Absa Bank, one of SA’s big four, says if SA were to be expelled from the African Growth and Opportunity Act (Agoa), the action would have a limited direct macroeconomic impact on the country as most of SA’s exports to the US already have a zero or nominal duty under a separate World Trade Organisation (WTO) agreement.
The bank released its Insight macroeconomic report on Tuesday and said while the risk of expulsion from Agoa is small, if SA were to lose its privileges, exports to the US already have a zero or nominal duty under the most favoured nation (MFN) regime under the WTO.
Absa chief economist Peter Worthington said while the difference in duty payable under the MFN and Agoa regimes for the limited number of export lines is large, the export values are typically not substantial.
“We calculate that the weighted average tariff on SA’s exports to the US as a whole in 2022 was 1.1% under the MFN regime versus almost zero under Agoa,” Worthington said.
“For some important sectors, such as motor vehicles, the difference is larger, about 2.5%, but not crushingly so.
“That said, expulsion from Agoa could have a bigger indirect impact through the loss of trade facilitation services and adverse impact on investor and business sentiment,” Worthington said.
SA Revenue Service (Sars) customs data shows that despite the presumed benefits of Agoa, SA ran a small trade deficit with the US from 2015 to 2020.
The balance surged into a surplus in 2021 and 2022 when soaring PGM prices lifted overall export earnings sharply. SA’s export earnings from the US peaked at $13.1bn in 2021 before falling to $11bn in 2022 and, according to Absa, a likely $8.5bn in 2023 as falling commodity prices and transport logistical constraints weighed on mineral export receipts.
Worthington said this took the US’s share of SA’s exports down from almost 11% in 2021 to slightly below 8% so far in 2023.
The data also shows that SA’s imports from the US continue to rise into 2023. Trade data for January through August suggest a small deficit is again likely for this year as a whole.
While the risk of SA losing its Agoa trade preferences appears to have receded, with SA still set to host the 20th Agoa Forum in November, continuing US concern about SA’s ties with two key US adversaries — Russia and China — suggests the risk of expulsion has not entirely abated.
Worthington said section 104 of Agoa states explicitly that one of the criteria for continuing inclusion is that countries do not engage in activities that undermine the national security or foreign policy interests of the US.
A number of countries have been suspended from Agoa over the years, Worthington said. In 2022, the US suspended Ethiopia, Mali and Guinea for alleged human rights violations and coups, and Burkina Faso was suspended at the beginning of 2023.
“SA’s continuing participation in Agoa is up for a formal review in 2025, and some US congressional leaders, both Republicans and Democrats, have called for SA to be expelled,” he said. “And so it is still worth analysing just how significant the economic blow would be if SA were to be expelled.”
According to Absa, SA’s exports to the US are quite diverse but also fairly concentrated in a few product lines. In 2022, the US imported 2,143 products from SA, but only 346 with a value of more than $1m and only 99 products with a value of more than $10m.
Over half — 56% — of the value of SA’s exports to the US in 2022 were chapter 71 exports (gold, platinum group metals, gemstones and jewellery). The next three biggest broad categories were chapter 87, automotive goods, at nearly 10%, chapter 72 (iron and steel products) at nearly 6% and chapter 84 (machinery and appliances) at over 4%.
Together, the biggest 10 (out of 96) chapters in the harmonised system classification accounted for almost 90% of all SA exports to the US in 2022.
Worthington said that in 2022, for the 651 products that SA exported to the US in amounts greater than $200,000, the MFN tariff was zero in about half the number of product lines, accounting for almost 71% of the total export value.
“Under Agoa all but 22 of the 651 export categories of more than $200,000 in 2022 entered into the US duty free. In value terms, SA exports that still experienced a US import tariff under Agoa amounted to just $46m, or 0.3% of the total,” Worthington said.
He said that put differently there were almost 300 SA export product lines in excess of $200,000 that amounted to $4.2bn in total that benefited from duty-free access under Agoa, against a nonzero MFN tariff.
“Presented this way, Agoa seems to offer big export advantages to SA. However, US tariff barriers are generally pretty small even under the MFN regime, which suggests limited benefit from Agoa’s tariff relief.”
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