South African President Jacob Zuma and Chinese President Hu Jintao on August 24 signed a bilateral agreement that calls for a new “comprehensive strategic partnership” and increased trade, investment, and other “soft” improvements in cooperation, including education and cultural exchange, between the two countries. South Africa, like many of China’s raw material-rich trading partners, faces a staggering trade imbalance with China that stems from China’s export of manufactured industrial and consumer goods and its heavy importation of non-value added minerals and other raw materials into China. Some sources estimate that South Africa’s trade deficit with China is now approaching close to US$3 billion.

Just as in the United States, South African domestic industries, including producers of automobile tires, have filed in recent years numerous antidumping complaints with South African government authorities, complaining that various imported products from China are being sold at unfairly low prices and are injuring domestic South African companies. In June, a South African court overturned a 2007 ruling by South Africa’s trade ministry that initially had blocked the imposition of antidumping duties on imported tires from China. The court has asked the trade ministry to re-visit the 2007 dumping claim and issue a new ruling by October. As a result of the court decision, and pending a new ruling from South Africa’s trade ministry, antidumping duties now could be imposed on tire imports from China only months after the countries agreed to enter into a new “strategic partnership” on trade, investment and other issues.

In light of South Africa’s large trade deficit with China and given the concern among domestic South African industries that Chinese import pressure will only get worse, this week’s strategic agreement aims to attract Chinese investment into South Africa in order to mitigate import pressure and to chip away at a growing imbalance in trade. As part of the agreement reached this week, South African and Chinese negotiators announced several large investment deals, including planned Chinese investment in South Africa’s mining, nuclear power and transportation infrastructure sectors. Although increased Chinese investment in South Africa could work to reduce trade friction, and could bring Chinese knowhow and advanced technology to South Africa, it is unlikely that Chinese import pressure on those South African industries not benefiting from Chinese direct investment will diminish enough to keep antidumping and other unfair trade claims from undermining the spirit of the new “strategic partnership” agreement.

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