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SA to focus on trade as global crisis recedes

Business Day, South Africa

SA to focus on trade as global crisis recedes

19 January 2010

SA is likely to focus on stimulating targeted sectors of the economy and firming up trade relations with key partners in Africa, Europe and the east this year, as growing global trade flows are expected to reflect a world emerging from recession.

SA’s new industrial policy would be presented shortly to the Cabinet, Trade and Industry Minister Rob Davies confirmed on December 29. Key parts of the “high-impact” policy would include emphasis on local procurement for infrastructure projects undertaken by parastatals such as Eskom and Transnet.

The focus of stimuli would be the manufacturing sector, green industries and agro-processing.

The Soccer World Cup will benefit more than SA’s tourism sector. In a recent interview, Derek Carstens, Fifa World Cup organising committee chief marketing officer, said SA’s global investment appeal would improve as businesses and individuals demonstrated they had the skills to host a successful event. The economy would also benefit generally from the investment in infrastructure and injection of forex from visitors.

On the international trade front, continuing discussions around an economic partnership agreement (EPA) between the Southern African Customs Union (Sacu) countries and the European Union (EU) are going to feature prominently. So far, SA, Angola (which is not a Sacu member) and Namibia have refused to sign an EPA but the other Sacu countries have signed an interim agreement. SA already has a trade and development co- operation agreement with the EU, but that could be revisited, if SA does not sign the EPA.

Davies told the Southern African Documentation and Co- operation Centre in Vienna last month that although some issues had been resolved through negotiation with the EU, others were outstanding, “and these are going to have to be resolved favourably to create the conditions for the three of us to want to sign. At the end of the day we will have to look and see what does the EPA look like once it is finally negotiated through, how will it look in comparison with the (trade and development co-operation agreement), is it worthwhile moving into the EPA?

“Those will be the kind of consideration(s) we need to make as SA.”

John Mare, a consultant on international public affairs, said it was likely SA would know its position on a trade agreement with the EU by midyear.

Negotiations with the EU had exposed the possibility of fractures within Sacu, but Mare said there could be a positive restructuring of the union as a result.

Currently, the bias in trade was against South African sales of processed agricultural goods to the EU, with EU imports to SA attracting zero tariffs but SA’s exports to the EU subject to a quota, and beyond that a heavy tariff. After the Copenhagen climate talks, when the EU pledged to help green industries in developing countries, it would have to accommodate growth of agriculture in Africa, Mare said.

Institute for Global Dialogue senior researcher Brendan Vickers said although the Southern African Development Community (Sadc) was due to launch its customs union this year — as a follow-up to the free-trade agreement of 2008 — it seemed unlikely to occur because the institutional requirements were not in place yet.

In April or May, another tripartite meeting of the CEs of the secretariats of the Common Market of Eastern and Southern Africa , East African Community and Sadc will be held towards reaching a tripartite free-trade agreement.

The goal is a tariff-free, quota- free and exemption-free, free-trade area combining the existing members of the three organisations, and to have an agreement in place by June 2011.

Vickers said Davies’s emphasis in free-trade agreements was to move away from the classical approach of market access and lower tariffs towards facilitation of trade in goods and services through eliminating nontariff barriers.

SA also wanted to change the focus of Sacu away from mainly revenue sharing to achieving a common policy towards agriculture, competition, intellectual property rights and procurement.

A global breakthrough for SA, and other developing nations, this year would be progress on the long- running Doha negotiations, which are aimed at helping poor countries prosper through trade.

Washington’s Peterson Institute for International Economics has estimated a Doha agreement could raise world gross domestic product by 300-700bn a year.

In an interview with Reuters last week, India’s chief negotiator, DK Mittal , said key issues had still not been settled and it was too early to say whether the pact would be signed by the end of this year.

Members of the World Trade Organisation (WTO) will have to agree on a formula for the deal by June this year in order to be in a position to sign an agreement by the end of the year, Mittal said . Vickers said a deal looked unlikely by the stated deadline, as the recent WTO meeting late last year focused on institutional and organisational issues, rather than Doha issues.