Subtitle:
Presenter:
Date:
The Benefits of Africa Growth and Opportunity Act (AGOA) to
South Africa
Evans Chinembiri
30 April 2013
Outline




Background
Objectives of the Study
Methodology
Key findings
 Desktop research
 Agriculture and Agro-processing
 Textiles and apparels
 Automotive
Background
 African Growth and Opportunity Act (AGOA)a unilateral trade policy concession governing
US - Africa trade and investment relations.
 AGOA enhances U.S. market access for 40
Sub-Saharan African (SSA) countries.
 Came into force in 2000 → Expiring in 2015
 Threats:
 AGOA may not be extended;
 AGOA extended - with South Africa’s benefits as
adjusted i.e. curtailed.
Objectives
1. Assess the impact of removing South Africa
from AGOA on the region
2. Identify and discuss the benefits to USA of
providing AGOA to South Africa
3. Identify and discuss challenges in the
following sectors
Agriculture and Agro-processing
 Identify the obstacles that South African producers face
when exporting to USA under AGOA, such as stringent
Sanitary and Phyto-Sanitary (SPS) requirements, and
other non-tariff measures (NTMs)
Objectives (2)
Identify and discuss challenges in the following
sectors
 Textiles and Clothing
 Identify textile and apparel tariff lines to lobby
for inclusion in the third country fabric
provision.
 Thereafter, identify tariff lines that are not in
competition with Lesotho and Swaziland.
 Automotive and components
 Assess and discuss the impact of AGOA on
value chains
Objectives (3)
4. Examine whether South African sectors may
have under-utilised AGOA as well as the
reasons why this may be the case.
In addition, the study should propose ways
and means to increase AGOA utilisation in
South Africa, and also assess and discuss
the potential impact of increased utilisation of
AGOA by these sectors.
Methodology
 Desktop literature review research
 Stakeholder engagement
 Interviews
 Electronic questionnaire
 On site visits
 Empirical analysis to estimate the impact of AGOA
 Gravity Model estimation for the Automotive
sector
 Expert review process.
Desktop Study Findings
Desktop Findings: Trade Trends
SA-US Bilateral Total Trade Trends
 SA represented the
biggest market and
largest trading partner
in SSA (excluding oil
exporters)
 US. SA maintained a
positive trade balance
over the period 20002011
Desktop Findings: Trade Trends
SA-US Bilateral
Aggregate Trade Trends
 SA mining exports:
 World ↑11 percentage
points;
 US ↓ 3 percentage points.
 Agric exports:
 World ↑1 percentage point;
 US ↓ 1 percentage points.
 Basic Processing:
 World ↓ 4 percentage point;
 US ↓ 3 percentage points.
 Advanced manufacturing
exports declined by 7
percentage points.
 World ↓ 7 percentage
points;
 US ↑ 6 percentage points.
Desktop Findings: Trade Trends
US-SA trade trends (Section Level)
Imports
Exports
C01:
C02:
C03:
C04:
C05:
C06:
C07:
C08:
C09:
C10:
C11:
C12:
C13:
C14:
C15:
C16:
C17:
C18:
C19:
C20:
C21:
C22:
C23:
Live Animals
Vegetable products*
Animal or Vegetable Fats†*
Prepared foodstuffs and tobacco†
Mineral products†*
Chemicals
Plastics
Leather
Wood Products
Wood Pulp and Paper
Textiles
Footwear
Stone and Glass
Precious Metals*
Base metals
Machinery*
Vehicles†
Scientific Equipment
Arms and Ammunition
Miscellaneous Manufactures
Arts and Antiques
Other unclassified goods
Special Classification: Vehicle Parts†
Share in
2011
1%
4%
0%
3%
25%
5%
2%
0%
0%
2%
1%
0%
0%
26%
14%
8%
8%
0%
0%
1%
0%
0%
0%
* Fastest Growing South Africa exports to the United States
† South Africa’s fastest Growing imports form the United States
AAG
2001-2011
8%
15%
19%
8%
20%
11%
14%
1%
2%
5%
3%
7%
7%
15%
11%
14%
14%
14%
-100%
4%
6%
-25%
11%
Share in
2011
1%
2%
0%
2%
8%
12%
4%
0%
0%
2%
1%
0%
2%
0%
2%
29%
24%
7%
0%
1%
0%
0%
3%
AAG
2001-2011
11%
9%
23%
13%
21%
8%
10%
2%
-7%
5%
0%
-8%
9%
7%
9%
8%
13%
9%
-100%
5%
7%
6%
17%
Desktop Findings: Trade Trends
SA-US Export Share Growth Matrix (Section Level)
Desktop Findings: Trade Trends
Intra-industry trade (5 Digit End use code) 2011
