Don’t panic, government tells exporters after US trade decision

The government says South African exporters need not panic about a decision by the US to remove the country from the list of nations that can receive preferential trade benefits.

Department of trade & industry director-general Lionel October said in an interview with Business Day on Thursday that while the implications of the US decision needed further assessment, it would not immediately affect local exporters because the government did not provide subsidies to local industry or agriculture.

The US this week narrowed its list of developing and least-developed countries to reduce the threshold for triggering a US investigation into whether nations were harming its industries with unfairly subsidised exports.  There were fears that the move could mean SA losing billions of rand in export revenue.

The US is a major trading partner. SA’s total exports to that country in 2018 amounted to $8.5bn (about R126bn), which was about 9% of the value of all products shipped by SA around the world.

“We are not doing any subsidising in any case,” said October.

“This [US decision] will only apply if the US suspects that a country is subsidising its industries. So this will not affect our exporters now. We also still have Agoa [the US trade agreement designed to help African exporters] and GSP preferences [the generalised system of preferences, which allows emerging markets to export goods to the US without paying penalties]. If ever we subsidise an industry, then the US will launch an investigation,” said October.

However, the department said the change in designation may be related to US efforts at the World Trade Organization (WTO) over the past two years to restrict the application of the principle of special and differential treatment that provides all developing countries flexibilities in negotiations. The US has asked many developing countries, including SA, to forgo such flexibility in future negotiations.

“It should be recalled that under the Uruguay Round negotiations, SA was treated as a developed country and was required to undertake deep and wide tariff reductions that have contributed to deindustrialisation and high unemployment in SA,” the department said in a statement.

The Uruguay round of trade talks were the largest in history and involved 123 countries.

“SA and many other developing countries have not been prepared to forgo special and differential treatment in future negotiations based on the experience of the Uruguay Round outcomes.” 

In 2019, US President Donald Trump issued an executive memo, asking US trade representative Robert Lighthizer to determine whether there had been “substantial progress” on limiting the number of countries considered developing nations. During his campaign for the presidency, Trump made it clear he wanted to protect US domestic business and manufacturing from threats abroad.

In reaching the decision, the US trade representative took into account SA’s Group of 20 membership (G20), despite the country having a per capita gross national income below $12,375, which is generally used as the benchmark to determine whether a country is developed or underdeveloped.

This week, DA MP and trade & industry spokesperson Dean Macpherson said that this was akin to classifying someone as “fit” based on them belonging to a gym.

phakathib@businesslive.co.za