The South African export industry will be facing a certain degree of strain, following the US’s decision to retract trade benefits under the World Trade Organisation (WTO) general system of preferences for developing nations.
On February 10, the US narrowed down its internal list of developing and least-developed countries. Thereby reducing the threshold of the nations which are possibly harming US industries with unfairly subsidised exports.
By doing so, the US eliminates special preferences to several countries which it does not view as befitting of the “developing nations” status.
These countries include South Africa, Hong Kong, China, India, Singapore and Ukraine.
This decision can result in some of the world’s top exporters facing stringent penalties. Currently, President Donald Trump is not amused that large economies such as China and India receive preferential trade benefits at the WTO, simply because they are classified as developing countries.
The focus on the WTO’s special preference is to help poor countries reduce poverty; while generating employment and integrating themselves into the global trading system.
With South Africa making its way onto the US’s list, the National Association of Automobile Manufacturers of South Africa (Naamsa) believes the decision will have a negative impact on the economy and the automobile industry.
Norman Lamprecht, Naamsa’s executive manager, explains that the US has been one of SA’s top export destinations and trading partners for the past three decades.
In 2019 alone, Lamprecht says 12 437 vehicles were exported to the US, along with automotive components to the value of R4.8 billion.
However, Lamprecht says once South Africa loses preferential treatment, it will lose out on an important export market.
The US and South Africa also trade in machinery, healthcare, metals and minerals, textiles and in the agricultural industry.
With the new policy set to have a knock-on effect in various industries around SA, and the unemployment rate standing at 29.1%, what are your thoughts on the situation?
Do you feel South Africa will be able to reach its full potential if no preferential treatment is given? Or do you feel SA requires the preferential treatment to ensure some form of economic stability?
Share your thoughts and opinions with us in the comment section below.