• Gubriel Loyd Index (GLI Measure of level of Intra-Industry
Trade)
Description
200969: Fruit juices
610610: Women’s cotton knit clothing
630299: Toilet or kitchen linen
100400: Oats
090620: Cinnamon and cinnamon-tree flowers
291719: Acyclic poly-carboxylic acids
940190: Parts of seats
732620: Articles of iron or steel wire
611595: Products of Cotton
940169: Seats with wooden frames
660199: Umbrellas
280800: Nitric acid, sulpho-nitric acids
391710: Sausage casings
690210: Refractory bricks
730690: Iron or steel tubes/pipes
830629: Statuettes and other ornaments
920890: Musical instruments
940520: Electric tables, desks, bedsides and floor lamps
410711: Leather ( after tanning or crusting
481720: Letter cards, plain postcards
Weighted Average of GLI for All South African Exports to the
United States
SA Exports to USA
251,133
16,718
11,942
305
22,344
34,780
3,952,933
158,831
10,990
54,225
30,484
1,584
79,992
896,726
245,629
137,044
74,807
40,896
15,714
37,042
2011
SA Imports from USA
252,467
16,840
11,829
312
22,984
35,793
4,068,750
163,907
10,544
56,627
29,029
1,669
84,502
947,982
260,125
145,158
79,340
38,327
14,712
34,637
GLI
0.997
0.996
0.995
0.989
0.986
0.986
0.986
0.984
0.979
0.978
0.976
0.974
0.973
0.972
0.971
0.971
0.971
0.968
0.967
0.966
0.099
Desktop Findings: Trade Trends
AGOA Tariffs Analysis: Applicable To South
African Exports (HS 6)
Tariff range
12%+
10%-11.9%
8.0%-9.9%
6.0%-7.9%
4.0%-5.9%
2.0%-3.9%
0.1%-1.9%
0%
Total
No. of HS6
Lines
264
116
172
205
421
810
760
2295
5051
US imports From
SA (US$ ‘000)
14 682
14 294
3 563
12 521
668 308
349 509
1 102 676
5 927 292
8 092 845
Total US Imports
(US$ ‘000)
1 131 228
1 251 481
3 210 782
11 899 008
12 456 713
10 962 106
28 273 500
2 193 400 816
2 262 585 634
Source: UN Comtrade (2012); ITC Trade Map (2012)
% HS6
Lines
5.2%
2.3%
3.4%
4.1%
8.3%
16.0%
15.0%
45.4%
100.0%
% Imports
From South
Africa
0.18%
0.18%
0.04%
0.15%
8.26%
4.32%
13.63%
73.24%
100.00%
% of US Total
Imports
0.05%
0.06%
0.14%
0.53%
0.55%
0.48%
1.25%
96.94%
100.00%
Desktop Findings: Trade Trends
South Africa Preference Margins Under AGOA (HS2)
HS
Code
H640110
H640411
H640291
H640419
H640199
H640299
H071220
H200911
H200919
H640420
H070951
H070390
H070970
H420219
H200929
H150710
H200840
H240130
H960310
H810820
Product Description
Waterproof footwear,outer soles&uppers of rubber/plastic,metal toe-cap
Sports footwear, incl. tennis shoes, basketball shoes, gym shoes, training
shoes and the like, with outer soles of rubber or plastics and uppers of textile
materials
Footwear, outer soles/uppers of rubber or plastics, covering the ankle, nes
Footwear with outer soles of rubber or plastics and uppers of textile materials
(excl. sports footwear, incl. tennis shoes, basketball shoes, gym shoes,
training shoes and the like, and toy footwear)
Waterproof footwear, outer soles/uppers of rubber or plastics, nes
Footwear, outer soles/uppers of rubber or plastics, nes
Onions dried but not further prepared
Orange juice, unfermented &not spirited ,whether/not sugared /sweet, frozen
Orange juice, unfermented, whether or not containing added sugar or other
sweetening matter (excl. containing spirit, frozen, and of a Brix value <= 20 at
20°C)
Footwear with outer soles of leather or composition leather and uppers of
textile materials (excl. toy footwear)
Mushrooms, fresh or chilled
Leeks and other alliaceous vegetables, fresh or chilled (excl. onions, shallots
and garlic)
Spinach, N-Z spinach & orache spinach (garden spinach),fresh or chilled
Trunks, suit-cases, vanity-cases, executive-cases, brief-cases, school
satchels and similar containers (excl. with outer surface of leather,
composition leather, patent leather, plastics or textile materials)
Grapefruit juice, unfermented, Brix value > 20 at 20°C, whether or not
containing added sugar or other sweetening matter (excl. containing spirit)
Soya-bean oil crude, whether or not degummed
Pears, prepared or preserved, whether or not containing added sugar or other
sweetening matter or spirit, n.e.s.
