Since the US announced import tariffs on an unprecedented scale on several countries confusion about how practically they will apply lingers.
We still have insufficient details regarding tariffs byproduct as the US authorities have not provided much official guidance. This dearth of detail creates uncertainty and limits the ability of South African authorities to engage productively with their US counterparts.
So far, the South Africans have expressed a willingness to engage with the Americans productively for any possible deals.
In a joint statement on April 4, the ministers of international relations and co-operation and trade, industry and competition said: “South Africa will work to secure opportunities, in a context of a rapid withdrawal of favourable arrangements giving our exports preferential access to the US. This might involve securing additional exemptions and favourable quota agreements, ensuring our industries maintain critical access to the US market, including through sectoral co-operation. This aligns with the national interest of promoting economic prosperity and safeguarding the livelihoods of South Africans.”
Agricultural stakeholders can play a constructive role in supporting the government's efforts: they can start gathering a rough assessment of the impact of 31% tariffs on their exports, mainly citrus, grapes, wine and nuts, among other products, as well as the effect on jobs in their regions. Most South African competitors in these agricultural products in the US now pay relatively lower tariffs of about 10%.
Moreover, the industry must assess the size of the potential quotas that could be exported to the US under a different quota regime in case South Africa successfully negotiates tariff-free or tariff quotas (possibly reduced) for specific products.
The industry should assess which US agricultural products South Africa could absorb as part of the reciprocal exchange of concessions in the context of a bilateral deal. South Africa now has just over 70,000 tonnes of tariff-free quota to be used by US poultry products. However, US poultry producers have used less than 60% of this tariff-free quota in the South African market.
One reason for low use is the low-quality products that have not met the South African specifications. This exercise will likely extend to other sectors of the South African economy with exposure to the US. So there’s is a scope to provide more flexibility for American products in the South African market, easing current trade tensions.
The South African authorities have also underscored the urgent need to diversify our export markets. The ministers of international relations and co-operation and of trade, industry and competition said: “Efforts will intensify to diversify export destinations, targeting markets across Africa, as well as in Asia, Europe, the Middle East and the Americas. Moreover, where deemed appropriate, such efforts will also involve bilateral arrangements that allow for the pursuance of our national interest.”
South Africa must make hard choices over which industries it is prepared to place on the table for possible trade-offs while building long-term competitiveness in sectors that can be major drivers for growth
This export diversification effort is vital in the context of the trade friction and as part of the South African agricultural growth agenda. The benefits of the effort will be more apparent in the medium term. Negotiations with countries, especially in agricultural products, take time and a scientific part is involved which also takes time to complete. Thus, we view its benefits as medium term, while the immediate approach in the US should be to find a deal that permits trade and for businesses to attempt to push more volumes to other regions.
Importantly, these challenges require government and industry to put more effort into engaging with the rest of the world, especially dynamic markets in the Gulf and Asia. South African trade authorities must adopt a new approach that embraces reciprocal free trade agreements rather than hesitating.
Negotiating free trade agreements should be the mainstay of trade policy, as this is vital insurance when the multilateral trading system is convalescing. As such, South Africa must make hard choices over which industries it is prepared to place on the table for possible trade-offs while building long-term competitiveness in sectors that can be major drivers for growth.
Trade is about trade-offs and backing the correct winners. Such calculations will require empirical and data-driven research, a critical input for guiding policymakers. Both organised agriculture and business must work together to define new priorities for the country and how these can be pursued internationally.
We also need more effective communication for South Africa’s trade policy in these times of economic strain for the country. Crucially, we must act with urgency.
• Sihlobo is chief economist of the Agricultural Business Chamber of South Africa
For opinion and analysis consideration, e-mail Opinions@timeslive.co.za
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