it appeared that Obama’s move was not intended to exclude South Africa as a whole, the fact that agricultural products, such as oranges, wine, macadamia nuts and citrus juice would be targeted, would have a damaging impact on the trade balance between South Africa and the US.
“Taking into account that the value of exports of only these products is in the region of R140 million to R150m per annum, the loss of this revenue to the country and the impact that it could have on agriculture is significant,” Sacci said.
Wesgro, which is the investment and trade promotion agency for the Western Cape, said more than R780m worth of the region’s annual exports were at risk if the US cut Agoa benefits.
The citrus sector in the Western Cape alone employs about 6 000 people, with 4 000 employed in sector-related jobs.
The Western Cape’s exports to the US under Agoa had increased by an annual average growth rate of 16 percent between 2001 and 2014, he said.
Local trade unions were particularly irate about Obama’s move.
Cosatu said: “The Obama administration expects us, to allow old meat into our country that does not meet the required standards. This blatant attempt at extortion will result in the loss of many jobs in South Africa, across many sectors that presently benefit from Agoa.”
The Food and Allied Workers Union (Fawu), one of the biggest unions in the agricultural industry, accused the US of trying to use the Agoa negotiations to force South Africa to undermine its agricultural industry.
Fawu general secretary, Katishi Masemola said: “Essentially, what the US wants is an agreement that favours its product without taking into cognisance our industry.”
Wider implications
Agri SA said the possible loss of the Agoa benefits would have wider implications on the agricultural sector as a whole.
The SA Poultry Association (Sapa) said the government had done all it could to address the US concerns, but the US had reneged on agreements that had been reached earlier. Chief executive Kevin Lovell said the deadline had made it difficult for reaching a compromise on the outstanding issues.
“We have not changed on any of our positions, but the Americans keep shifting the goal post and that has made it difficult for any agreement to be reached,” Lovell said.
In another development, Trade and Industry Minister Rob Davies has denied claims by the DA that he had almost bungled Agoa. Davies told journalists in Parliament on Friday that the trade deal with the US was still on track.
* With additional reporting by Bloomberg
TIMELINE
December, 2014: Two US Senators, Chris Coons and Johnny Isakson, send a letter to President Jacob Zuma in which they caution against South Africa’s refusal to eliminate “unfair duties” on US poultry that could jeopardise South Africa’s eligibility for the African Growth and Opportunity Act (AGOA).
March, 2015: Coons meets with South African government officials in Washington to resolve the dispute.
March, 2015: Thirteen US senators write to Davies to resolve dispute.
June, 2015: After a two-day meeting held in Paris, South Africa and the US agree to a US poultry import quota of 65 000 tons a year.
September, 2015: Coons and Isakson again write to Zuma urging him to open up the local market to US poultry “expeditiously”.
October, 2015: A deadline is missed for resuming US poultry imports.
South Africa and the US had set an October 15 deadline to agree on new animal health and food safety rules, which also affect US beef and pork exports and are estimated to cost the US more than $80 million (R1.13 billion) a year.
November, 2015: US President Barack Obama signs a letter to suspend the application of duty free treatment to all Agoa-eligible goods in the agricultural sector for South Africa within 60 days.
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