SA has levied dumping duties on the US since the early 1930s.
A “stay of execution” for a few more days, a friend said last week, for Washington to consider Pretoria’s tariff offer. The relationship has come to this. Suspense, drama and anxiety.
It has not always been like this. Business Day economics correspondent Jana Marx shared an interesting timeline last week of the bilateral trade relationship between SA and the US. It detailed since 1929 areas of economic diplomacy between Pretoria and Washington. It showed how frequent “developments” were in the recent moment. Involving significant expansion of preferences for SA, culminating in a record surplus for SA of $10.3bn in 2021. Yet the turbulence we now confront in that relationship is no surer a sign of the times than the public brinkmanship.
The period between 1929 and 1976, and after the 1973 oil crisis, was certainly not a period of solely “stable” relations between the US and Pretoria. Far from it. SA has levied dumping duties on the US since the early 1930s, on products such as rubber hose, glucose, pipes and tubing, iron and steel products and tyres, as it sought to protect its own nascent industry. With “maximum leviable” duties of 50% the practice at the time.
As the Trump tariffs and the next stage of his diplomacy dragoon negotiators from Maseru to Manila towards a series of concessions, it is a reminder that the history of trade is not just about bilateral preferences but a terrain of inter-nation hostility and contestation. For instance,
SA did not have any meaningful convention, treaty or agreement on tariffs with the US before the general agreement signed in 1947 as part of the “new order” established after World War 2.
Its only preferential agreements, reciprocal exchange or “most favoured nation” treatment were with areas under British control or by commercial arrangements with parts of Europe. As a share of the total, exports to the US seldom breached 20%, save for the immediate postwar period in 1949, when such trade constituted more than two-thirds of exports. The US now receives, by value, less than 10% of total South African exports.
This is not to suggest such trade is not consequential. What makes US trade crucial for SA has been the quality of the non-mineral trade opportunities it has provided in relatively higher- complexity goods such as axles, rigs, vehicles and catamarans; even though platinum and platinum group metals-embedded goods constitute nearly a third of the export flows. However, absent the capabilities acquired by servicing these orders, the SA tradable sectors would solely comprise things we dig up, plant or slaughter. The share of manufactured goods in the basket of exports to the US is of better quality than that sent to China or India. This is on stark display if one considers the automotive sector, making up more than a fifth of the export value to the US.
“We’re at full capacity now and the volumes on these US projects are huge,” said the owner of a Kariega-based component exporter with nearly half of its orders coming from customers in the US.
He suggested as we spoke about the April 29 announcement of an “import duty adjustment offset” for some of his customers that might provide some reprieve. For now, that is, in cases where the value of imported components for assembly into the US constitute less than 3.75% of the retail selling price of a final vehicle.
The risk is that an export demand shock to manufacturing sectors such as automotives and car components, rolled aluminium and certain steel products may make “diversification” difficult. As chronic overcapacity in some of these product markets and the absence of customer orders (on a sufficient scale) may complicate matters. Yet niches matter too and as one Gqeberha-based fabricator suggested, some of his customers will battle to find substitute suppliers. Yet the signs are ominous.
One wonders how instructive a guide the past may be. Or whether we are in the throes of the unprecedented?
- Cawe is Chief Commissioner at the International Trade Administration. He writes in his personal capacity.