Expiring US trade policy could spell economic meltdown for East London

I’m disappointed in the local media coverage surrounding discussions with United States Secretary of State Hilary Clinton in South Africa this week to extend an essential trade policy that expires in 2015.

South African negotiators have been scrambling ahead Clinton’s visit to ensure we remain a beneficiary of the US African Growth and Opportunity Act (Agoa) after it expires in 2015. If South Africa were to be excluded from the act, it would have serious implications for players in the local motor and motor components industries, among others.

Under the act, African countries have been granted tariff-free access to the US market, with widespread implications for apparel manufacturers on the continent. Locally, companies exporting cars and car parts to the US have also fallen under the act. Both Trade and Industry Minister Rob Davies and director-general Lionel October confirmed that elements within the US Congress were questioning South Africa’s continued involvement in the act. "They think we’re too developed," Mr October said, and the fact that "the World Trade Organisation classifies us as industrialised" was not helping the cause.

Peter Draper, of the South African Institute of International Affairs, said "there have been rumblings over the years concerning whether South Africa should be part of Agoa. South Africa’s economy is much more diversified and the scheme was devised for the very poorest and some argue we should graduate from it." Draper said there "have also been rumblings from US industrial and agricultural groups who want certain products excluded, or South Africa totally out" of the act. He said the view that South Africa was "anti-US and pro-China" was "gaining currency".

The implications of South Africa being excluded from the act could be significant for the motor industry – particularly the East London Area. US ambassador Donald Gips said South Africa exported more than $2bn worth of cars to the US last year. Mercedes Benz exports most of its cars to the US, and it is possible that they could cease production of future models in East London if it becomes expensive to export to the US, which would spell and economic nightmare for the greater Buffalo City area.