South Africa and USA trade: What are the scenarios beyond the ‘Africa Growth and Opportunity Act’ (AGOA) for South Africa’s wine exports and wine tourism sector?

Abstract

The growing protectionist stance of the current US administration has potentially negative implications for trade welfare in many African countries including South Africa. The loss to South Africa of trade benefits under the African Growth Opportunity Act (AGOA) of 2000, which is expected to expire in 2025, would be devastating for many sectors which have benefited under AGOA. These include the South Africa wine exporting industry, which has direct links to the country’s tourism in regions such as the Western Cape. Losing AGOA benefits would have a direct negative impact on a sector whose size was estimated at R36.1 billion in 2015, endangering more than 300 000 jobs for mostly unskilled and semi-skilled workers. This paper uses a partial equilibrium analysis and international trade data to estimate the negative trade effects that are likely to arise if South Africa were to lose its AGOA benefits from the US. The analysis estimates the directions and sizes of the negative trade effects for scenarios replacing AGOA tariffs with Most Favoured Nation (MFN) rates for South African wine exports. It finds that, for all wine product lines currently benefiting under the AGOA agreement, a market worth more than R100 million would be lost if MFN tariffs were applied. Overall the impacts of trade restrictions from losing AGOA benefits would have negative net effects on global welfare even if the US government was able to raise revenues from imposing higher tariffs on South African exports. It is argued that South African public policy and the private sector need to ensure that the country remains eligible for AGOA benefits until they expire, while seeking and negotiating new trade agreements for the country’s exports to other destinations.

Keywords

• Trade-effects
• wine-exports
• AGOA
• partial equilibrium analysis