“The election of Joe Biden as United States (US) president-elect could eventually create an opportunity for South Africa to buttress its economic narrative with the US from both a trade and an investment point of view.”
This is according to Prof Raymond Parsons, economist at the North-West University (NWU) Business School.
He says that while Africa is not an immediate high priority for a new US administration that will clearly be heavily preoccupied with other domestic political and policy issues, South Africa is still the US’s largest trade and investment partner in Africa.
“Despite previous economic tensions in the relationship, political change in the US may now provide scope to reset mutually beneficial commercial relationships and eliminate any friction points that may have developed.”
Prof Parsons says although it is still early days, President-elect Biden also augurs well for the global economy. His track record is one of an internationalist who takes a cooperative, rather than a transactional, approach to foreign economic and diplomatic relationships. “Biden will want to mend fences with overseas allies. More specifically, to promote international cooperation, a Biden administration is more likely to support multilateral and ‘rule-based’ global institutions like the World Trade Organization (WTO).”
According to Prof Parsons, a more supportive role from the US in the WTO could create a more certain and predictable framework for an international trade regime which, for a number of reasons, is at present under great stress.
“Whatever the current problems in the WTO, for most countries it remains the most appropriate structure to help ensure a level playing field in world trade matters and to provide much-needed conflict management in trade disputes. It is in the interests of small economies like South Africa, which are heavily dependent on foreign trade, that the WTO operates effectively.”
Prof Parsons explains that, apart from the WTO, South Africa’s trade interests in the US are to a large extent intertwined with its status under the US African Growth and Opportunity Act (AGOA) and the trade opportunities that American legislation has created for South Africa in recent years. However, since the AGOA legislation came into existence under former President Clinton, the US conditions imposed on South Africa in AGOA have been considerably tightened, the international economic environment has changed and US protectionist influences have strengthened.
“The global pandemic and other setbacks to sectors of the US economy have enhanced bipartisan congressional support for a more inward-looking US trade policy, which Biden also captured in his policy platform. The US trade stance in the future will be shaped by geo-political trends, US domestic economic developments and factors specific to South Africa. It is in South Africa’s interest to closely monitor these elements from now on and to ensure that any bilateral US-South African economic disputes are satisfactorily resolved.”
Prof Parsons says the US economy remains an important market for South Africa. South African exports to the US in recent years have benefited from the AGOA legislation, both in terms of volume and of diversity.
“Looking ahead, although AGOA only expires in 2025, South Africa must not only ensure that it makes the best use of the remaining five years of the favourable AGOA trade regime, but should also begin to contemplate what might eventually replace it. We need to start thinking about what the options might be in a post-AGOA era, including expediting negotiations with regard to the African Continent Free Trade Agreement.”
Prof Parsons believes that, apart from maintaining good economic relationships with the US, South Africa would therefore also be well advised to concentrate on strengthening its overall global competitiveness.
“South Africa’s share of world exports has been steadily declining for some years. Although AGOA is still available to South Africa in the US market for now, a bigger and broader penetration of global markets, especially in products with rising value and demand, is essential to growth and job creation in the years ahead.”
