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Blog: 5 January 2017 (SA's trade balance with China and America)
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In today's blog we take a look at South Africa's trade balance with both China and the United States and ask if South Africa is doing the right thing by continiously siding with China and actively pursuing trade with China when there is clearly only one winner (and it's not South Africa), and neglecting the west, in particular the USA where terms of trade for South Africa is much more favourable, especially considering agreements such as AGOA.
Note data used: SARS customs data. |
East vs West
So SA's government has made no secret of it, it fancies it's eastern buddies Russia and China, and actively pursues trade deals on that side of the planet instead of building and fostering ties in the west. While promoting trade is one thing, having a country trade with you just so they can get your hands on your resources is a completely different story. Unless a tax is levied for excessive amounts exported. As we will show later in the article it is clear China is only after particular items in South Africa (precious metals, minerals and products of iron and steel). And we export massive amounts to them, without any form of protection of our natural resources being in place, such as taxing excessive amounts exported.
As far as we know SARS has no such tax levies in place. Taxes on exports aren't used very often, but when used it is aimed at keeping particular products or resources within the boundry of the country, and penalizing those who export such products by levying a tax on them.
As far as we know SARS has no such tax levies in place. Taxes on exports aren't used very often, but when used it is aimed at keeping particular products or resources within the boundry of the country, and penalizing those who export such products by levying a tax on them.
So lets start with the bigger picture. Who benefits and who loses out when looking at bilateral trade between SA and China and SA and the USA. The bar chart below shows SA's trade balances (Export - Imports) with both China and the USA per year. If the value is negative we importing more than we exporting (basically we paying more than what we get it) and visa versa.
As the bar chart shows that South Africa's trade balance with China (the red bars) has become progressively worse over the years and the cumulative trade balance from 2010 to 2016 (up to November 2016) was standing at -R384.1billion. When looking at our trade balance with the USA, it is in positive territory for all but one year. SA's cumulative trade balance with the USA for the same time period amounted to R28.3billion. Which means SA actually received R28.3billion more than what they had to pay for imports, while with China, SA had to pay R384.1billion more for their imports than what they exported. Clearly showing how skewed trade between South Africa and China is. So the question remains, why is SA's government so hell bent on promoting trade with China when we pulling on the short end of the stick.
So it's clear we importing way more from China than what we are exporting. So what exactly is leading to this negative trade balance of R384billion with China, and the positive trade balance of just over R28billion with the USA?
So it's clear we importing way more from China than what we are exporting. So what exactly is leading to this negative trade balance of R384billion with China, and the positive trade balance of just over R28billion with the USA?
The bar chart below shows the trade balance per product type (from 2010 to 2016) for both China and the USA.
From this bar chart it's clearly evident what exactly China wants from South Africa. They are after South Africa's mineral produts, precious metals and products of iron and steel. And nothing else really. The rest of the products South Africa are net importers and not exporters. To highlight just how odd trade between China and South Africa is, South Africa, with all it's farming land and available land, imports vegatables from China. While we are net exporter of veggies to the USA. So if we are net exporters of veggies to the USA, why do we need to import veggies from China. Surely some form of agreement could have been struck with China for SA to offset fresh produce to the massive Chinese market? This aforementioned just reaffirms our view that China is only interested in importing particular goods from SA, and that is it's minerals and resources.
The large negative trade balance amounts for textiles and footwear also raises the fear that China is dumping cheap goods on the SA market, and thereby killing the local textile industry. Wonder if our fancy government departments called "Trade and Industry" and "Economic Development" ever looked at what importing the massive amounts of textiles and footwear is doing to the local industry? And whether trade tariffs in such imports are in place, and if so if they are effective in protecting local industries?
With Donald Trump assuming office in the USA, protectionism and manufacture locally is placed at the forefront of policy setting. With Trump looking to keep manufacturing within the USA and imposing additional taxes on certain imports under the guise of protecting local industy. While it is not always advisable to implement such policies, as retaliation policies then tend to follow from the trading partners, South Africa needs to relook it's trade with China.
Firstly to protect and keep some of SA's valuable resources within the borders of the country, or to stop it leaving our borders so quickly. Secondly to protect local industries from "dumping" practices and unfair pricing from trading partners. But based on SA's public comments on China and the USA we doubt SA would implement anything remotely resembling a policy that the USA would implement (i.e the protectionism and raising import taxes), and we doubt SA would cut off or limit the supply of our natural resouces to its friends in the east. And we exporting it by the shipload yet SA as a whole paid R384billion more to China for goods, than what it received for it's natural resources.
SA seems to be owned by China. Politicians worry about "white monoply capital" yet modern day colonialists China is busy taking over.
Firstly to protect and keep some of SA's valuable resources within the borders of the country, or to stop it leaving our borders so quickly. Secondly to protect local industries from "dumping" practices and unfair pricing from trading partners. But based on SA's public comments on China and the USA we doubt SA would implement anything remotely resembling a policy that the USA would implement (i.e the protectionism and raising import taxes), and we doubt SA would cut off or limit the supply of our natural resouces to its friends in the east. And we exporting it by the shipload yet SA as a whole paid R384billion more to China for goods, than what it received for it's natural resources.
SA seems to be owned by China. Politicians worry about "white monoply capital" yet modern day colonialists China is busy taking over.