I am playing around with the idea of putting out periodic trade briefs, covering trade topics which are relevant right now. This is my first attempt.
Competition Commission steel inquiry
Last week the Competition Commission announced it would be conducting a market inquiry into the steel industry and published a draft terms of reference for comment. This is important because the steel industry is packed choc-a-bloc with trade policies which distort the normal behaviour of the steel market. We have one primary steel producer who benefits from import duties of 10%. Because almost everything contains at least some steel, they predictably can’t produce everything they have duty protection on and so an enormous number of temporary rebates have been created to provide duty relief for importers who can’t source the product locally. These are not always easy to access and ultimately they depend on that sole producer to confirm they can’t supply. This can be a bit of a tussle, which means the rebates have relatively low levels of utilisation, making them often quite ineffective.
The scrap steel sector has its prices forced down through the Preferential Price System and export duties, to the benefit of a small number of mini-mills and foundries. At the expense of the manufacturers who generate the scrap. This, it turns out, is very good for scrap metal consumers, not so great for manufacturers and really bad for recyclers.
If you are in the steel industry, its important to provide information to the Competition Commission so they can properly set up their final terms of reference.
The deadline to respond is 12 May 2023
Need help? Drop us a line at firstname.lastname@example.org
US AGOA report published
This is a dense document, but important in light of South Africa possibly losing access to AGOA benefits after 2025. I have written about this extensively and my concerns remain as strong as ever. This report tells us absolutely nothing about South Africa’s prospects of remaining an AGOA beneficiary, but it does raise some other important issues:
We are the fourth largest supplier of processed peaches to the USA and apparently undercut USA prices even without accounting for AGOA benefits. The Yanks don’t want to give us AGOA preferences for canned peaches because we make them nervous. In 2022, we exported 8 000 tons and earned R218m in sales to the USA. Go SA peach producers! We should be careful however. If we keep so aggressively undercutting their producers, we could face an anti-dumping action like we did on lemon juice. American anti-dumping actions are no joke, so this needs to be watched carefully.
We are the largest AGOA beneficiary, with most of these benefits accruing to the automotive and chemical industries. These are not our largest export sectors though, with this dominated by platinum group metal exports. These are duty free in the US and so AGOA doesn’t affect them.
The chemical industry ,as the second largest AGOA beneficiary sector, receives special attention in the report. Brain drain in the chemical industry makes it difficult for the industry to reach its export potential. We can echo this for most complex industries in South Africa.
Our infrastructure is a disaster which keeps getting worse. Load shedding receives special attention as the main culprit, followed by our failing railway system. Inadequate access to water is not helping either.
“[T]oday South Africa’s freight rail infrastructure is neither well maintained nor secure, and rail traffic has been declining“. Not good. “And even when a company is able to secure rail cars and engines, incidents have been reported of abandoned cars that a company did not consider profitable enough to transport and therefore were not delivered to the purchaser, theft of protective equipment that ruined a shipment, and theft of the metal used to build the railway itself”.
Our roads receive short shrift too. “Roads in South Africa are now often the better choice for transporting chemicals—despite roads suffering from lack of maintenance and being generally less efficient (e.g., product must be shipped in smaller batches) than shipment via well maintained rail lines”.
American importers need to use the benefit as they are the only parties who can receive the lower duties. In some cases, they deem the cost of compliance too high and so don’t use the benefits. Predictably, this is more of a problem when the duty benefit is quite low. There needs to be a team effort between exporters and American importers to ensure the best access is achieved.
People don’t know about the benefits available and/or the compliance requirements. This is where the Department of Trade, Industry and Competition can really make a difference. Educate manufacturers so they understand how to better use AGOA to penetrate the US market.
All of these are identified as inhibitors to taking proper advantage of AGOA, so we should take note.
Somewhat ironically, our relatively poor utilisation of AGOA (despite being the best in Africa), means losing access will limit the damage to a relatively small number of sectors. We should still put the work in to not lose access of course.
Sectors like wine are mentioned as opportunities which are inadequately exploited because “some are not using the preference because the United States is a minor destination market for some exporters”. This is a chicken and egg problem. The market will remain a minor destination if we don’t use the benefits available. On the other hand, if we can obtain better prices elsewhere, then the US will not receive attention unless the AGOA benefits are large enough to make up for the price differential. This is a massive market though, and it might be worth the time to look at how the wine industry can sell more wine to Americans.
Want to export to the USA? Drop us a line at email@example.com
Ukrainian grain banned in some EU countries
Well, this is awkward. The EU has allowed Ukrainian grain to transit through the EU to other destinations, such as north Africa, but some of this grain got stuck in eastern European countries like Poland, Hungary and most recent Slovakia. These markets are now flooded with cheap Ukrainian grain, depressing the domestic price of grain and making the local farmers grumpy, hence the ban. Countries within the EU can’t act independently of the EU in such decisions, but of course they just have, creating this awkward moment inside the very awkward war which everyone in the EU doesn’t see in quite the same way, despite what Brussels says.