Tobacco refuse
Brooms/brushes of twigs/oth veg mat bound together,with/w/o handles
Unwrought titanium; titanium powders
Tariffs
AGOA
MFN
Preference
Margin
0%
0%
38%
34%
38%
34%
0%
0%
29%
29%
29%
29%
0%
0%
0%
0%
0%
28%
27%
26%
22%
22%
28%
27%
26%
22%
22%
0%
21%
21%
0%
0%
21%
20%
21%
20%
0%
0%
20%
20%
20%
20%
0%
20%
20%
0%
0%
19%
15%
19%
15%
35%
1%
0%
50%
18%
15%
15%
16%
15%
Desktop Findings: Trade Trends
South Africa Preference Margins
Under AGOA (HS 6)
PM>10% 10%>PM>5%
Value of trade (2001-2011)
Number of lines that have a margin of
preference over MFN
13 973 712
46
5%>PM>0%
Total
7 799 831 1 178 963 338 1 202 909 615
114
419
579
Agriculture and Agroprocessing
Sector Specific Key findings
Agriculture and Agro-processing
Sector Specific Key findings:
 Key export earners in Agro-processing industries
in both the world and United States markets were
wine and citrus.
 Indicative potential in a number of fresh and
preserved fruits – Avocado, Grapefruit and
Pears.
 Products with a case for inclusion in AGOA:
Canned apricots, peaches and mixed fruit
Agriculture and Agro-processing
Sector Specific Key findings:
 Possible reasons for the under-utilization of AGOA.
 Perceived complexity of United States market.
 Price competitiveness- South Africa competing with
South American countries that are closer and are cost
efficient
 Length of time taken to grant fresh fruit produce
eligibility into the United States market
 Legislative uncertainty surrounding AGOA
Agriculture and Agro-processing
Sector Specific Key findings:
 SPS measures limiting exports to United States under
AGOA
 Citrus: Citrus Black Spot excludes certain regions of
South Africa from exporting to the United States.
 Citrus: False Codling Moth – South African exports
subjected to an extra 2 days cold treatment.
Lobbying Points to Note
Sector Specific Key findings:
 Recommendations
 South Africa should engage the United States for the
extension of AGOA on a longer time horizon
 Engagement with the United States on reducing the
time taken to grant product export eligibility.
 South Africa engagement with the United States on
need for prompt resolutions concerning disputes
related to SPS matters, in the spirit of trade facilitation.
Agriculture and Agro-processing
Sector Specific Key findings:
 Recommendations
 South African producers need to seek ways that improve
price competitiveness of South Africa’s agricultural exports
through seeking and employing cost saving, energy efficient
technology in the production process.
 Engagement with key service providers to improve efficiency
and provide services at prices that enable South Africa
exports to be price competitive (Transnet, and Eskom)
Textiles and Apparel
Sector Specific Key findings
Sector Specific Key findings
Textiles and Apparel
 Textile is a declining sector (its in the low growth quadrant).
 At its peak in the mid-1980s, South Africa’s textiles and apparel
industry used to employ an estimated 150,000→ in 2010
declined to between 60 000 - 80 000. (1.2% direct employment9% indirect employment)
 Textiles contribute 1% of exports.
 South Africa’s potential benefits have not been realised owing to
South Africa not qualifying for the 3rd Country fabric provision,
as well as the more stringent non-tariff measures (NTMs) that
are exclusive to South Africa.
Sector Specific Key findings
Textiles and Apparel
 246 textile and apparel product lines at HS6 level for which South
Africa obtains significantly higher tariffs under AGOA than its SACU
counterparts
 26 apparel products are not in competition with Lesotho and
Swaziland. These include tents, camping goods, sails – essentially
niche products that are not price demand driven
 However, these product lines are not sufficient in terms of value
added tariff lines to create any degree of interest in a lobbying effort
 Only one apparel product whose exports are greater than US$1
million per year - H611595 panty hose and tights of cotton
Sector Specific Key findings
Textiles and Apparel
 It should be noted that the tariff lines produced by Lesotho and
Swaziland are exactly where South Africa should be pushing for
inclusion.
 Experts argue that to exclude these products will practically
eliminate South Africa’s interest in participating in the textile and
apparel lobby.
 It can be successfully argued that, the inclusion of South Africa in
all the textile and apparel benefits of AGOA including the third
country fabric provision will enhance the competitiveness of the
entire region which the industry players feel will ultimately benefit
both Swaziland and Lesotho
.
Lobbying Points to Note
Textiles and Apparel




South Africa does not compete to any significant degree with its
neighbours in terms of exports to the USA because it cannot compete
on price for basic merchandise.
The poor in South Africa are as much in need of the employment that
textiles and apparel can offer as any other poor country in Sub Saharan
Africa despite the fact that South Africa is not a Least Development
Country.
The South African Textile and Apparel industry is mature and, for the
most part, compliant with internationally accepted social and
environmental standards.
