Trade pacts and low rand take equal credit for export boost

Alan Peat ALTHOUGH THERE is no easy numeric means of measuring their effects, the trade pacts in which SA is a partner have definitely boosted trade, according to two trade analysts interviewed by FTW. The AGOA (African Growth & Opportunity Act) with the US and the trade agreement with the European Union (EU) have both played a beneficial role, both heavily favouring exports. Indeed, the AGOA pact is a one-sided agreement, with SA (and the other eligible African states) receiving duty-free access to the US market but with no reciprocal arrangement. While not direct proof of the efficacy of the pacts, the trade statistics with Europe and the US have both increased dramatically in the last two years, according to Duncan Bonnett, trade analyst and member of Whitehouse & Associates. And it's SA exports which have been the significant scorers, he added. Trade surplus "The trade surplus with Europe is growing substantially," Bonnett told FTW. Riaan de Lange, associate director of trade and development solutions at Deloitte & Touche, is equally positive Ð confident that AGOA and the EU pacts have given a distinct boost to SA exports. But, both De Lange and Bonnett warn, the recent depreciation of the rand has also played a big part in swelling the SA export coffers and must be part of any equation about causes for improvement. What probably needs to be done to get closer to statistically measuring the comparative effects of the declining rand exchange and the trade pacts, according to De Lange, is to work the figures from a chosen base year, balancing rand depreciation with export appreciation. But without this, both commentators are still adamant that pacts versus depreciation would probably show a close balance between the effects of each. And both headline the same five export industry sectors as being the main players in the field. Fruits, vegetables, wines, motor vehicles and clothing and textiles are the stirring force. "Motor vehicle and parts exports to the US have increased substantially in the last couple of years," said Bonnett. De Lange agrees, but also points to the importance of the European market. "I'd say this is our main area of export growth," he said, "mainly because the European-based manufacturers are big investors in the SA motor industry. "However, we shouldn't forget Toyota just buying a bigger stake in Toyota SA. That should herald more exports to Japan, but also probably increase exports to the US and Europe." The agricultural industry, De Lange added, has to benefit from trade pacts Ð with SA already having a long history as one of the preferred southern hemisphere suppliers of fruit and veggies to the European winter market, for example. Clothing and textiles Both our sources headline clothing & textiles as the big beneficiary of the benefits of AGOA. It's an utterly cut-throat export trade when it comes to price, De Lange and Bonnett suggested, and getting full duty-free access to the massive US market can only give SA (and the other African AGOA beneficiaries) a distinct Ð and rather exclusive Ð price-competitive advantage. Another factor which holds the production cost in SA down, De Lange told FTW, is that there is not as much imported input in the products as in many others Ð a blessing also shared somewhat by the agricultural industry. "The clothing and textile trade has also taken full advantage of the local duty credit certificate scheme (DCCS), a means of laying SA import duty off against exports," said De Lange. "This a similar scheme to the import/export balancing act which was promoted by the MIDP (motor industry development programme)." But whatever else, said Bonnett: "The main point is that the implementation of both AGOA and the EU agreements has been accompanied by significant increases in SA exports. So they're a cause, not a coincidence."