The proposed SACU-US free trade agreement : impact on AGOA benefits

Van Wyk, Albertus Maritz (2006-12)

Thesis (MBA)--Stellenbosch University, 2006.


The African Growth and Opportunity Act (AGOA) was signed into law in May 2000 by President Clinton to allow sub-Saharan countries to export designated products duty-free into the US. AGOA is a temporary measure that is non-reciprocal and not negotiated by the participating parties. The initiative was launched to liberalise the markets of developing countries on the road to become integrated in the global economy. The initial success of AGOA was limited, with only a few countries making use of AGOA to increase their exports into the US markets. Problems encountered were high levels of protectionism from the US and the existence of technical trade barriers (including sanitary measures in agriculture) and nontariff barriers (including quotas). African countries are using shipment as the main transport for exports, and the US barred transshipment due to corruption that occurred in the past. The AGOA also made provision for 'special provisions' measures to enable AGOA eligible countries to export apparel and textile to the US. The export of apparel was very successful until the Multifibre Agreement expired in 2005, leading to relocation of apparel factories to lower cost bases. The real beneficiaries from AGOA are oil-exporting countries that make up more than 90% of total AGOA benefits. South Africa is the only country who succeeded in diversified AGOA exports. AGOA has been supplemented by AGOA II (extending the product range) and AGOA III (extending the expiry date to 2015). After the EU-SA Free Trade Agreement has been concluded in 1999, the US started with FTA negotiations with the South African Customs Union (SACU) to improve the exposure of US products to the SACU market and to decrease the trade deficit. However, the agenda of the FTA negotiations included second generation issues of intellectual property rights, trade in services, investment and government procurement. The SACU negotiators learnt some lessons from the EU-SA FTA and progress was slow. The extension of AGOA to 2015 saw a decrease in the urgency of striking a SACU-US FTA. Negotiations slowed down and the decision was made in April 2006 to conduct talks on a lower level. This breathing time can be used by the SACU negotiators to develop an aggressive offensive strategy for future negotiations, and to build competency against the efficient and offensive US negotiators. The US-SACU FTA must still be pursued to ensure that the benefits of AGOA are locked in. It will be beneficial for SACU if the different needs for all the SACU countries are addressed and the negotiations are done in incremental steps .

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