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US revoking of trade benefits may cost SA manufacturing sector billions of rand

Published Feb 12, 2020


JOHANNESBURG – South Africa’s export industry is set to take strain from the US’s decision to revoke trade benefits under the World Trade Organisation (WTO) general system of preferences for developing nations as it hits on a long-standing bilateral export market.

US President Donald Trump on Monday narrowed that nation’s internal list of developing and least developed countries to reduce the threshold on whether the imports harmed US industries with unfairly subsidised exports.

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The US is South Africa’s third-largest trading partner.

The revoking of the trade benefits could see the manufacturing sector losing billions of rand in revenue.

It will make it easier to penalise a number of developing countries, such as China, India and South Africa, which the US views as not befitting the “developing nations” status.

It would also attract higher import duties and levies to the US market.

The National Association of Automobile Manufacturers of South Africa (Naamsa) said the move was a tragedy for the industry and economy as all preferential treatment was crucial.

“The US has been one of South Africa’s top export destinations and trading partners for the past three decades. In 2019, a total of 12 437 vehicles were exported to the US along with automotive components to the value of R4.8 billion,” said executive manager Norman Lamprecht. 

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The General System of Preference (GSP) allows for the bulk of local automotive components to enter the US duty-free, while the African Growth and Opportunity Act (Agoa), an extension of the GSP bestowed towards 39 African countries, including South Africa, allowed for duty-free access of manufactured vehicles exports.

The revoking of the GSP treatment was especially poignant for South Africa, because there are strong indications that its extended programme (Agoa) would likely not be renewed in 2025.

“If we lose preferential treatment, we lose an important export market,” Lamprecht said.

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The two countries do brisk trade in machinery, healthcare, minerals and metals, electronic products, footwear, energy related products, agricultural industry implements and produce as well as textiles and apparel amongst others.

Steel and Engineering Industries Federation of Southern Africa economist Michael Ade said the revoking of special preferences would make it difficult for South Africa to implement countervailing duties.

Ade said the WTO rules required governments to terminate their countervailing duty investigations if the amount of foreign subsidy was de minimis, which is normally defined as less than 1 percent ad valorem. 

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He said a different standard for so-called developing nations that requires investigators to terminate duty investigation if the amount of subsidy is less than 2 percent ad valorem applies.

“This is a travesty from our perspective,” Ade said. “The challenges of high inequality, high unemployment, low growth and others mean that South Africa has every right to be declared a developing nation. Maybe China and India can live with that status, but here we have a Gini coefficient of 6.3 percent, which is very high.”