339. Paper Prepared in the Department of State1
Economic Impact on South Africa of a Termination of Eximbank Activities in South Africa
We judge that the direct economic impact upon South Africa of a termination of Eximbank facilities for trade with South Africa would not be significant, aside from limited price increases, provided that South Africa’s other trading partners continued to offer the equivalent of Eximbank facilities to their nationals. The Germans, French, and British all have significantly larger Eximbank type-exposure in South Africa. Eximbank facilities support only a small proportion of U.S. exports to South Africa. For example, in 1977 Eximbank authorizations for South Africa were about $115 million, while U.S. exports to South Africa totalled $1.1 billion. (Comparable figures for 1976 were $1.4 billion in U.S. exports and about $200 million in Eximbank authorizations).
We believe that if Eximbank facilities were terminated U.S. exports to South Africa would decline somewhat, but we cannot quantify this loss. The U.S. share of the South African import market has remained [Page 1034] generally in the 16–18 percent range since 1965. Europe and Japan stand ready to provide virtually all of South Africa’s needed imports.
Private banks would note Eximbank’s termination of business with South Africa. Both they and foreign direct investors might feel less optimistic about South Africa’s balance of payments.
Prohibition of Eximbank activities would be the first significant economic measure which we have taken against South Africa since Eximbank loans to South Africa were prohibited in 1964. Such an action would have a political and psychological effect on South Africa underscoring U.S. concern over the trend of developments there. It would also represent a tangible action taken to distance ourselves from a government which has so far not indicated publicly or privately that it intends to end apartheid or undertake significant movement toward full political participation of all its citizens in the affairs of South Africa. Prohibition by Congressional action might well have a greater political and psychological impact upon the South African Government because of the belief widely held in South African Government circles that Administration policy vis-a-vis South Africa is not supported by the majority of the American people.
We believe that the most likely South African Government response to an Eximbank cut off, whether by Administrative or legislative action, would be increased criticism of the Administration for pursuing a policy of “selective morality” i.e., punishing South Africa while allegedly overlooking serious human rights violations in other countries. The South African Government may consider such an action as a harbinger of more comprehensive economic sanctions in the future and take accelerated measures to reduce South African dependence on imports. If a legislatively imposed prohibition passes Congress before the Namibian and Rhodesian issues are resolved, it could make it more difficult for us to secure the South African Government’s cooperation in achieving satisfactory solutions to the Namibian and Rhodesian problems. We doubt that the cut off of Eximbank facilities would lead South African Government to take serious retaliatory measures such as prohibiting the repatriation of earnings of American firms in South Africa, defaulting on loans (including loans guaranteed by Eximbank) or restricting export to the U.S. of minerals important to the functioning of U.S. industry such as chrome and platinum. Such retaliatory measures would seriously erode investor confidence in South Africa and would complicate even more the government’s efforts to attract foreign investment and to boost exports. However, we cannot entirely rule out South African retaliatory measures since the government for reasons of national pride might decide to take some action against the U.S.
- Source: Carter Library, National Security Affairs, Brzezinski Material, Country File, Box 70, South Africa: 1–5/78. Confidential. Tarnoff sent the paper to Brzezinski under an April 22 covering memorandum, in which he wrote: “Attached is a paper prepared in response to a request from the NSC for an analysis of the economic impact on South Africa and possible responses by that country to a termination of Eximbank facilities for trade with South Africa.” In an April 20 memorandum to Tarnoff, Dodson requested a “brief report on the predicted economic impact on South Africa of termination of EX–IM guarantees and insurance exposure.” (Ibid.)↩