South Africa could be removed from US trade agreement

Ebrahim Patel who is the Minister of Trade, Industry, and Competition recently warned Parliament that there is a possibility that South Africa could be “graduated” out of a preferential trade agreement with the United States as the country has gained enough from the agreement.

Patel revealed that in terms of creating the Africa Growth and Opportunity Act (AGOA), the US might conclude that South Africa has benefitted enough from the trade agreement and end the country’s participation.  

In effect, the nation can be “graduated” out of AGOA if found to have developed and grown to a point where it no longer needs preferential access to the US market. This means that as a middle-income country, South Africa was technically not meant to be a part of AGOA as the Act is specifically aimed at low-income countries.

Even though that is the case, the main reason why South Africa’s preferential access to the US market is at risk is the country’s ties to Russia and alleged support of its war effort. Four congressmen wrote to US trade representative Katherine Tai and Secretary of State Antony Blinken asking for the AGOA summit to be moved away from South Africa towards the end of this year.

The congressmen indicated that South Africa’s ties to Russia are they reason why the summit has been moved. The letter read: “South Africa’s actions call into question the country’s eligibility for trade benefits under AGOA.”

AGOA also mentioned that the US can unilaterally end any trade relationship with the African participating states if found to engage in activities that undermine US national security or its foreign policy objectives.

South Africa’s stance on the war in Ukraine, alleged support of Russia’s war effort, and joint military exercises with Russia and China were pointed to as examples of South Africa undermining US national security and foreign policy goals.

The minister is set to lead a high-level delegation to the US to present to US trade representative Tai why South Africa should remain part of AGOA, and he will make a case to remain in AGOA and that it is in the country’s best interests to remain within the trade agreement.

In the fourth quarter of 2022, the US surpassed China to become South Africa’s top export market according to the Trade and Industrial Policy Strategies. It accounted for 9.9% of the total export value, amounting to R47.4bn. Recent research showed 38% of South Africa’s exports to the US went through AGOA.

Being removed from Agoa would mean an increase in the applicable tariffs for products going into the United States, not that the products would no longer be exported to the US. With that being said, an increase in price due to higher applicable tariffs would undoubtedly hurt South African export industries as it would make the exports uncompetitive.