Article
SA organized agriculture and government must focus more on trade matters
Published: 05/02/2025
Now that US President Donald Trump has followed through with his election promise to impose tariffs on imports from Canada (25%), Mexico (25%) and China (10%), what can we expect next? And how should organized agriculture businesses and the South African government prepare for this new normal?
- Now that US President Donald Trump has followed through with his election promise to impose tariffs on imports from Canada (25%), Mexico (25%) and China (10%), what can we expect next? And how should organized agriculture businesses and the South African government prepare for this new normal?
- In one sense, there is nothing unexpected about Trump's use of tariffs to pursue America's mercantilist objectives. Similar tariffs were deployed back in 2018, but that was against China, which Western countries had a silent consensus that it was a strategic rivalry. Now, with close allies such as Canada and Mexico, this takes trade frictions to shocking levels.
- In the coming years, as trade friction persists globally, we suspect that there likely will be a change in various regions' trade approaches, with some preferring more protectionism for their markets in general. The EU is one such region. For agriculture, farmers from France and other major EU countries have called for months for restrictions on imports of agricultural products. This is likely to intensify, and in some instances, it may take the form of non-tariff barriers to soften the blow in the public gallery.
- In the past, EU officials have resisted the pressure to impose tariffs, preferring instead to maintain a relatively open market approach. Non-tariff barriers towards some countries have been the EU's preferred instrument to keep some producers happy. An example of this is South Africa's citrus industry, which has a case against the EU at the World Trade Organization.
- If trade fragmentation and economic nationalism intensify, South Africa's agriculture and other exporting industries will be at risk. The South African agricultural sector generated much of its growth over three decades through increased export opportunities. Roughly half of the produce in value terms goes to the export markets. For 2024, these exports likely exceeded the US$14,0 billion mark for the first time. The higher commodity prices and strong fruit exports are mainly the drivers of South Africa's trade. The actual figures we have so far are for 2023, where South Africa's agricultural exports reached a record US$13,2 billion, according to data from Trade Map.
- The EU, broader Africa, Middle-East and Asia are part of the large export markets. In value terms, the Americas region was only 6% of South Africa's overall agricultural exports in 2023. Still, the region matters significantly for two reasons.
- Firstly, the exports are concentrated in specific industries, mainly nuts, citrus, wines, grapes and fruit juices. This means while the risks associated with this market are not as significant in proportion to overall agricultural exports, they present challenges to specific industries. Secondly, the negative sentiment arising from any confrontation with the Americas region would have negative effects on South Africa's agriculture. It is, therefore, vital that South Africa maintains positive agricultural relations with this region.
- South Africa must focus on strengthening and revitalizing relations with its trade partners beyond Europe. For each export-oriented industry, there should be regular engagement between local business representatives, organized businesses, and the government to hone our export strategies. In these times, South Africa must maintain a posture as an open global actor that seeks to build relations across the globe on a pragmatic basis. This openness and pragmatism – rather than ideology and dogma - should be its leitmotif in bilateral and multilateral trade relations.
- Beyond the existing markets, we must urgently widen export markets for various agricultural products. Worryingly, the push to open more export markets at a time when the world is fragmented and looking "inward" also implies that this will be a challenging task and one that requires the sort of economic diplomacy rooted in strategic collaborations between government and industry, and here both the Department of Trade, Industry and Competition (DTIC) and the Department of International Relations and Cooperation have a pivotal role to play. Beyond working together to advance South Africa's economic diplomacy, these departments must build strong capabilities in their bilateral trade desks.
- For South Africa's long-term agriculture growth strategy, export markets are a fundamental part of its success. Thus, agribusiness and farmers should now, more than before, put more emphasis on this matter in their various engagements with government and international stakeholders.
