How the Whole Trade Thing Began
The Republic of South Africa occupies the southernmost portion of the African continent, stretching from the Limpopo River in the north to Cape Agulhas in the south. The discovery of diamonds near Kimberley in the year 1867 and of gold on the Witwatersrand in 1886 was contributory to the transformation of the country from a primarily agricultural area into a modern day industrial state. Today, it is regarded as the strongest industrial economy found on the African continent despite uneven occurrences of development. White minority reliant on black labor were responsible for economic growth while its homelands remained lagging behind.
Arable land was insufficient yet South Africa is virtually self-sufficient in foodstuffs. Forty-five percent (45%) of its homeland relies on imported food. The chief crops are corn and sorghum. Cash crops found in the place are grown by the white minority with sugarcane, wheat, citrus fruit, tobacco, grapes, cotton and even corn established as the primary sources. Fishing is regarded as a major industry while cattle and sheep-raising are also vital in the economy.
Minerals account for 70% of the country's earnings in foreign trade. In fact, South Africa leads the world in the production of gold, vanadium and chrome. It is also standing along the lines of leaders in international business when it comes to gem production of diamonds, uranium, asbestos, antimony, platinum and manganese. The only industrial resources which did not contribute largely to the mining industry are petroleum and bauxite since they could not supplement commercial consumption.
Domestic mining of coal makes up 80% of the country's primary energy needs. It is also considered as the world's largest producer of synthetic fuels. More than half of the African continent, at a rate of 70%, generates electricity from South Africa. In fact, Lesotho, Botswana, Swaziland and Mozambique were seen to be overwhelmingly dependent upon South Africa when it comes to electricity supply.
The United States is actually the single trading partner of South Africa. As evidence to this, statistical data gathered depicted the reliability of trade between the two nations. Since 1999, increases in import and export relations between the two were seen. To these days they have lived with the legacy of supporting each other in world trade.
Major Imports and Exports for the Two Countries
South Africa's chief exports are gold accounting for nearly half the export earnings of the country. Other metals and metal products as well as diamonds, foodstuffs, chemicals, transportation equipment and machinery play major roles in the economic growth as well. A customs union formed within the African Continent makes South Africa the lead nation.
The United Census Bureau was able to track the balance of trade between these two nations. As of the end of July 2008, the seven-month data for the year established a total of $4.24 billion in US exports to South Africa and $7.21 billion imports of the former from the latter. In 2007, product data were seen on the following trends:
Trade Agreements between US and South Africa
- US Imports from South Africa. Obtaining a total amount of $9.07 billion in imports from South Africa, US placed other precious metals on top of the line with a total of $3.79 billion. It was joined by other commodities like: uncut or unset gem diamonds; unmanufactured steelmaking and ferro-alloying materials; other parts and accessories; new and unused passenger cars; bauxite and aluminum; miscellaneous nonferrous metals; industrial organic chemicals; semi-finished iron and steel mill products; and crude. Crude gained a total of $97.62 million.
- US Exports to South Africa. The 2007 total exports from US to South Africa amounted to nearly $5.52 billion. On top of the list was excavating machinery which earned $347.73 million. The top ten was completed by: materials handling equipment; minimum value shipments; organic chemicals; telecommunications equipment; trucks, buses and special purpose vehicles; civilian aircraft; other industrial machines; other petroleum products; and wheat. Wheat managed to be in close fight with other petroleum products as it totaled to $147.38 million.
Despite South Africa's having the United States as its biggest single trading partner, the two governments still found it necessary to support their trade relationship. With all their efforts to manifest the support they have for each other's economy, they signed pacts which had further strengthened the ties. Because of their endless attempts to soar to greater heights together, the following trade agreements were formulated:
Trade Disparities between US and South Africa
- Trade and Investment Framework Agreements (TIFA's). The United States have actually developed various TIFAs for almost all nations in the world. The Preamble of this pact specifically focused on inspiration, commitment, recognition, determination, desire and reaffirmation. These particular aspects focused on trade, friendship, cooperation and other ties that bond the two nations. The primary objectives were set on the expansion of trade of goods and services between them considering all the terms of the agreement and founded on its framework. Furthermore, the agreement was taken for appropriate measures that will encourage exchange of goods and services while securing a long-term development and diversification of trade. Lastly, it encourages both countries' private sectors to enhance the growth through job creation and economic development which will create an open environment for investment.
- Africa Growth and Opportunity Act (AGOA). This boosted South Africa's trade relations with the US by allowing the latter duty-free access from a choice of around 1,800 product lines. In 2004, US President George Bush signed the AGOA Acceleration Act thus extending the termination of the AGOA benefits deadline from 2008 to 2015. The AGOA allowed expansion of trade and as proof to this, the $923 million exports in 2001, increased by 40.8% in 2002 with an amount of $1.3 billion. The pact specifically boosted the clothing industry for South Africa with cashmere sweaters, micron or finer wool, fabric and yarn, and hand-made and hand-loomed folklore articles being significantly affected.
- Trade and Investment Development Cooperation Agreement (TIDCA). This was signed in July 16, 2008 to further create a free trade agreement between the United States and the South African Customs Union (SACU). Ever since, the US has been negotiating with SACU but further issues were not tackled yet most especially that the intellectual property rights demanded by US was inflexible in nature. The efforts were then elevated and are now founded on TIDCA after five long years of compromise.
One of the known barriers to the free trade agreement between the US and South Africa is the latter's participation with the SACU. While the United States is considered as a good economic partner, other South African nations were affected. In 2006, the effort to negotiate with SACU was a bit suppressed. There was this belief that SACU countries may find it rather drastic to adapt by the measures of US when it comes to intellectual property rights and investment. Other trade conflicts seen in the past were:
The Future Trade between the Two
- Threatening of Trade Sanctions. In 1999, US threatened South Africa of trade sanctions. This was because the US found out that the latter was producing cheaper AIDS drugs than those produced by pharmaceuticals in the US. The Pharmaceutical Research and Manufacturers of America (PhRMA) charged South Africa on grounds of violating the rules of the World Trade Organization (WTO) on patents and intellectual property. It was found out, however, that South Africa was doing nothing wrong and that these pharmaceutical companies brought themselves into criticism just to raise their market share on sales.
- Africa Reacts to Terrorism in US. While everyone posts a war against terrorism, some countries were a bit apprehensive by the means that US adapted. The South African government felt that everybody was shaken in US's pursuit to give justice to the September 11 bombings of the twin towers. The impact on African economy also bothered the people.
The conflicts could never be avoided. Just like in any game people play, there is always that desire to win but it is better if the seas are sailed with someone. The US and South African friendship may be based on this kind of initiative. The negotiations on Free Trade Agreements from US to SACU may have not yet been realized but at least the TIDCA says a lot about it. The TIDCA is just the beginning of a brighter future that awaits both nations.
They may have varied opinions on certain things such as terrorism. Despite this fact, they have still been trading in the world market. The international business would not be complete without the exports and imports of these two nations. Their impact on the lives of each other is much more important than the disparities which used to bring them apart. There are more things to come for the US and South Africa. Who knows the possibility of building an FTA may already be at hand?
US-South Africa Trade References