Future trade with US a major concern

NOW that most Zululanders have digested the surprise announcement of Donald Trump being elected as the 45th president of the United States, economists are answering the big question: what does it actually mean for us?

Their forecasts certainly do not spell global doom and gloom as countless non-supporters jested about an impending World War 3 on social media, but what is of significant concern, particularly for port cities, is potential trade policy changes as Trump embarks on his sloganised mission to ‘make America great again’.

‘His presidential victory is likely to have mixed consequences for us – from a preferential trade perspective it might be bad, but protectionism, tax breaks and government spending might have positive spinoffs for our mining and manufacturing industries,’ said economist and Deputy Dean in the Faculty of Commerce Administration and Law at the University of Zululand (Unizulu), Dr Irrshad Kaseeram.

‘Analysts consider the trade impact to be a major area of concern, partly with regard to African Growth and Opportunity Act (Agoa) – the agreement which was renewed in 2015 for the next 10 years.

‘This trade agreement which began in 2000 provides South Africa and other African states with duty free access through exports to the US market, and was only reached after we agreed to open our markets to cheap chicken imports.

‘A conservative Republican government could extort more access to our markets in return for continued duty free access to theirs during the next round of Agoa negotiations.’

Kaseeram highlighted that trade with the US last year amounted to R176-billion, making it SA’s third largest trading partner.

‘Through Agoa related trade, some 60 000 jobs have been created over the past 15 years in labour-intensive agriculture, automotive and textile industries.’

Knock-on effects
With the US trade deficit running into trillions of rands with China, Kaseeram also expects Trump’s government to reduce the dependency relationship with China.

‘They are likely to follow a protectionist trade policy with the rest of the world to advance their national businesses and thus curbing foreign competition.

‘Such a trade stance is likely to affect us.

‘Protectionism will also mean that the unemployment rate among our unskilled workers will rise over the next few years as demand for some of our exports will shift to goods sourced from their domestic firms.

‘Our government will need to make overtures to the Trump government to secure trade access, however in recent years our government has been shunning the West in favour of BRIC (Brazil, Russia, India and China) economies and a conservative Republican government will certainly frown upon such a position.’

Economist.co.za economist Mike Schüssler reiterated concern for SA’s future in trade, referring to several radical claims made by Trump.

‘He has threatened to scrap some existing free trade agreements, including the North American Free Trade Agreement between the US, Canada, and Mexico, which he blames for job losses.

‘He has even suggested withdrawing the US from the World Trade Organization.

‘He is also in favour of taxing imports and has talked about imposing tariffs of 45% on China.

‘China would not be able to export much to the US and they are our biggest single trade partner as a single country.

‘That means less demand for steel, less demand for our iron ore and less demand from America for our tariffs free cars, which African Growth and Opportunity Act gives us access to.

‘Our car exports would tank! We would see agricultural products come under pressure from wine to meat.

‘Any slowdown and shrinkage of trade will not be good for the world, but will certainly be bad for South Africa.

‘But as an Asian trader said, ‘better the devil you know rather than the great unknown.’

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