The grain policy environment

April 2017

JENNY MATHEWS, SA Graan/Grain contributor

Ms Gerda van Dijk (Director of Directorate: International Trade) looked at the current trade in grains and products. Exports of South Africa’s primary products like oats, wheat, maize and buckwheat were high until 2013, but we have seen a decline in export of primary products since then.

Anticipation is that there will be a significant increase after this year’s bumper crop. There have been large imports which declined in 2014, but are increasing again largely attributable to weather conditions.

The export of processed products like flours and pastas has seen consistent growth. There has been a decline in imports, however Van Dijk says this is increasing again.

Global dynamics which currently influence trade

• The new Trump administration which has a more protectionist approach and has indicated intent to re-negotiate the North American Free Trade Agreement (NAFTA) (which includes Mexico, about which his views are well-known).
• The US has stepped out of the negotiations in the Trans-Pacific Partnership Agreement, which includes countries in the East and New Zealand. These all affect the multilateral trading system.
• Trump’s protectionist view means challenges to any discussions on domestic support, especially if he is going to protect US producers and give them more support.
• Brexit will definitely influence trade with the UK moving out of the EU. This is significant since the UK is the biggest market for many South African commodities. We need to work very closely with the UK towards ensuring there is no distortion in the current trade between us.
• The slowing down in world economies, e.g. China.
• Van Dijk says it is her department’s view that tariffs are playing a lesser role while the issues of sanitary and phyto-sanitary measures are increasing in importance, as are the technical barriers to trade and also the non-tariffs barriers which are increasingly in evidence world-wide, making it difficult for products to move across borders.
• The impact of the so-called Fourth Industrial Revolution.
• The growth in digital trade including the use of robots, which will influence job opportunities.

Multi-lateral trade rules and the WTO
The 1995 Marrakesh Agreement states that all products and all countries have means to protect themselves, e.g. rules against dumping, countervailing- and safeguard measures including a specific agricultural safeguard measure, which South Africa has not yet employed but is currently re-visiting. Van Dijk says the issue of domestic support needs to be more transparent and predictable.

In fact it needs to be done away with in order to level the playing fields where those producers receiving support are able to be more competitive than others not receiving support in the form of subsidies.

Van Dijk maintains there is ignorance about opportunities available through market access quotas which require that countries allow some products in while South Africa must also create opportunity for other countries to export to us.

Current negotiations
The on-going DOHA negotiations with 162 member countries (since 2001) have not reached agreement but milestone victories have been achieved, e.g. elimination of export subsidies, trade facilitation agreement, public stock holding for food security purposes and increased support to the cotton industry.

Regional trade agreements are increasingly more important, especially if we experience marginalisation internationally. African countries need to collaborate and have an ‘African voice’ in the multilateral trade arena.

South Africa no longer negotiates alone but within the South African Custom’s Union (SACU) block. Regional value chains and value addition deserve attention to strengthen the region, thus all current negotiations are focussed on establishing a ‘continental free trade area’.

Van Dijk described numerous trade agreements like the Economic Free Trade Association, the India Preferential Agreement, the SACU-MERCOSUR Preferential Trade Agreement and the US-Africa Growth and Opportunities Act (AGOA) where her department participates in policy formulation.

She also warned that the pressure on the South African poultry trade is not going to go away and believes South Africa and SACU need to examine their view on trade relations with the US.

Looking ahead
She urges that the marketing and promotion of South African products be prioritised, quality and standards need to be met and supply needs to be consistent. The constraints to our market participation will probably be sanitary and phyto-sanitary measures and restricted market access because of tariffs. Van Dijk believes the grain industry deserves to be prioritised because of available export opportunities.

Publication: April 2017

Section: Grain SA