We must work harder to secure trade access in the US and UK
6 February 2017
The year that was 2016 could not have offered more surprises if it tried, BREXIT, The DA kicking the ANC out of major metros and of course the election of Donald Trump as United States President.
If there is one thing we learnt about the year gone by, its that things in politics are never certain and constantly change. Trade is no different from politics and with exports remaining a key component to South Africa’s economy, especially with respect to equipment ,agriculture and vehicle exports, we need to evaluate what these changes mean for us as a country.
The United States and Europe are some of our biggest markets for exports with the African Growth and Opportunities Act (AGOA) and the European Partnership Agreement (EPA), offering South Africa duty free access on a number of our goods into these markets.
As a result of Trumps election and his campaign promises ‘to make better deals’ and ‘to Make America Great Again’, our duty free access to this important market is no longer guaranteed should the United States Congress wish to repeal the Act.
In South Africa, AGOA is estimated to have created 62 000 jobs by extending preferences on more than 4 600 products and allowing 90% of South Africa’s exports into the US duty free for the past 15 years valued at around R70 billion per year.
Similarly, after BREXIT and the recent announcement that Prime Minister Theresa May will be triggering a ‘hard exit’ from the European Union, our duty free access to the United Kingdom through the EPA will ultimately come to an end. Through no fault of our own, South African industry and manufacturing stands to be a big loser as a result of these two democratic decisions and affect a combined R140 billion worth of exports each year.
It is therefore incredibly important that just like the British have demanded the Prime Minister to table a plan for BREXIT, the South African Government must begin the process of meeting with both nations to seek clarity on where we stand in the pecking order of duty free market access and brief our exporters and the public at large.
Regrettably, since the BREXIT vote, in June 2016, Trade & Industry Minister Rob Davies has only recently decided to have discussions with UK Secretary for Trade, Liam Fox. Surely it would have been better for President Zuma to have initiated these state to state discussion with Prime Minister May? Whatever the status of the discussions, the fact remains that the Minister has decided to go down the road of ‘wait and see’ while jobs and our industries face uncertainty.
During President Trumps inaugural speech on 20 January 2017, he said in no uncertain terms with respect to trade, ‘protection will lead to great prosperity and strength’. This is the clearest indication yet that he will adopt measures which could threaten our market access into the United States.
Since the Presidents speech, there has been radio silence from the South African Government or Minister Davies on what our plan is to secure AGOA and stave off any populist attempts by those Congressmen and Senators that have backed him to the repeal important trade legislation.
Coupled to this threat, it is also going to become increasingly more expensive for the US and UK to buy from us due to the weakening of the Dollar and Pound against the Rand due to policy uncertainty after both political events.
2017 is the year to sink or swim for South Africa in terms of trade as we attempt to rebuild our economy and create jobs. Therefore, it can not be ‘business as usual’ which led to the 74% decrease in Foreign Direct Investment (FDI) in 2016.
We also have the continued fight to avoid a credit downgrade to junk status which would lead to 160 000 people losing their jobs according to a joint World Bank/Reserve Bank study. Any threat to our ability to manufacture and export to the United States and United Kingdom would surely only add to the case for a downgrade.
What South African’s really need during this time of uncertainty is a plan from our Government, one that acknowledges where we are as a country, the importance of trade and continued duty free access into markets like the United States and the United Kingdom.
We need a plan that spells out how South Africa is not going to wait for our partners to come to us but rather how we are going to take the talks to them.
By being proactive and ahead of the competition, we can carve out new deals that will increase trade, jobs and keep a credit downgrade at bay. Millions of South Africans livelihoods require us to do so.
Dean Macpherson is a member of Parliament for the Democratic Alliance and Shadow Deputy Minister for Trade & Industry
