To ignore the Agoa eligibility requirements is playing with fire

30 April 2015
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Georgia Republican Senator Johnny Isakson is demanding that South Africa must meet with Agoa’s eligibility requirements under the US African Growth and Opportunity Act (Agoa) to remain an eligible sub-Saharan African country. According to a report in Business Day (24 April) he wants a review of South Africa’s eligibility, the purpose of which is, “to have people held accountable for their trade policies and practices … We are standing up for open markets and open trade. SA is the largest beneficiary of Agoa. It should be the most co-operative player”.

The review would have to consider whether South Africa met the eligibility standards of being “a market-based economy that protects private property rights, incorporates an open rule-based trading system, and minimises government interference in the economy through measures such as price controls, subsidies, and government ownership of economic assets.”        

This excerpt from the Act details the requirements:

“SEC. 104. ELIGIBILITY REQUIREMENTS

(a) IN GENERAL.—The President is authorized to designate a sub-Saharan African country as an eligible sub-Saharan African country if the President determines that the country—

(1) has established, or is making continual progress toward establishing—

(A) a market-based economy that protects private property rights, incorporates an open rules-based trading system, and minimizes government interference in the economy through measures such as price controls, subsidies, and government ownership of economic assets;

(B) the rule of law, political pluralism, and the right to due process, a fair trial, and equal protection under the law;

(C) the elimination of barriers to United States trade and investment, including by—

(i) the provision of national treatment and measures to create an environment conducive to domestic and foreign investment;

(ii) the protection of intellectual property; and

(iii) the resolution of bilateral trade and investment disputes;

(D) economic policies to reduce poverty, increase the availability of health care and educational opportunities, expand physical infrastructure, promote the development of private enterprise, and encourage the formation of capital markets through micro-credit or other programs;

(E) a system to combat corruption and bribery, such as signing and implementing the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions; and

(F) protection of internationally recognized worker rights, including the right of association, the right to organize and bargain collectively, a prohibition on the use of any form of forced or compulsory labor, a minimum age for the employment of children, and acceptable conditions of work with respect to minimum wages, hours of work, and occupational safety and health;

(2) does not engage in activities that undermine United States national security or foreign policy interests; and

(3) does not engage in gross violations of internationally recognized human rights or provide support for acts of international terrorism and cooperates in international efforts to eliminate human rights violations and terrorist activities.

(b) CONTINUING COMPLIANCE.—If the President determines that an eligible sub-Saharan African country is not making continual progress in meeting the requirements described in subsection (a)(1), the President shall terminate the designation of the country made pursuant to subsection (a).”

The FMF has warned in the past that in ignoring some of the fundamental requirements of Agoa, South Africa risks losing its eligibility. The treatment of US companies operating in South Africa, for instance, leaves a great deal to be desired. Some of the items with which South Africa is not complying are:

Matters for consideration by South Africa to ensure extension of Agoa eligibility

Extension of Agoa will depend on the approval of the US Congress, and the inclusion of South Africa in such an extension is similarly dependent on congressional approval. The government of South Africa can take deliberate steps to increase the potential for the extension of Agoa and of South Africa’s inclusion, which could include:

1.      Ensure that South Africa meets and continues to meet all the Agoa eligibility requirements.

2.      Give particular attention to matters that are causing difficulties for US companies operating in South Africa, such as –

2.1   The Broad-Based Black Economic Empowerment requirement for companies to transfer part ownership of their enterprises to black South Africans and the lack of objective criteria for meeting equity equivalent alternatives. [see 1 (A)]

2.2   Extreme delays and requirements in obtaining work visas for staff of US firms (including senior executives) to work in South Africa, the limitations placed on the period of stay, and the impediments to long-term service in South Africa of key personnel that are essential for continuity [see 1 (c)(i)]

2.3   Requirements for product localisation that interfere with multi-source modern production methods and intellectual property considerations. [see 1 (C)(i)]

2.4   Problems experienced with parallel imports and counterfeit products. [see 1 (C)(ii)]

2.5   Price controls imposed on pharmaceutical products [see 1 (A)]

2.6   Excessive delays in the registration and approval of pharmaceutical products [see 1 (D)]

2.7   Development of tax policy that promotes free trade (see 1 (C) (i) and (iii)

2.8   Regional Integration / Duty Free Trade – push forward the agenda of regional trade integration within southern & eastern Africa. Establish a tripartite trade bloc between the Southern Africa Development Community (SADC), East Africa Community (EAC), and Common Market for Eastern and Southern Africa (COMESA).

Free trade with the US is highly beneficial to the South African economy and essential for growth. The government needs to make every effort to meet with the eligibility requirements.

Author: Eustace Davie is a director of the Free Market Foundation. This article may be republished without prior consent but with acknowledgement to the author. The views expressed in the article are the author’s and are not necessarily shared by the members of the FMF.

 


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