SA cautions against review of preferential access by Trump administration

The government will tell President Donald Trump’s administration that its review of a preferential trade agreement with SA that could put as much as $2.4bn in exports at risk is premature and potentially damaging for both economies.

The US trade representative will start public hearings on Thursday to review the nation’s duty-free access to the US market under the so-called Generalised System of Preferences (GSP), its oldest and largest trade-preference programme for the world’s poorest economies.

That is after it accepted a complaint from the International Intellectual Property Alliance (IIPA) — a private-sector group that represents 3,200 US companies including the makers and distributors of books, films, music and video games — that alleges SA’s Copyright Amendment Bill and Performers’ Protection Amendment Bill fail to “provide adequate and effective protection of US copyrights”.

According to the prehearing brief filed by the SA embassy in Washington DC, senior officials in the department of trade & industry will argue that the IIPA’s concerns are “at best speculative and certainly premature” as the proposed bills are not yet in operation and undergoing a review by President Cyril Ramaphosa. Xavier Carim and Evelyn Masotja will make the representations.

To qualify for GSP benefits, a country must meet the criteria established by the US Congress. The extent to which the country provides adequate and effective protection for intellectual property rights may affect its eligibility.

This is not the first time that SA’s actions have put it at risk of losing preferential trade access to the US In 2015, the US warned that changes to legislation that would limit foreign ownership of private security companies in SA may affect the country’s inclusion in the African Growth and Opportunity Act. The bill was passed by parliament, but was not signed by the president.

If the outcome of the review is negative, SA could lose its preferential market access under the GSP and the African Growth and Opportunity Act, which together allow most sub-Saharan African countries duty-free access to the US market for almost 7,000 products. This could deepen the malaise of an economy stuck in the longest downward cycle since World War 2.

Trade in goods and services between SA and the US was $18.9bn (R276bn) in 2018, with $2.4bn of exports from Africa’s most industrialised economy under the two preferential programmes, according to US government data.

Oranges and aluminium

SA’s agricultural sector has the “greatest exposure” to a potential loss of preferential market access relative to total sectoral exports, according to Eckart Naumann, an independent economist and associate at the Stellenbosch-based Trade Law Centre (Tralac). That is ahead of the automotive sector, which ships more in nominal terms. About 75% of US-bound farm exports, equivalent to $304m, was cleared under duty-free preferences in 2018, he said.

The country is the second-largest source of imported oranges in the US and also ships table grapes, litchis and avocados to the world’s biggest economy. The viability of the local fresh-produce industry, which supports more than 300,000 jobs, could be affected by a loss of access to the African growth act allowances, Anton Kruger, CEO of the Fresh Produce Exporters’ Forum SA, said in his submission.

The SA and US minerals and metals industries could be affected by a negative review, even though only 15% of the $4.75bn in US-bound freight used GSP and African growth act preferences last year. Hulamin, a Johannesburg-listed aluminium semifabricator that supplies the US with metal used in the production of beverage cans, vehicle manufacturing and construction, estimates that a loss of these benefits would increase the price at which it delivers aluminium sheet and plate products in the US

“This could ultimately have profitability implications for companies that are importing aluminium for further processing,” the company said in its submission to the US trade representative.

There will be no change to SA’s GSP or African growth act benefits during the review process, a US embassy official in Pretoria said.

Bloomberg