The U.S. said it will suspend South Africa’s duty-free agricultural trade benefits March 15 for failing to meet trade requirements, but President Barack Obama could revoke the suspension before it takes effect if South Africa complies, SABC reported.
South Africa has until March 15 to fully comply with U.S. meat and poultry imports according to the African Growth Opportunity Act (AGOA) which allows duty free access to U.S. markets for more than 7,000 products from 39 sub-Saharan African countries.
To qualify, African countries must eliminate barriers to U.S. trade and investment, operate a market-based economy, protect workers’ rights and implement economic policies to reduce poverty.
South Africa missed a previous 60-day deadline to remove barriers to U.S. meat and poultry. Obama announced the new deadline Monday for compliance, ordering suspension of duty-free access for all AGOA-eligible goods in the agricultural sector from South Africa, Fin24 reported.
In November, Obama gave South Africa until Dec. 31 to lift barriers to U.S. meat and chicken exports or face suspension of trade preferences on products such as wine, citrus, macadamia nuts and avocados under AGOA, according to an earlier AFKInsider report.
South Africa blocked U.S. poultry exports claiming that an outbreak of avian flu in the U.S. which killed close to 50 million birds could threaten its economy, Reuters reported. The U.S. says there is no risk from its poultry.
South African officials said negotiations concluded Jan. 6 on outstanding issues of the AGOA agreement. Details were finalized by the U.S. Department of Trade and Industry, South African Minister of Trade and Industry Rob Davies told media on Thursday.
The South African Poultry Association said orders for U.S. poultry imports have already been placed and are expected to arrive in South Africa within the next month, EyewitnessNews reports.
Mike Brown, president of the U.S. National Chicken Council, told Business Day newspaper it’s “just a matter of the South African government issuing import certificates for South African importers and the U.S. government’s food safety and inspection service issuing paperwork to U.S. exporters. I would hazard a guess that we could be in country within … 30 or so days by boat.”
But U.S. Ambassador Michael Froman said Jan. 8 there is still work to be done.
“While we celebrate the progress we have made in resolving the outstanding technical issues, the true test of our success will be based on the ability of South African consumers to buy American product in local stores,” he said.
“We will be working to ensure that this final benchmark of entry of poultry is achieved so that South Africa continues to have the advantage of full AGOA benefits, including by working with the U.S. and South African industries to expedite the shipment of eligible product as soon as possible.”
Obama was more direct.
“I have determined that South Africa is not meeting the requirements described in section 506A(a)(1) of the 1974 Act and that suspending the application of duty-free treatment to certain goods would be more effective in promoting compliance by South Africa with such requirements than terminating the designation of South Africa as a beneficiary sub-Saharan African country,” Obama said in a proclamation released on Monday.
“Accordingly, I have decided to suspend the application of duty-free treatment for all AGOA-eligible goods in the agricultural sector from South Africa for purposes of section 506A of the 1974 Act, effective on March 15, 2016,” Obama said.
Entry of U.S. poultry into South Africa under the agreed-upon conditions is the remaining benchmark to be met before 15 March that will determine whether the South Africa’s AGOA suspension is revoked or takes effect, SABC reported.
The U.S. is not prepared to ease pressure on South Africa, hence the threat of removing the AGOA benefits, Fin24 reported.
“Obama’s proclamation is likely the stick to go with this warning (to lift restrictions) – one we hope local authorities will heed,” said Bart Stemmet with Oxford Economics-owned advisory firm, NKC African Economics, Reuters reported. “We are confident that the suspension will ultimately be avoided.”
Analysts expect resolution before the March deadline because South Africa can’t afford the damage to its reputation and struggling economy from losing AGOA benefits, Fin24 reported.
South Africa exported $176 million in agricultural products to the U.S. in 2014 under AGOA, Reuters reported. It stands to lose $4 million to $7 million.
In the first three quarters of 2015 it exported $154 million worth of agricultural goods to the U.S. under AGOA — about 14 percent of shipments, according to data from the Stellenbosch-based Trade Law Centre, Bloomberg reported. Most South African AGOA exports are vehicles and auto parts.
“No one is happy to be punished, but we agreed to be punished and we accept the punishment,” said Kevin Lovell, CEO of the South African Poultry Association, in a Bloomberg interview Tuesday. “South Africa would have more taken away from us if AGOA is not renewed.”