by Ed Yourdon
Farm trade impasse between SA and USA-What it means for businesses
South Africa is one of the several beneficiaries of the US trade programme, African Growth and Opportunity Act (AGOA). The programme allows the entry of African products including agricultural products in the US market duty-free and quota-free. In 2014, South Africa exported about $ 1.7 billion-worth of products to the United States. Despite the booming trade relationship, South Africa could stand to lose the benefits it enjoys under the AGOA if the farm impasse between the two is not resolved. The dispute is over the importation of poultry, pork and beef products from the United States; these products have not been allowed to access the South African market for 15, 3 and 12 years respectively.
Alluding to health concerns arising out of the avian flu outbreak in the United States, South Africa has blocked the imports of chicken from the United States. The African government believes that the imports of US poultry could put the health of the South African population as well as animals in danger. The avian flu had killed about 50 million birds on the other side of the Atlantic Ocean. At the same time, several American producers have not been able to gain entry to the South African market due to high duties, which have been imposed in response to American businesses “dumping” poultry at costs lesser than the production value.
If the benefits to South Africa are withdrawn by the United States, its citrus manufacturing sector or its automobile industry is expected to see great losses. The African nation not only stands to lose duty-free access to the US market for its citrus fruits and luxury car exports but also experience the negative impact it may have on the country’s economy including loss of jobs for thousands of its people. In terms of development of the South African economy, the programme has helped to advance the manufacturing sector of South Africa with Port Elizabeth exporting $ 1.3 billion worth of luxury cars to the United States every year. With regards to the export of agricultural products, the African nation is estimated to export about $ 250 million worth of citrus products to the US market every year.
It is due to the AGOA that automobile exports from the country have seen a growth from a negligible figure in 2000 to an average of about $ 1.7 billion every year. It has been responsible for generating over 30000 jobs directly and over 60000 jobs indirectly. In addition to boosting its automobile production, the Act has also enabled the country’s citrus industry to make the US market an important export destination and a base from which to compete against countries like Mexico and Europe. As a result of the AGOA, 85000 jobs have been created in the citrus industry. In terms of its exports performance in the year 2014, South Africa exported about $ 55 million worth of fruits and vegetables to the US.
At present, both sides are carrying out negotiations to further the reach of certain South African products like lamb, avocados and parsimons.
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