Setting the Record Straight on AGOA Renewal for South Africa

Pretoria—April 9, 2015  Media stories in the South African press have published a wide variety of opinions on the on-going discussions concerning the renewal of the African Growth and Opportunity Act (AGOA) as it relates to South Africa.  We wish to clarify some erroneous views that have recently been published in the South African media.

“The U.S. is holding South Africa hostage on AGOA renewal”

Absolutely not.  The United States has made clear our consistent position that we want AGOA seamlessly renewed, and that we want South Africa included.

Both the Administration and Congress, however, have also made clear that we want to resolve outstanding issues blocking U.S. trade, most notably on several agricultural products.  A number of Congressmen have written several letters over the last two years, including a letter signed most recently by 13 Senators, noting their concern that South Africa has maintained an anti-dumping duty on U.S. bone-in chicken since 2001, and making their view clear that they believe 15 years is a reasonable amount of time to have resolved this dispute.

 

“AGOA isn’t that important for South Africa.”

The United States’ $16.8 trillion market is the largest in the world and AGOA gives South African industries duty-free access to that market for virtually any product produced in South Africa.

In 2014, the total value of South African exports to the U.S. under AGOA was $1.7 billion, including automobiles, ferromanganese, industrial alcohol, oranges, wine, macadamia nuts, mandarins, citrus juice, pimentos, nuts and raisins.  Since 2000, AGOA has helped build the South African automobile industry resulting in tens of thousands of new South African jobs.  South African agricultural growers have taken extensive advantage of AGOA.  In 2014, the United States imported $55 million in fruits and vegetables including oranges, $51 million in wine and beer, and $48 million in tree nuts like macadamias.

Moreover, U.S. government estimates show that the South African agricultural sector has the potential to expand their exports to the U.S. by over $175 million in the near term.  As South African industry grows, the potential benefit of AGOA increases as well.

 

“The United States hasn’t made clear what it wants”

The United States is calling for South Africa to resolve the outstanding non-tariff barriers and other measures that are blocking U.S. exports of beef, pork and chicken without delay.  We appreciate the progress that our governments have made over the last two years in addressing some aspects of the issues on beef and pork, but we need to resolve the remaining issues expeditiously to restart trade in these key sectors.

On chicken, the United States believes South Africa would best be served by re-examining the basis for the anti-dumping duty that currently keeps U.S. chicken out of this market.

Additionally, the United States has world-class livestock and meat production systems which allows us to safely export U.S. poultry, pork, and beef to over 100 countries worldwide. We are asking South Africa to accept our proposed protocols for pork, poultry, and beef that provide all necessary animal health and food safety assurances to South Africa.

 

“The WTO has not ruled on the method that South Africa has used to calculate the anti-dumping duty on U.S. chicken”

Both the U.S. poultry industry and the United States government have questioned whether the basis for those antidumping duties – South Africa’s use of the so-called “weight average cost of production” methodology – is consistent with international law. In 2013, the United States successfully challenged China before the WTO in a case where China attempted to employ the same type of methodology.  A summary of those findings can be found here.

 

“The U.S. and the U.S. poultry industry have not challenged the anti-dumping duty in the WTO for 15 years.  Either it has never cared enough or it is afraid it will lose”

Over the past 15 years, we have continually made our position clear to the South African government on the anti-dumping duties against U.S. chicken parts.  The U.S. poultry industry has strongly argued against these duties since they were imposed.

 

“Removing the anti-dumping duties on U.S. chicken would destroy the South African poultry industry, threatening thousands of South African jobs”

In 2014, South Africans consumed about 1.8 million tons of broiler chickens.  Local producers supplied 1.4 million tons while the rest (about 400,000 tons, about half this amount is bone-chicken, and half is a deboned product that is used in processing) was made up by imports from overseas.  That means South Africa already imports about $350 million worth of foreign chicken each year.  Domestic chicken producers are already “protected” from these foreign imports by a 37 percent ad valorem import duty on bone-in imported chicken.  On top of that duty, U.S. chicken is charged an anti-dumping duty of Rand 9.8 per kilo, effectively making it more than twice as expensive as other foreign exporters.

If the anti-dumping duty against U.S. chicken were removed, it wouldn’t mean that U.S. producers would replace the South African poultry industry, but merely that the U.S. would compete against the other foreign producers already in the market.  U.S. chicken would still be subject to South African’s 37 percent import tariff—one of the highest in the world.

Moreover, historical trends show that South African demand for chicken continues to increase at a steady rate so both domestic production and foreign imports need to keep expanding simply to keep up.  The balance of domestic production compared to imports would likely remain the same.

 

“The U.S. wants unfettered access to the South African chicken market”

The U.S. is not challenging South Africa’s 37 percent import duty, which hardly constitutes unfettered access to the South African chicken market.  The U.S. just wants to be treated equally to other foreign producers and pay the same import tariff rates without an additional anti-dumping duty.

 

“The U.S. doesn’t want South African industries to develop and compete against American companies”

Nothing could be further from the truth.  We want to help South Africa develop a vibrant innovation economy, capturing the tremendous potential of your companies to help solve some of the planet’s toughest challenges while making businesses more productive and helping to create thousands of new jobs in your country and ours.

A strong, prosperous South Africa provides a good market for U.S. goods and services, and as a thriving democracy, South Africa brings stability and prosperity to the region.  We are focused on developing a broad, stronger economic partnership with South Africa, and would like to move beyond debates over tariff levels.  We believe that expanding trade and investment in both directions is the best way to develop both the U.S. and South Africa.