By Lehlohonolo Lehana.
Minister of Trade and Industry Parks Tau says tariffs announced by President Donald Trump this week effectively nullified the benefits African countries enjoy under U.S. trade initiative the African Growth and Opportunity Act (AGOA).
Agoa is legislation approved by the US Congress in May 2000 to allow certain African countries preferential access to the US markets. South Africa has been one of the countries that have benefited from this legislation for over two decades.
Tau and International Relations Minister Ronald Lamola briefed the media in Midrand, Johannesburg.
Trump imposed a 30% levy on goods imported from South Africa, but Tau says this was rectified to be a 31% levy.
Tau explained that the US trade stance does not support agreements that appear to be one-sided. Based on this principle, the department considers Agoa effectively nullified.
According to Tau, the US has confirmed that the Agoa Forum, an annual forum on ways to boost economic cooperation and trade between the United States and Africa, is still happening in July.
“As African trade ministers trading under Agoa, we have to engage on the basis of a US that has adapted its trade policies, and we have to adjust our own engagement to acknowledge that. My sense is that when we go to the US as trade ministers, we are going to engage on the basis of a US approach that does not want arrangements that only benefit one side,”says Tau.
Tau touched on the topic that has been circulating: having reciprocal tariffs on goods imported from the US.
“That would be a race to the bottom. It would be ill-considered to simply just make a decision to impose a reciprocal tax. Our approach has always been to engage with the US and send a delegation. We are not going to simply make public pronouncements,” says the minister.
A delegation is preparing to travel to the US, but President Cyril Ramaphosa will announce the exact date, Tau commented.
He says the conversation will centre around tariffs and bilateral trade agreements between the US and SA.
“There are specific trade issues that happen between the US and SA even outside of Agoa. In fact, the bulk of our trade with the US is outside of Agoa. 25% of our trade with the US is under Agoa a, and 75% has been under most-favoured-nation governed by the World Trade Organisation,” Tau noted.
The World Trade Organisation explains the most-favoured-nation (MFN) principle as a cornerstone of a multilateral trading system conceived after World War II. It seeks to replace the frictions and distortions of power-based (bilateral) policies with the guarantees of a rules-based framework where trading rights do not depend on the individual participants’ economic or political clout.
“We also need to talk to the US around bilateral trade for our respective investments. We have also significantly invested in the US as a country and we have significant investments through Sasol, Sappi and others. We have companies that have listed on the US stock exchange, “says Tau.
While the US is yet to formally announce the future of AGOA, Lamola said the writing was on the wall.
“The reciprocal tariffs effectively nullify the preferences that sub-Saharan African countries enjoy under the Africa Growth and Opportunity Act. The sweeping tariff measures will affect several sectors of our economy, including the automotive industry, agriculture, processed food and beverage, chemical, metals, and other segments of manufacturing, with implications for jobs and growth.”
Lamola said: “The new tariff regime arising from the decision by the United States of America, which has been directed not only at South Africa but at the entire world, necessitates strategic responses to maintain and grow our industrial base as a crucial avenue to pursue inclusive growth.
In response to the US government’s imposition of tariffs, South Africa will continue to navigate the challenges and opportunities these measures present with resilience and innovation.”