South African textile and apparel industrialists have the technological
and innovative abilities to drive the growth of the industry throughout
the region.
Lobbying Points to Note
Textiles and Apparel



South African industrialists are already manufacturing in countries that
enjoy the full benefit of AGOA including Lesotho, Swaziland,
Mozambique, Botswana and others.
South Africa could act as a coordinating hub for the planned
cooperative growth of the textile and apparel value chain throughout
the region. Already apparel manufactured in neighbouring states by
South African industrialists is consolidated in South Africa and sold
throughout Sub Saharan Africa.
Granting all countries in the region, that are compliant with basic
human rights and standards of governance, equal trading access, will
act as a stimulus for integrated growth and sustainable value chain
development.
Lobbying Points to Note
Recommendations from the industry are:
 Lobbying for full AGOA inclusion in the
first instance including the 3rd country
fabric provision.
Automotive Sector
Sector Specific Key findings
Sector Specific Key findings
 Automotive Sector
 Automotive sector is a key export sectors→ 6.8% of GDP
and 11.8 % of total exports US$7.1billion in exports (62%
vehicle exports and13 % motor vehicle parts)
 The industry consists of a diversity of manufacturers of light
passenger and light, medium and heavy commercial vehicles
as well as over 200 component manufacturers.
 The vehicle manufacturing directly employs 36 000 people.
 South Africa exports 54 %of Motor Vehicles (H8703) to the
US, thus US market the largest export destination of SA
motor vehicle exports.
Why the US Market?
 USA accounts for 37% of South Africa’s light vehicle
exports
 USA accounts for 54% of SA’s total automotive
exports
 The single biggest country market
 South Africa takes up only 1.3% of the US market
 NAFTA single Biggest regional market (outside of the
EU)
Summary of Automotive Trade
Table 1: Sector Level Trade Potential between South Africa and the United States
HS
Code
H8703
H8708
H8704
H8707
H8702
Annual % growth in value, 2001-12
Product
Cars (incl. station wagon)
Parts and access of motor vehicles
Trucks, vehicles for transport of goods
Bodies for motor vehicles
Public-transport type vehicles
Source: Own Calculations based on ITC (2013) data
SA exports
to USA
24.4
1.7
(33.7)
(23.2)
0.0
USA imports from
the world
0.8
4.9
(3.4)
5.4
(4.2)
South Africa’s Exports
to the world
9.4
7.9
26.7
17.5
22.1
Summary of Trade Potential
Table 1: Automotive Trade Potential Summary Assessment
H8703
H8708
H8704
H8707
H8702
Cars (incl. station wagon)
Parts and access of motor vehicles
Trucks, vehicles for transport of goods
Bodies for motor vehicles
Public-transport type vehicles
Source: Own Calculations based on ITC (2013) data
US Market
Growth
Relative Trade
potential
Positive
Positive
Negative
Positive
Negative
High
High
High
Low
Low
Average tariff applied
by USA to South Africa
0.68
0.81
4.99
0.65
1.00
Sector Specific Key findings
Automotive Sector (1)
 US exports mainly concentrated in exports of whole made vehicles (H8703)
 Export equation of South African exports to the USA shows the following
results:
 Income and Market Size: has a positive and significant effect on export
growth
 Preference Margins: has a positive and significant effect on export growth
 Every unit increase in the preference margin will lead to a 2% increase
in exports
 The MIDP : Has a positive and significant effect on exports
 AGOA: Has a positive and significant effect on
exports
Sector Specific Key findings
Automotive Sector (2)
 Exchange rate: has a positive effect BUT is not
significant
 Supports industry view that short term Exchange Rate
fluctuations are not key driver of motor vehicle exports –
due to significant sunk investments
 Key point: AGOA has a very strong influence in
motor vehicle exports to the USA.
 But what is its impact?
.
Lobbying Points to Note
Automotive Sector (3)
 What we know:
 Employment in the motor vehicle manufacturing
sector supports 10 other jobs in downstream autos
industries
 Auto’s contribution to GDP grew by 0.6% between
2010-2012.
 Key drivers are AGOA and the MIDP (now APDP)
 So what can we say about AGOA?
Simulation of AGOA vs. No AGOA
Impact of removing AGOA
4.000
3.500
2.500
2.000
1.500
1.000
0.500
Baseline (Exports)
Scenario (without AGOA)
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
0.000
1994
Exports (US$ Billions)
3.000
Impact of AGOA if it was removed
 The model reveals that exports to the US could drop
by as much as 92% in the first year without AGOA.
 By 2019, exports will be 57% below what could be
produced under AGOA
 Motor vehicle exports drop to pre-2001 (pre-AGOA)
levels.
 Removing AGOA makes motor vehicle exports to the
USA unviable
 AGOA is therefore crucial!
 The APDP is also going to be critical in augmenting
exports
Thank you