South Africa’s economy faces a possible double-blow as the United States announced an increase in steel and aluminium tariffs and the possible withdrawal of foreign aid donations unless the country votes with the US more often in the United Nations. Every year the US State Department compiles a report on voting practices at the UN. The report is then given to the US Congress. This report includes a comparison between the voting records of the US and other countries on UN General Assembly records.
The report was released last week and found that of the 93 resolutions that were voted on in 2017, on average, other countries only voted with the US 31% of the time. South Africa received $258-million (R3.2-billion) in aid during the 2017/18 year, yet it only sided with the US on nine occasions and voted against it on 68 occasions.The majority of the aid funding goes towards health initiatives and cutting aid could place a huge strain on the South African treasury.
South Africa’s Department of Trade and Industry (DTI), led by Rob Davies, failed to convince the US government to provide an exemption, leaving the economy to face added pressure from an increase in tariffs.The US is imposing a 10% ad valorem tariff on imports of aluminium products and a 25% ad valorem tariff on imports of steel.
The tariff increases could lead to job losses in South Africa, with up to 7,500 jobs in the steel industry at risk as a result.
The US did grant exemptions until 1 June for several countries, including Mexico, South Korea, Australia, Argentina, Brazil, Canada and the European Union.
South Africa’s 2017 steel exports only accounted for 0.98% of total US steel imports but represent 5% of South Africa’s production. “South Africa will be disproportionately affected both in terms of jobs and productive capacity,” the DTI reiterated in its arguments to the US government. The DTI said South Africa is grappling with a steel glut and has control measures in place to avoid the re-exporting of steel from third countries. It also offered to restrict its exports to a quota based on the 2017 exports level, but this was not enough to convince the US.
The DTI also pointed out that some of the exempted countries are the biggest exporters of steel and aluminium to the US, accounting for 58% of US steel imports and 49% of aluminium in 2017. “South Africa is therefore not a cause of any national security concerns to the US nor a threat to US industry interests and is not the cause of the global steel glut. Instead, South Africa finds itself as collateral damage in the trade war between key global economies. South Africa is concerned about the unfairness of the measures and that it is one of the countries singled out as a contributor to US national security concerns when its exports of aluminium and steel products are not that significant,” the DTI said.