NEWS & MEDIA

SA trade with North America

23 June, 2004

The US is one of South Africa's key trading partners for both South African export promotion and inward investment mobilisation. The trade and investment relationship between the two countries has been growing since 1994. The trade balance has turned in favour of South Africa and reached R4,5bn in 2001. Traditionally the US exports more value-added products to South Africa while South Africa exports raw material to the US.

However, this situation is changing particularly since the introduction of the Africa Growth and Opportunity Act (AGOA) which allows duty-free access of exports into the US. The first two Sub-Saharan Africa (SSA) countries to be approved under Agoa were Mauritius and Kenya, followed by South Africa, Madagascar and Lesotho. However, the number of countries is continually changing as more are granted approval under the Act.

At present, one of the major benefits is that AGOA gives a major boost to the clothing manufacturing industry in South Africa. Various categories of duty-free access for clothing articles are provided for. These can be summarised as follows:

• Duty-free and quota-free access for clothing manufactured in SSA from fabric wholly formed and cut in the USA from yarns wholly produced in the USA;
• Duty-free and quota-free access for clothing manufactured in SSA from fabric wholly formed in the USA and assembled from thread formed in the USA;
• Duty-free access for clothing manufactured in SSA from fabric manufactured in SSA from yarn originating in the USA or SSA, but subject to a quota equivalent to 1,5% in year 1, rising in year 8 to 3,5% of the value of total clothing imports into the USA;
• Duty-free access for clothing manufactured in lesser-developed SSA countries, regardless of the origin of the fabric up until September 2004 and subject to the above quota;
• Duty-free and quota-free access for sweaters of cashmere or of 18,5 micron or finer wool, knit-to-shape in SSA;
• Duty-free and quota-free access for clothing manufactured from fabric or yarn not available in commercial quantities in the USA; and
• Duty-free and quota-free access for hand-loomed, hand-made and folklore articles. Certain concessions are provided for in the case of the use of foreign origin interlinings, finishings and trimmings in the manufacture in SSA of clothing as long as the value of these items does not exceed 25% of the value of the clothing article.

Another concession is that non-USA or non-SSA fibre and yarn is permitted in the manufacture of clothing up to 7% by weight of the garment.

The legislative process is currently underway in the USA, whereby proposed additions and amendments to AGOA are being considered: the so-called AGOA II or Bush's African Enterprise Initiative. Aspects that will be important for South Africa and indeed many other SSA countries to have changed would be the extension of AGOA beyond September 2008, the termination on 30 September 2004 and the non-extension to higher developed SSA countries of the third country fabric concession, the inclusion of yarns, fabrics and household textiles as qualifying for duty-free access and a number of the other existing provisions of AGOA.