The United States will suspend duty-free benefits for South Africa on March 15 because it has failed to meet the requirements of a trade deal, President Barack Obama has announced, in a move that could cost South Africa up to $7 million.
The suspension is seen by analysts as a move to pressure Pretoria to loosen restrictions on U.S. farm exports, in particular on U.S. poultry products.
South Africa has said it is concerned that an outbreak of avian flu in the United States, which killed nearly 50 million birds, could pose animal and human health risks to its economy. The U.S. denies there are such health risks from its poultry.
“I have determined that South Africa is not meeting the requirements … and that suspending the application of duty-free treatment to certain goods would be more effective in promoting compliance,” Obama said in a proclamation.
South Africa’s trade ministry did not immediately respond to a request for comment on Tuesday.
South Africa said only last week it was close to striking a deal over farm produce trade with Washington that would see it retain the benefits of the African Growth and Opportunity Act (AGOA), a U.S. trade agreement designed to help African exporters.
“Mr Obama’s proclamation is likely the stick to go with this warning (to lift restrictions) – one we hope local authorities will heed to,” NKC African Economics analyst Bart Stemmet said in a research note on Tuesday.
Analysts expect a deal to be struck before the March deadline because Pretoria cannot afford the reputational and financial damage a removal from AGOA would have on an already struggling economy.
“We are confident that the suspension will ultimately be avoided,” Stemmet added.
Eliminating barriers to U.S. trade and investment is one of the criteria for membership of AGOA, which was renewed earlier last year and provides duty-free access to goods from sub-Saharan African countries, ranging from crude oil to clothing.
South Africa exported $176 million in agricultural products to the United States under AGOA in 2014 and potential lost benefits are estimated to total $4 million to $7 million.
South African products affected would include oranges, macadamia nuts, wine and citrus, U.S. data shows.