NEWS & ANALYSIS

Trump’s trade war may succeed to our detriment

Douglas Gibson notes that SA is running a trade deficit with China, but a trade surplus with the USA

President Cyril Ramaphosa was quoted recently in The Star as saying that South Africa would not be bullied by the United States of America when it came to trade relations. He was defending the closer links with China and, of course, with the other BRICS nations and clearly siding with them against America and against President Trump.

The statement by Ramaphosa was no doubt popular in his own party. Many people in the ANC dislike the USA – after India the world’s biggest democracy – preferring the undemocratic world. It seems sometimes that the South African government never meets a one-party state or an undemocratic country that it does not like.

President Trump of the USA has not exactly endeared himself to people in South Africa, Africa or to people around the world, for that matter. Referring to them as “sh.thole” countries was not the way to win their hearts. But presidents come and go and sometimes even the unpopular ones leave a legacy that has merit.

President Xi of China, on the other hand, has headed a push by his country for influence here and elsewhere on the continent and during his visits he has seemed an avuncular figure, friendly towards us and wanting to help South Africa’s drive for foreign investment and for loans.

All of this seems to make sense and few will criticise President Ramaphosa for being cool towards the USA and warm towards China. I wonder, though, how strategic the choice is and whether it will prove to be in our long-term interests.

Don’t simply assume that the USA will lose a trade war. The reason is simple: fair and equitable trade, especially between the USA and China demands that China will adjust many of its practises, its defences, its tariffs, its government subsidies, and its theft of intellectual property, all of which contribute towards making it difficult for the USA to access the Chinese market. The result is an enormous trade gap between the two with Chinese exports to the US in 2017 earning $505 billion, while America earned only $129.8 billion from its exports to China. This imbalance is not sustainable. Just watch China begin to make concessions, even while adopting a tough stance.

Interestingly, South Africa suffers from a very adverse R42 billion trade balance with China, while enjoying a healthy surplus of R15.2 billion with the USA. Is it clever to jeopardise this by an aggressive stance towards the USA and plumping too definitely for China? What happened to the idea of being non-aligned and the sensible idea that our foreign and trade policy should enable us to be friendly with and to trade with all nations that want to do business with us?

What of the investment scene, so important to South Africa? This week, China committed to R193 billion in investments in South Africa. But this is dwarfed by South African companies' investment in China. South Africa invests eight times more in China than the other way around. The $14.7 billion (R193 billion) in Chinese investments – including repayable loans to Transnet and Eskom – announced during Chinese President Xi Jinping’s state visit to South Africa this week, are dwarfed by South Africa’s investment in that country, which stood at just over $80 billion in 2016, according to a recent report compiled by Deloitte for the Department of Trade and Industry. At that same time, China’s investment in South Africa was $10 billion.

The USA also makes hugely generous outright payments through USAID. In 2016 that aid amounted to $459.7 million (R5.779 billion). This money is used to fund our HIV/Aids programme and the fight against TB and Malaria. Unpopularly, but perhaps understandably, the USA has recently threatened to cut funding to countries that do not vote alongside it in the United Nations – countries that include South Africa.

In a report titled “Voting practices in the United Nations in 2017” South Africa was named as one of the countries that voted with the US in the UN the least. We voted with the US on 9 occasions and against it 68 times. According to eNCA, the 10 countries with the lowest voting coincidence with the US were Zimbabwe, Burundi, Iran, Syria, Venezuela, North Korea, Turkmenistan, Cuba, Bolivia and South Africa. Strange that we feel comfortable in that company and so uncomfortable in the company of many of the democracies. It would be strange too if there was not a price to pay for our stance at the UN.

This becomes of even greater significance as South Africa prepares to join the UN Security Council as one of the 10 non-permanent members. The permanent members of the Security Council are the USA, China, the UK, France and Russia. Our choice of allies and friends, and of those whom we do not support, becomes even more important.

President Ramaphosa has sketched in lyrical terms the use to which our membership will be put: promoting Africa. That is natural, given the strong support we received from the Africa bloc. But I would suggest that it should also be used to promote South Africa’s interests and particularly its trade and investment interests. There is nothing more important than creating the growing economy that will help us make a dent in our unemployment figure – the highest in the world.

It makes sense for us to be friends with the BRICS countries and especially China; the second biggest economy in the world is a friend worth having. But this should not be like a marriage where one has to be true to only one partner: South Africa’s interests dictate that we should maintain a close relationship with other old friends like the European Union, the UK and especially the USA, the biggest economy in the world.

Douglas Gibson is a former opposition chief whip and a former ambassador to Thailand. His website is douglasgibsonsouthafrica.com.

This article first appeared in The Star.