South Africa

Tariffs Aren't Going To Be Our Largest Trade Issue

Wed, 08 Jan 2025 20:54:19 GMT

The most overused word in the English language since November has to be the word “tariff” as speculation runs rampant on how much a Trump 2.0 presidency will use this controversial trade negotiation tool.

Here’s a sampling, so you get the idea: “Think About Making These Purchases Before the Trump Tariffs are Enacted”, U.S. News; “U.S. Carmakers Face Rough Ride Under Trump Tariffs”, Bloomberg.com; and “Bourbon Industry Concerned About Looming Tariffs”, LEX18. You know it’s bad when tariffs threaten to make it harder to drink your troubles away!

Tariffs can disrupt almost any industry, but U.S. agriculture has already seen this movie.

During Trump’s first term, according to the USDA’s Economic Research Service, retaliatory tariffs reduced U.S. agricultural exports by $27 billion from mid-2018 when the tariffs were imposed to the end of 2019. Soybeans accounted for the majority of the decline at 71%, followed by sorghum and pork at 7% and 5%, respectively. The losses were primarily concentrated in states, such as Iowa, Illinois and Kansas, exporting these products.

As a result of ag being caught in the cross fire of a new trade war, the USDA allocated $23 billion in trade-aid payments to U.S. producers. However, the rest of the story is that the Trump administration’s tough-line trade tactics ultimately led to the China Phase I deal and record exports to China and record farm income in 2021 and 2022.

That turned out to be short-lived. Even with the Phase I deal still in place, 2024 saw a serious erosion of U.S. agricultural exports to the Chinese mainland. After reaching a high of $36.38 billion in goods in 2022, USDA ERS projected 2024’s final export tally to China was expected to come in at only $23.3 billion.

So What Exactly Went Wrong This Time Around?
One could still blame such an export freefall on some of the tariffs that are still in place. But the truth is that the U.S. is now navigating the most troubled geopolitical waters since the Cold War days of JFK and Ronald Reagan. Simply put, China and Russia—aka the old Soviet Union—are not our friends.

What should be concerning, to those in U.S. agriculture and beyond, is the influence these two countries now have over a multi-country trading alliance referred to as BRICS. That acronym is short for the Brazil, Russia, India, China and South Africa alliance.

The original members of BRICS held their first summit in Russia in 2009 and sought to establish themselves as a geopolitical club to counter the influence of the G7 nations: the U.S., Canada, United Kingdom, Germany, France, Italy and Japan. Their agenda at that first meeting was firmly shaped by the global recession and, therefore, mostly focused on redistributing voting rights in the International Monetary Fund and World Bank in favor of the developing world. One of the most controversial statements to come out of that 2009 meeting was the calling for a new global reserve currency. From that point on, it was clear that the dominance of the U.S. dollar was being put on notice by the members of BRICS.

Today, the trading bloc is the world’s largest by population and accounts for about 37% of the world’s grain. China has been particularly aggressive in strategic moves with countries within BRICS. In 2023, Brazil was China’s largest source of agricultural imports. This movement of agricultural products accounted for more than 50% of Brazil’s total trade with China and 24.85% of China’s overall agricultural imports. No longer are U.S. farmers China’s primary source of imported soybeans or corn.

Real-Life Monopoly
Right now, China is buying up railroads in Brazil plus upgrading and expanding port facilities. Between 2007 and 2022, China invested $71.6 billion in 235 projects carried out in Brazil. The country’s investment and buying spree have been more impressive within the continent of Africa. At present, 53 out of 54 nations in Africa are part of China’s Belt and Road Initiative (BRI), which supports building key infrastructure projects throughout Africa, Asia and Europe. The projects intend to provide improved shipping corridors for precious raw materials and commodities. As of 2023, the two-way investment between China and its BRI partners had reached $380 billion.

