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Viewing cable 05PRETORIA4752, SOUTH AFRICA: NO SAFEGUARD PROTECTION

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Reference ID Created Released Classification Origin
05PRETORIA4752 2005-12-02 14:02 2011-08-24 01:00 UNCLASSIFIED Embassy Pretoria
This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS SECTION 01 OF 02 PRETORIA 004752 
 
SIPDIS 
 
DEPT FOR EB/TPP/ABT/EHEARTNEY, AF/EPS, AF/S 
COMMERCE FOR ITA/OTEXA/MARIA D'ANDREA COMMERCE 
ALSO FOR 4510/ITA/IEP/ANESA/OA/JDIEMOND 
DEPT PASS USTR FOR PCOLEMAN AND AHEYLIGER 
 
E.O. 12958: N/A 
TAGS: ECON ETRD KTEX SF
SUBJECT: SOUTH AFRICA: NO SAFEGUARD PROTECTION 
FOR THE TEXTILES AND APPAREL INDUSTRIES 
 
REF: (A) PRETORIA 3823 (B) PRETORIA 2238 (C) 
PRETORIA 1365 
 
1. (U) Summary.  While the South African textile 
and clothing industries complained about cheap 
imports from China, the South African government 
announced that it was not prepared to employ 
safeguards for an extended period to limit 
imports from China.  Government officials 
criticized industry for a lack of creativity, 
vision, and entrepreneurship, as well as failing 
to adjust to the demands of a changing global 
competitive environment.  Notwithstanding this 
hard line, the Minister of Trade and Industry 
indicated that he would take the matter up with 
the Chinese, work to stiffen customs inspection 
to keep out illicit imports, and support 
extending the duty credit scheme .  End summary. 
 
Chinese Imports 
--------------- 
 
2. (U) According to representatives of the 
textiles and clothing industries, cheap Chinese 
imports are the single most vexing problem that 
the industry faces in South Africa.  Helena 
Claasens, Economist at the Textile Federation of 
South Africa (Texfed), claims that Chinese 
clothing imports have grown by over 400% since 
2001, contributing to numerous factory closings 
and job losses.  Texfed supplied the following 
supporting data on South African apparel and 
textile imports from China for the period 
January 2005 to August 2005. 
                                        % of 
                                   total 
                                        imports 
Apparel: 
       Volume: 239 million units          86% 
       Value:  $R2.3 billion*             76% 
 
Household textile: 
       Volume: 19,586 ton                 60% 
       Value:  $R110 million*             49% 
 
Industrial textiles: 
       Volume: 26,993 ton                 42% 
       Value:  $697 million*              40% 
 
*Note: using rand/dollar exchange rate of 6.5. 
 
The U.S. Market 
-------------- 
 
3. (U) South African clothing manufacturers are 
also taking it on the chin when it comes to 
exports to the United States - even with AGOA 
trade preferences.  According to the latest 
United States Department of Commerce data, the 
total value of South African apparel and textile 
exports to the United States fell by 49% 
(apparel) and 5% (textiles) during the first 
nine months of 2005 compared to the same period 
in 2004.  United States imports of South African 
apparel exports totaled $108.6 million in the 
first nine months of 2004, but declined to $55.3 
million for the same period in 2005.  AGOA 
apparel also decreased from $92.1 million to 
$54.6 million during this period, representing a 
decrease of 40%. 
 
Government's View 
----------------- 
 
4. (U) Although both the textiles and clothing 
industries in South Africa have applied for 
safeguard protection in recent months, Minister 
of Trade and Industry Mandisi Mpahlwa said his 
department did not plan to invoke safeguard 
measures to limit cheap imports from China. 
Despite huge pressure from industry and labor, 
the government was not convinced that safeguards 
by themselves could save the industry.  Mpahlwa 
stressed that it was the responsibility of 
industry to save itself by adapting to global 
competition.  Nevertheless, Mpahlwa said that he 
would raise the surge in imports from China in 
government-to-government talks with that 
country.  He added that customs inspection 
should be stiffened to prevent illegal or 
underinvoiced imports, and also that his 
department had recommended that the duty credit 
scheme be extended.  The duty credit certificate 
scheme is an export-incentive programme, 
providing duty credit certificates to firms 
according to proven exports. 
 
5. (U) At a recent parliamentary hearing, 
Department of Trade and Industry (DTI) Deputy 
Director General Iqbal Sharma stated that the 
South African government wanted to foster a 
strategic and long-term relationship with China 
based on economic cooperation and common 
approaches to broader global and geopolitical 
issues.  The South African government's 
strategic long-term trade and political 
relationship with China would not be sacrificed 
for a textile and clothing industry that had 
failed to meet global competition.  Sharma 
blamed industry for having made little use of 
existing safeguards that provided what he termed 
"extensive protection and time" to restructure 
before international quotas were removed on 
January 1, 2005.  He further criticized the 
"alarming lack of creativity, entrepreneurship, 
vision, and leadership" in the clothing and 
textile industry. 
 
Government Assistance 
----------------------- 
 
6. (U) Apart from the proposed government- 
to-government talks with China, the Department 
of Trade and Industry recommended extending the 
duty credit scheme and the development of a 
customized sector program to assist industry. 
Mpahlwa also proposed improving customs 
inspection to reduce illegal or underinvoiced 
imports from China and elsewhere.  Meanwhile, 
the clothing industry is lobbying for the review 
of import tariffs on textiles, with an eye to 
reducing costs for local manufacturers. 
 
Industry Reaction 
----------------- 
 
7. (U) Igsaan Salie, President of Texfed, was 
surprised to learn that the government's view 
towards safeguards seemed to have undergone an 
about-face.  Keith Robson, Director of South 
African Clothing Industries, saw Sharma's 
remarks as "most unfortunate" in light of the 
need for a cooperative relationship between 
business and government to tackle the issue. 
The Clothing Trade Council of South Africa 
(CLOTRADE) welcomed Mpahlwa's statement on talks 
with China, and a possible solution to the surge 
of cheap Chinese imports.  Texfed's Claasens 
warned against a possible negative result from a 
review of textile import tariffs, pointing out 
that South Africa's applied rates were either 
equal or very close to their bound rates.  A 
review could conceivably lead to some tariffs 
being lowered. 
 
Comment 
------- 
 
8. (U) Although the change in the South African 
government's view towards safeguards could be 
interpreted by industry as a kick in the teeth, 
bilateral talks with China might bring the first 
real relief to an industry in distress. 
 
TEITELBAUM