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Southern Africa: On WTO and SACU-US Free Trade Negotiations

Published date:
Friday, 26 August 2005

South African President Thabo Mbeki is reportedly following up a mandate given to him by the G8 and their developing-country partners heads of State at their recent meeting in Gleneagles, Scotland, to facilitate consensus-building in regard to the current Doha round negotiations, including the contentious issue of farm-trade liberalisation ahead of the next World Trade Organisation (WTO) ministerial, scheduled for Hong Kong in December.

Little is known about the precise nature of the mandate, but it is understood that Mbeki has been requested to lead a consultation process involving the world’s most powerful leaders from the North and South, some of whose govern-ments hold the key to unblocking the current impasse in the Doha Development Agenda (DDA) negoti-ations.

At this stage, it is uncertain whether there are plans for a meeting ahead of the WTO gathering or whether other, less formal, avenues of consultation will be pursued. What is known is that the G8 leaders agreed to ‘redouble efforts’ to achieve a successful conclusion of the DDA, which they said was vital to drive growth and boost incomes across the world, and a necessary part of efforts to reduce global poverty.

In a statement released following the conclusion of the meeting, which was interrupted by the London bomb blasts of July 7, the leaders said that G8 + 5 agreed with their emerging-economy partners to “inject the necessary political momentum into the discussion to ensure an outline agreement by the WTO Hong Kong ministerial in December and a final agreement in 2006”.

“We reaffirmed our commitment to open markets more widely to trade in agricultural goods, indus-trial goods and services, and, in agriculture, to reduce trade-distort-ing domestic subsidies and eliminate all forms of export subsidies by a credible end date,” the statement read.

The heads of State also committed themselves to dealing with products of interest to least-developed coun-tries in the negotiations and to en- sure that these countries have the flexibility to decide their own eco-nomic strategies.

The statement on trade was coupled to a broader commitment to the African continent, which included a promise to boost Africa’s trading capacity, accelerate debt relief and raise levels of aid.

The issue of Mbeki’s mandate was reportedly indicated at the July Cabinet lekgotla in Tshwane, and it is understood that Trade and Industry Minister Mandisi Mpahlwa has been given responsibility to support the President.

Department of Trade and Industry (DTI) acting director-general Tshe-diso Matona confirmed that the matter had been raised, but indicated that it was too early to say for certain what the preferred consultative approach would be.

Engineering News also approached South Africa’s chief trade negotiator, Xavier Carim, for comment. He confirmed early-stage work on a possible consultation process and that the Hong Kong meeting was receiving priority attention within the department.

He also reports that South Africa is considering sending additional resources to Geneva to support the work of Ambassador Faizel Ismail once the WTO reconvenes in Sep-tember. Such a move is possible from other countries too, as the pres-sure mounts to see progress in the DDA process.

“Of all the negotiations we are currently pursuing, the Hong Kong ministerial is receiving our highest priority attention,” Carim says, admitting, though, that it remains an ‘enormous’ undertaking.

“There are still many issues on the table and many diverse interests, which makes the prospect of Hong Kong a daunting one.

“However, we believe it is possible to have a successful outcome, espe-cially if there are either early agree-ments or early signals ahead of the actual meeting.” Carim reiterated government’s oft-stated stance that agreement on agriculture would be the key to unlocking the other DDA issues and that there should be a concerted effort in Geneva to reach agreement on as many issues as possible before December.

Failing this, heads-of-State inter-vention could prove crucial in avert-ing failures such as those that took place in Cancun, Mexico, and earlier, in Seattle, US.

High-level pressure can work

Meanwhile, Matona indicates that he has had personal experience of how high-level political intervention can help unblock a trade-negotiation impasse. He pointed, for instance, to the current deadlock in free-trade-agree- ment talks between the US and the Southern African Customs Union (Sacu), which are set to be unblocked soon, primarily as a result of recent interactions between Mbeki and US President George W Bush.

The talks, which appeared to have broken down permanently, are now likely to resume in the next couple of weeks and under a far more ‘flexible’ framework.

Matona reports that the Sacu had found the US’s previous negotiating template far too restrictive, but that there has been agreement on a new model.

Carim says the talks, which should resume before the end of Septem-ber, will now focus on industrial tariffs, with the ‘difficult issues’ of services, investment, govern-ment procurement, labour and the environment having been put on an ‘exploratory track’.

It is likely that the talks will re-convene in Botswana, which had offered to host the next negotiation round before the process collapsed last year. No deadline has been set for the conclusion of the talks, with much of the pressure having been alleviated due to the fact that US lawmakers have backed moves to extend the Africa Growth and Opportunity Act (Agoa) to 2015.

However, Carim reports that the unilateral Agoa plan is based on historical trade patterns and that Sacu would still like to seek a per-manent agreement, which also takes into account possible future patterns.

Yet more talks under way

Beyond the WTO and US talks, South African trade negotiators are also closing in on a deal with the countries that make up the European Free Trade Area (Ice-land, Leichtenstein, Norway and Switzerland) and are set to begin a process for a far narrower pre-ferential trade agreement (PFA) with India.

Carim says the PFA, which is similar in design to that developed with the Mercosur countries of South America, will exclude sen-sitive products and should begin in earnest in August.

He is more circumspect about negotiations with manufacturing powerhouse China, saying that it will only engage in the process once a broad-based consultation process has been undertaken with business and labour.

At present, the National Economic Development and Labour Council is undertaking a study into the possible effects of a trade deal with China, while the DTI is continuing with its own internal sector studies.

“We feel that a lot of circum-spection is required, as a lot of con-cern is being expressed from our business sector with regard to a trade deal with China,” Carim says.

South African Institute of Inter-national Affairs trade specialist Peter Draper, who believes the relative openness and size of the Chinese economy positions it stron-ger relative to South Africa with regard to benefits from a free-trade agreement, supports this view.

South Africa will have to find new products and services to sell to China in order to take advantage of a free-trade agreement being negotiated between the two coun-tries and to stem the growing trade deficit, Draper argues.

He notes, too, that South African trade with the rest of Africa is also threatened by Chinese efforts to negotiate bilateral free-trade agree- ments with other African countries.

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