If U.S. agricultural exports to China continue their decline, then it won’t be because of the “T” word. It will be because China holds a majority of railroads, utilities and low-cost properties on the world’s Monopoly board. Why buy U.S. soybeans when you can ship them from Brazil on your own railroad to your own port to your own container ship? Same goes for precious metals in Africa or oil in Russia or Iran. If you already own everything but Boardwalk and Park Place, then you don’t need the economies of the West to be involved as you plot your future livelihood.

Time To Take Control
A lot of unknowns exist as the second iteration of the Trump presidency begins. But this is clear. In 2023, the U.S. trade deficit with China was a whopping $279.4 billion. Those are the very dollars subsidizing a railroad somewhere in Brazil or a superhighway in South Africa—all to our own detriment. For the sake of our own future, we must start negotiating trade deals from a position of strength instead of begging for mercy. “Speak softly, and carry a big stick” was Teddy Roosevelt’s mantra during his time as president. When it comes to U.S. agricultural trade, we need Trump to start channeling his inner Teddy beginning Jan. 20, 2025.

U.S.-South Africa AGOA Talks: Substantial Progress, But Details Remain

Thu, 19 Nov 2020 03:57:57 GMT

Beef, poultry issues still to be resolved while pork issues appear to have been addressed

NOTE: This column is copyrighted material; therefore reproduction or retransmission is prohibited under U.S. copyright laws.

U.S. and South Africa continue to negotiate in “extra time” on several trade issues, with substantial progress being signaled by some sources despite reports from some general media indicating no substantive movement has been seen on issues surrounding beef, pork and poultry trade between the two sides.

“We’ve made what both sides are acknowledging as considerable and discernable progress, including through the holiday period” where progress was made on several outstanding issues, South African Trade Minister Rob Davies told reporters in Pretoria ( link ). He detailed that there is now an avian influenza certificate on the South African side, rules for administration of the quota that was published Dec. 18 and have “for all practical purposes, concluded on the pork issue.”

As for beef trade issues, Davies said the latest issues there are focusing on whether the rules apply specifically to beef born and raised in the U.S. or whether they apply to beef coming into the U.S. from other countries. “We have submitted a proposal [that] we are waiting to hear the answer to,” he said, “that beef that comes in from neighboring countries which has been part of the United States’ herd for 90 days… that beef will qualify after a quarantine period of 90 days, that would qualify as though it was born and bred in the United States.”

However, Davies observed there is still an “outstanding matter” relative to salmonella. “There have been a lot of interactions between our veterinary authorities on the question of salmonella, really the levels for tolerance for salmonella and the procedures that would follow the detection of any salmonella.”

While the two sides had a “deadline” of Dec. 31 to reach a deal under the African Growth and Opportunity Act (AGOA), Davies invoked a soccer phrase to describe where the talks stand now. “We are recognizing that we are in extra time – that we’re past full time, if you like, but we’re in extra time,” Davies stated, “But the whistle hasn’t as of this moment been blown, and we are hoping that the whistle will not be blow to give our veterinary authorities on both sides an opportunity to engage again.”

Another session is set for Jan. 6, Davies informed, “and the work will continue whether the whistle is blow or not because the consequences of the whistle being blow would be that certain products that are currently enjoying access under AGOA, those are the agricultural products, would be excluded, and we have to see the terms of that exclusion.” Specifically, Davies said a key would be whether it is a partial exclusion for a period of time and if no solution was found, that would be ramped up.

Should there be a partial exclusion and a deal is reached, Davies said the understanding is that it would be a quick reversal to remove the exclusion. “We are not the ones that blow the whistle,” he added, saying they are continuing to work toward a solution, one that would allow South Africa to honor their commitments made in Paris talks on poultry and also commitments made on beef and pork but also to “ensure that we do not pose risks to human and animal health in South Africa. That is what the issue has been all along.”

The products that could be affected include citrus, macadamia nuts, canned fruit, wine and avocados, according to officials.

That focus on the sanitary and phytosanitary issues has not been a “game as a protectionist measure to keep U.S. products out,” Davies said.

