Wrong decision on land could kill off SA’s US trade ties
Trump’s trade tariff announcement may be a source of considerable angst, but even more so are pronouncements on land expropriation without compensation, writes Richard Tren
US President Donald Trump has set the cat among the pigeons with his proposed steel and aluminium tariffs. Over several decades global trade has steadily increased and has been a driver of economic growth and rising prosperity around the world.
Poverty in India and China declined rapidly after those countries liberalised their economies and opened up to global trade. Trump’s belief that the US can "win a trade war" is misguided. No one wins a trade war and it is the poor who would suffer.
As President Cyril Ramaphosa develops his economic strategy for SA he would do well to bear this in mind and focus on those policies we know will help the poor. One of the benefits of the end of apartheid and the National Party rule’s was the re-entry of this country into the global trading system.
ALL TRUMP NEEDS IS AN EXCUSE TO SAVE THE $300M THAT THE US SENDS TO SA, AND SA’S PARLIAMENT MAY HAVE JUST GIVEN IT TO HIM.
According to the Fraser Institute’s Index of Economic Freedom, SA’s freedom to trade globally increased significantly between 1990 and 2000, and this must have been an important driver of the economic growth and prosperity the country experienced at the time.
As economists Donald Boudreaux and Nita Ghei of George Mason University in Virginia explain, free trade "drives economic growth, enhanced efficiency, increased innovation and the greater fairness that accompanies a rules-based system". The economists say these benefits increase as overall trade — exports and imports – increases.
The US remains an important trading partner for SA and the Africa Growth and Opportunity Act (Agoa), which was passed during the Clinton administration, offers favourable trade terms to qualifying African countries. After Nigeria, SA is Africa’s second largest exporter to the US under Agoa, with almost $3bn worth of exports in 2017.
These exports allow South Africans, in turn, to import from other countries. Indeed, the only point of exporting is to be able to import, which drives innovation and growth.
In addition, American taxpayers provide millions of dollars in aid through the US Agency for International Development (USAid). Development aid does not and never will increase economic growth. In fact, as the economist William Easterly has shown in numerous publications, it could even frustrate economic growth by counteracting the need for recipient governments to reform their economic policies and diverting the onus of leaders from being answerable to their citizens, to merely being answerable to aid "bwanas".
That said, few would argue that there is no place for humanitarian aid. Almost all of USAid’s assistance to SA is devoted to HIV/AIDS programmes, with almost $483m in grants in 2017. Such assistance saves lives and benefits the poorest and most vulnerable South Africans.
Trump’s trade tariff announcement may be a source of considerable angst, but even more so are the ANC and EFF’s pronouncements on land expropriation without compensation. Undermining property rights in SA would be devastating.
Before taking any action Ramaphosa should recognise that one of the conditions for participating in Agoa is that a country must be "committed to the rule of law, economic reform and the eradication of poverty". Furthermore, Agoa is open only to countries that are market-based and "protect private property rights".
Parliament’s recent vote on land expropriation would likely disqualify SA from Agoa on both counts. While SA risks losing a trading partner, there is growing outrage in the US about the racial targeting of whites. Tucker Carlson of Fox News, an influential conservative media pundit, questioned why US taxpayers should send aid to SA if the ANC is determined to undermine property rights. Trump has vowed to cut overseas development aid and is known to be an avid Fox News watcher.
All he needs is an excuse to save the $300m the US sends to SA, and SA’s Parliament may have just given it to him. SA’s new president may rightly feel confident after beating Nkosazana Dlamini-Zuma to the top spot. However, Ramaphosa will face the entire electorate before long.
Depending on the path he takes, Ramaphosa can either campaign on a track record of growing prosperity and better livelihoods, or pacify public rhetoric and watch the country descend into a Venezuela-or Zimbabwe-like state. The choice lies in Ramaphosa’s hands.
• Tren is a writer based in Washington.
*This article has been amended to reflect the correct figure, provided by the US embassy, of $483m in HIV/AIDS grants to SA in 2017 and not $240m as previously stated.