The ANC has been desperately seeking ways to soften the blow of the 30 percent tariff President Donald Trump imposed on most of our exports to the US last week. Substantially easing the damage and making up for the immense lost opportunity will be impossible.
The signs from the Trump administration are that the tariffs are now final for some countries. Ahead of last week’s announcement, Trump said it was “too late” for some countries to seek new deals.
SA might have been dealt a final hand. Washington has not even responded to the latest offer from Pretoria for a trade deal. Pretoria now says it will submit another offer. But ‘no reply’ might be the reply.
Trump does not seem to be in any mood to negotiate with us. He has said he will not be coming to the Group of 20 meeting here later this year, because he does not like our policies. We are better off than Brazil, which now faces a 50 percent tariff on its exports to the US because Trump views the prosecution of the country’s former President, Jair Bolsonaro, as politically vindictive.
We could still face higher tariffs. Trump might be about to slap a 10 percent levy on exports from the Brazil, Russia, India, China, South Africa (BRICS) grouping, which is central to our foreign policy. Trump sees the grouping, which now has Iran as a member, as “anti-American”. One of its key purposes is to find alternatives to doing business with the US.
And the Africa Growth and Opportunity Act, which gives us and most other African countries duty-free access to the US for a range of goods, might soon be terminated by the Trump administration.
So what happened to the talks between the US and SA on a trade deal?
It was not the trade issues on their own that led to the break-off in talks. SA offered to buy Liquid Natural Gas from the US, and to urge SA mining companies to invest in the US. It could also have offered to greatly lower or scrap tariffs on selected US goods: something that has allowed other countries to obtain far lower tariffs on their exports to the US.
Stalled
The Director General of the International Relations and Cooperation Department, Zane Dangor, admits that talks between SA and the US stalled.
At a Kgalema Motlanthe Foundation seminar last week, Dangor said the talks had been complicated by pressure from the US over domestic policy, particularly SA’s Black Economic Empowerment (BEE) framework, according to a radio station, Voice of the Cape.
So that spells out why the talks ended. The Trump administration is imposing higher tariffs because the ANC refuses to meet the four demands the US has said are necessary to normalise relations. These demands went public after they were outlined to the three Afrikaner leaders who visited the White House in June.
The first demand is that farm attacks must be classified as priority crimes. The second is that the ANC must denounce the “Kill the Boer” chant, and the third is that there must be no land expropriation without compensation. And fourth, US companies must be given an exemption from BEE requirements.
Dangor is correct that the demands do amount to pressure over domestic policy, although there is a strong argument that BEE is a form of trade and investment restriction. Companies without favourable BEE ratings are, for example, limited in doing business with the government.
The ANC has insisted that it will not be bullied, but it could find language to meet the first three conditions and give US companies an exemption from BEE through an “equity equivalence” arrangement. That would mean US companies would not have to give away equity, but could take on, for example, a community or charitable initiative.
But the ANC is clearly refusing to give way on this. It is worried that if it gives in to the US, demands for such an exemption will be made by other foreign and then local investors.
Destroy jobs
So the ANC is in a tight corner, and from Dangor’s words last week, it is fully prepared to allow tariffs to destroy jobs rather than give way on, above all, BEE.
Other African countries in our region got off far more easily. Many southern African countries were only hit with a 15 percent tariff. If we give way on BEE and the three other demands, we could also be in such a relatively favourable position.
The ANC is trying to convince the country that it can ease the damage of job losses and hits to companies.
So far it has said it will divert R340 million in funds meant to encourage local industrial development to a package for businesses hard hit by the tariffs. It also says it will not apply competition laws when companies co-operate on trade initiatives. And it has promised assistance from a Trade, Industry and Competition Department help desk. All that will not come close to making up for the real damage from a loss of jobs, production and even long-term market share.
Our membership of the Brazil, Russia, India, China, SA (BRICS) grouping should in theory have helped diversify our trade away from the US. After all, that is one of the rationales for the group. But there is not much chance of this.
Finding alternative markets is not a quick solution. For example, many citrus growers in the Western Cape have production geared to the US market. A citrus farmer says it could take many years for the Western Cape growers to switch their production away from the US market. The ANC ministers say they want more trade with the rest of Africa. So do exporters, but, as yet, there is insufficient demand from the rest of Africa to take up the slack.
Virtually nil
The Reserve Bank Governor, Lesetja Kganyago, says Trump’s tariffs could mean about 100,000 jobs are lost, mostly in agriculture and car manufacturing. The job losses in agriculture, particularly citrus, table grapes and wines, will fall on low-skilled workers, whose chance of finding other jobs is virtually nil. In the Western Cape citrus sector, 35,000 jobs could be lost.
There will also be a likely impact of the Trump tariffs on our economic growth rate this year, which is now forecast by most economists to be well under one percent.
Rather than admit that its policies are what provoked the punitively high tariff response from Trump, the ANC has blamed the DA, AfriForum and the three Afrikaner leaders who went to Washington and came back with bad news.
The cost of ANC petulance and of narrow BEE, which has demonstrably benefited only a few, is now on full display.
[Image: izhar ahamed from Pixabay]
The views of the writer are not necessarily the views of the Daily Friend or the IRR.
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