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South Africa May Suffer 'Moderate' Blow If It Loses AGOA: Expert

© AP Photo / Alex BrandonPresident Joe Biden shakes hands with South African President Cyril Ramaphosa in the Oval Office of the White House, Friday, Sept. 16, 2022, in Washington.
President Joe Biden shakes hands with South African President Cyril Ramaphosa in the Oval Office of the White House, Friday, Sept. 16, 2022, in Washington.  - Sputnik Africa, 1920, 14.06.2023
Enacted in 2000, under then-US President Bill Clinton, the African Growth and Opportunity Act (AGOA) was aimed at helping African countries increase their economic growth and development by promoting trade, investment, and economic cooperation between the US and "eligible" sub-Saharan African countries.
South Africa is currently facing the threat of losing the benefits of the African Growth and Opportunity Act (AGOA) as a result of geopolitical trade headwinds, but the blow to the country's economy could be "moderate," Ashraf Patel, a senior research associate at the Institute for Global Dialogue (IGD) and a member of the South Africa BRICS Think Tank Network, told Sputnik Africa in an interview.
The AGOA program was created during the administration of US President Bill Clinton and was originally set to expire in 2008, but was extended in 2004 by President George W. Bush until 2015. It has since been extended by President Barack Obama for 10 years, from 2015 to 2025.
It was designed to promote US economic engagement with sub-Saharan Africa and provide duty-free access to the US market for African producers, including South Africa.

"Since the Ukraine conflict and how African nations have been voting at the UN Security council, significant pressure has come upon South Africa as a leader in Africa and in the AU and G20," the South African expert said.

Patel characterizes this pressure as a trade coercion "carrot and stick" approach, stating that it is unfair.
Earlier this week, a group of US House of Representatives members from both major US parties (Democrats and Republicans) petitioned the White House to move this year's AGOA meeting elsewhere, claiming that South Africa should lose its status under the trade policy.
A U.S. flag waves outside the New York Stock Exchange, Monday, Jan. 24, 2022, in New York. Stocks are drifting between small gains and losses in the early going on Wall Street Tuesday, May 3, 2022 as investors await Wednesday's decision by the Federal Reserve on interest rates. The Fed is expected to raise its benchmark rate by twice the usual amount this week as it steps up its fight against inflation, which is at a four-decade high. - Sputnik Africa, 1920, 13.06.2023
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Despite concerns that the AGOA meeting may be moved out of South Africa, Patel believes that this narrative is "more of a psychological approach" and that Washington "would not want to push too hard" as Pretoria is a major US trading partner and has major investments.

"US and EU trade programs have been lopsided and unfair, generally favoring the powerful G7 nations," Patel suggested.

He cited examples such as World Trade Organization (WTO) cases for developing countries on agricultural and health vaccine intellectual property exemptions as evidence of this inequity.
Patel argued that while AGOA has some benefits and challenges, it can be adjusted based on "geopolitical headwinds" such as the conflict in Ukraine and South Africa's membership of the BRICS group.
The use of preferential trade agreements as a tool of political pressure is a common practice for the US, and this implies that different African countries are treated differently under the same trade program, he said, noting that this puts pressure on a common African position at the African Continental Free Trade Area (AfCFTA).

"So Kenya and Zambia are different as they follow many US prescriptions and hence get free trade agreements. This puts pressure on a common African position at the AfCFTA," Patel explained.

Finally, Patel suggested that the blow to South Africa if it loses AGOA trade preferences "would be moderate, but in a global recession and weak currency, the picture is mixed."
US Secretary of State Hillary Rodham Clinton, left, and Kenyan President Mwai Kibaki, centre, with Kenyan Prime Minister Raila Odinga, right, the 8th Africa Growth Opportunity Act Conference (AGOA), in Nairobi, Kenya, Wednesday, Aug. 5, 2009.  - Sputnik Africa, 1920, 11.05.2023
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He added that AGOA and AfCFTA mostly benefit large farmers and foreign multinational corporations.
For this reason, Patel argued that a more unified regional approach is needed in African economic groupings such as the Southern African Development Community (SADC), the Common Market for Eastern and Southern Africa (COMESA), the Economic Community of West African States (ECOWAS), and others in order to "get a fairer deal" with the US, EU, BRICS, and other powerful nations.