Echoing those sentiments, Minister of Agriculture, Forestry and Fisheries Senzeni Zokwana said South Africa has not lowered its trade standards in the talks with the United States. “South Africa bases its health animal requirements on the world organization for animal health quotas,” he stated. “So, we are not lowering or heightening, we are sticking to the standards that were set globally on which the United States is part of.”

While the poultry quota was announced and worked out in December, Health Minister Aaron Motsoaledi simply said that his country “is adhering to standards that are set globally. We do not want unacceptable risks to human health.”

Under the AGOA accord between the U.S. and 39 African countries, it eliminates import duties on more than 7,000 products ranging from textiles to manufactured items. To continue those benefits, the countries have to eliminate barriers to US trade and investment, operate a market-based economy, protect workers’ rights and implement economic policies to reduce poverty.

US officials have confirmed that work is ongoing between the two countries, with a spokesman for the U.S. Trade Representative telling Bloomberg BNA, “We are continuing to work with South Africa to remove the barriers that block American poultry, beef and pork.”

Comments: Both sides are still working with South African painting perhaps a more-positive or optimistic view of the discussions. That may be why some in the US media have reported that no progress has been made on beef, pork and poultry trade issues, even as South Africa’s Davies indicated most of the pork issues have been dealt and they are awaiting word on issues relative to beef. And it also seems that both sides view any action to remove AGOA benefits from South African products would initially be on agricultural products and could quickly be reversed in the event of an agreement being reached. So this situation with South Africa is little different than other trade-related negotiations – the final details are the hardest to work out and those are likely where the biggest potential benefits to both countries could materialize. But some are apparently taking the view that little progress has been made, a view which sources signal is not accurate.

NOTE: This column is copyrighted material; therefore reproduction or retransmission is prohibited under U.S. copyright laws.

Zimbabwe Grain Millers Want 40% Import Tariff on Corn, Corn Meal

Tue, 17 Nov 2020 03:03:37 GMT

The Grain Millers Association of Zimbabwe, which represents the country’s major milling companies, said it wants the government to impose a 40 percent of tariffs on imports of corn and corn meal because its struggling to compete with cheaper South African corn grown from genetically modified seeds.

The imports are harming Zimbabwe’s attempts to improve food security by boosting local production, Tafadzwa Musarara, the chairman of the association said in an e-mailed response to questions on Thursday.

“The local milling industry has been on the end of the stick with regards to South African imports as South African millers literally dumped cheap GMO maize meal into our economy and its time Zimbabwe realign its economy by localizing production of its staple foods,” he said.

Zimbabwe, once a corn exporter to its neighbors, has been importing the grain since a failed land reform program that began around 2000 during which mainly white commercial farmers were stripped of their land. That land was then redistributed to black subsistence farmers.

Zimbabwe has spent $7 billion on corn and corn product imports since 2002, Musarara said.

The association has committed to buying 800,000 metric tons of locally grown corn and 100,000 tons of locally grown wheat this season, the association said in a separate submission to parliament. The country has wheat stocks of 115,000 tons, which it is struggling to use because of wheat flour imports, it said.

South Africa Warns Armyworms Could Be 'Disastrous' to Corn Farms

Tue, 17 Nov 2020 03:03:03 GMT

South African corn farms are suffering “extensive” damage from what appears to be an alien caterpillar that destroyed fields in other countries in the region, according to the government.

While the government is yet to verify the pest as the fall armyworm that’s native to the Americas and arrived in Africa last year, the caterpillar may pose a serious threat to production of the staple food, the Department of Agriculture, Forestry and Fisheries said in an e-mailed statement Wednesday.

The pest has been reported in the northern Limpopo and North West provinces, the department said. North West and the central Free State province account for the bulk of South Africa’s corn output.

“If this pest is indeed the fall armyworm, it could be disastrous, particularly to maize production,” the department said.

Zambia, Malawi and Zimbabwe already suffered extensive damage to tens of thousands of hectares of mainly corn fields. The arrival of the alien species threatens to hurt corn output as Southern Africa is recovering from its worst drought in over 35 years, even as rainfall improves.