(Bloomberg) -- South Africa could lose part of its preferential access to the US if its trade policies disadvantage American exporters relative to their developed-nation counterparts, according to people familiar with the matter.
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Thousands of South African products enter the world’s biggest market duty free under the African Growth and Opportunity Act, or AGOA, and the so-called Generalized System of Preferences, or GSP. South Africa shipped goods worth more than $15 billion to America last year, with $2.7 billion’s worth cleared under the two accords, US government data show.
AGOA is due to expire in 2025 and US officials have previously said the qualifying criteria for beneficiaries could be revised or the program may be replaced. It would be surprising if South Africa’s trade terms remain as favorable as they currently are, said the people who are familiar with the talks about the accord’s future and spoke on condition of anonymity as the discussions are private.
US lawmakers’ concerns that South Africa is taking advantage of its preferential market access while imposing tariffs that render American goods uncompetitive could trigger the change, the people said. AGOA’s eligibility requirements include eliminating or working toward scrapping barriers to US trade and investment.
South Africa’s Department of Trade, Industry and Competition didn’t respond to calls and text messages seeking comment.
Former US Trade Representative Robert Lighthizer told a House Ways and Means Committee hearing in 2020 that an increase in South African poultry tariffs gave European exporters an unfair advantage over their American competitors. Given the benefits South Africa enjoys from its duty-free access to the US, the move struck him as “completely crazy,” he said. His successor, Katherine Tai, is due to participate in a US-Africa leaders’ summit that President Joe Biden will host in Washington next week.
America maintains a close relationship with South Africa, said Constance Hamilton, the assistant US trade representative for Africa.
“Our ministers have a lot in common in terms of aspirations for these trade relationships. South Africa qualifies for AGOA because it meets the criteria that was set out in the legislation,” she said in a phone interview on Thursday. ‘“There is nothing they have done that says they are not meeting that criteria.”
In 2015, the US threatened to exclude South Africa from a preferential trade agreement after a disagreement over poultry levies. It also warned that proposed changes to legislation that would limit foreign ownership of private security companies in the country may affect its inclusion in AGOA.
South Africa’s status as one of sub-Saharan Africa’s most-developed nations may also allow it to graduate out of AGOA or exclude it from future iterations, the people said.
Together AGOA and the GSP give about 40 sub-Saharan African countries, including Nigeria, Kenya and Ghana, duty-free access to the US market for almost 7,000 products.
South Africa’s market access under the GSP, America’s oldest and largest trade-preference program for the world’s poorest economies, has been under review since 2020. That’s after the authorities accepted a complaint from a US private-sector group alleging that proposed changes to South African laws fail to provide for adequate and effective protection of American copyrights.
--With assistance from Samuel Gebre, Paul Vecchiatto and S'thembile Cele.
(Updates with comment from assistant US trade representative for Africa in seventh paragraph)
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