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Tuesday, 07 June 2016

The 2016 US presidential elections and the implications for US-South Africa trade

  Chelsea Markowitz
The 2016 US presidential elections and the implications for US-South Africa trade Photo © DonkeyHotey/ Flickr

The 2016 US presidential elections are just around the corner, and the world has been watching closely as this year’s particularly colourful and controversial campaigns have unfolded. Last week, when South Africa's Minister of International Relations and Co-operation, Nkoana Maite-Mashabane, was asked about her position on the US elections, she responded that she does not really care who wins. This begs the question: can Africa’s most sophisticated economy afford to ignore the US elections?

While much of the discourse in South Africa thus far has centred on Republican frontrunner Donald Trump’s xenophobic declarations, the potential impact of the election on US-South Africa trade relations is one that simply cannot be ignored.

US-South Africa trade is primarily governed by the African Growth and Opportunity Act (AGOA). AGOA was passed by the US Congress in 2000 and extends preferential access for 37 African countries to export a wide range of goods duty free to the US. Generally, there are concerns over unilateral trade regimes such as AGOA, as they do not offer the beneficiary countries say in the negotiations. However, the fact remains that South Africa greatly benefits from AGOA, and is the biggest African exporter of non-oil goods under the Act. It is therefore critical to explore the trade positions of the US presidential hopefuls, and how these could affect US-South African trade relations going forward.

The general political climate in the US has shifted towards a more protectionist stance on international trade since the global financial crisis. While the outsourcing of production networks has had a direct adverse impact on specific manufacturing segments in the American economy, the consumer benefits of free trade are broader and more nuanced. All the presidential candidates have vowed to pay special attention to the middle class American worker and have taken a stronger stance against free trade. This is threatening to unravel Obama’s legacy of promoting free trade through proposed 'mega-regional' trade agreements such as the Trans-Pacific Partnership (TPP), the Trans-Atlantic Trade and Investment Agreement (TTIP), and various bilateral FTAs.

View all of SAIIA's analyses and resources on AGOA here.

Hillary Clinton, the Democratic frontrunner, has perhaps expressed the least resistance to free trade, backed by her historic support of most US international trade initiatives. As Secretary of State during the Obama administration, she actively pushed for AGOA’s 10-year extension in 2015. However, hostile US voter perspectives towards international trade have even pushed Clinton to revoke her initial support of the TPP.

Donald Trump, despite his seeming hostility to cheap imports from China, has repeatedly voiced his support for the concept of free trade. His critique is rather towards the nature of the current FTAs, believing that the existing FTAs should be re-negotiated to unquestionably favour the US.

However, it is in fact democratic candidate Bernie Sanders’ opposition to free trade that is the most extreme. Although Sanders’ chances at winning the Democratic nomination are now virtually impossible, he has vowed to remain in the race until the Democratic convention next month. Sanders’ campaign has focused heavily on domestic policy, and he has touted his opposition to all major US FTAs, seeing them as a product of corporate America that unfairly disadvantages the lower class American worker.

Read a March 2016 article on this topic, 'AGOA and the future of US–Africa trade relations.'

What is the broader significance of these stances for future US trade relations with South Africa? Although AGOA has recently been extended to 2025 - beyond the two-terms of any US president - the future president can still have a substantial impact on its terms and conditions. The president can also have a significant impact on the direction of a possible future US-SACU FTA and the still to be ratified mega-regionals such as TTIP and TPP.

The recent trade debacle between South Africa and the US over chicken demonstrates the substantial sway of a US president over AGOA. President Obama used AGOA as leverage to remedy what the US poultry associations believed to be unfair tariffs on US chicken exports into South Africa. After South Africa missed the first deadline to produce import certificates for US chicken products to prevent the suspension of AGOA, Obama granted the negotiators another 60-day extension. Imagining Trump as president during this dispute, would he on principle have given such a grace period for a missed deadline?

Looking at the potential stance of each of the candidates, Hillary Clinton might take a similar approach to Obama, ie suspending benefits for particularly exceptional cases with the view to reinstating them as soon as the dispute is resolved. Sanders on the other hand might consider suspensions if there are any aspects within AGOA that might harm the interests the American working class. Indeed, his ideological opposition to free trade altogether should give reason for pause.

Trump, however, is the most unpredictable. His recent statement that he will “lock Mugabe and Museveni in prison” if he becomes president departs from his generally isolationist stance on issues that do not directly affect US interests. The question of whether Trump would actually follow-through on some of his outlandish declarations is a big unknown. But if he indeed decides to become the ‘world’s policeman’, AGOA would be the most readily available tool to keep Southern African leaders who are not behaving according to his liking in check.

Additionally, given that resistance is growing towards the ‘carrot and stick’ approach of AGOA, especially in South Africa, the time is ripe for a discussion on a more equitable trade arrangement. The global trade landscape for Africa is changing fast, as the EU is phasing out its preferential schemes with African countries and China maintains a reciprocal trade regime with African countries under the WTO.

Of all the candidates, Clinton would most likely be open to such talks, through the potential pursuit of a US-SACU FTA or even the inclusion of South Africa into one of the budding mega-regionals. Sanders is unlikely to be interested in such discussions at all, and with Trump the concern would be that protracted negotiations would never bear fruit. While Sanders’ position is most worrying, Trump’s stance is also concerning, as US inflexibility at the negotiating table in the early 2000s prevented the previously proposed US-SACU FTA from materialising.

Many questions remain unanswered concerning the future of US-South African trade relations under the next US President. Yet despite current anti-trade sentiment sweeping over the campaigns, it is almost certain that these populist appeals will soften once the election ends. Still, none of the candidates look to be as favourably disposed towards free trade as was Obama.

Additionally, for South African policymakers it is also relevant to consider just how important South African trade is in the grand scheme of US trade interests. Even Bernie Sanders, who touts his rejection of all major FTAs, voted for the extension of AGOA. However, this also means that if South Africa truly desires to move towards a more equitable trade relationship with the US in a post-AGOA era, there is no room for complacency. Its decision-making and policy choices over the next 8 years will in part determine whether South Africa has a seat at the international table or remains dependent on hand-outs and special concessions that could be revoked at a whim.


Chelsea Markowitz is a visiting researcher in the institutes Economic Diplomacy Programme. This article was first published in the Business Day.

To better understand the impact of AGOA on South Africa's balance of trade and exports, SAIIA has created an infographic summarising the key statistics and issues:

AGOA info A4v3small
Click on the image to see a larger version, or   pdf click here (1.63 MB) to download this info-sheet as a printable PDF.