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Sacu-US to pursue scaled-back trade talks after FTA process ceases

Mining Weekly (South Africa) | 21 November 2006

Sacu-US to pursue scaled-back trade talks after FTA process ceases

The South African Customs Unions (Sacu) has formally accepted an offer made by the US government to progress a so-called trade and investment cooperation agreement (Tica), following the breakdown of the more ambitious free-trade agreement (FTA) talks earlier in the year.

South Africa’s chief negotiator Xavier Carim tells Engineering News that it became apparent in about April that the Sacu-US FTA process would not meet the US’s internal target of having all its trade negotiations at, or near, conclusion by the end of 2006. This deadline was itself guided by the fact that the Trade Promotion Authority (TPA) - a mandate given to the administration by Congress allowing for the negotiation of trade deals that will either be approved or disapproved, but not amended - would expire in June 2007, unless extended by the new Democratic Party-controlled Congress.

Carim admits that the FTA talks were always difficult given their plurilateral nature, as well as the fact that the American negotiators were constrained by what has been called a ’template-like’ framework. The South Africa negotiators have described the US approach as inflexible and lacking a developmental impetus, while the US have countered that its approach is more ambitious. The Americans also deny that their framework is inflexible and suggest that deals with other developing countries such as Morocco, Mexico, Bahrain and a host of others, are indicative that such deals can have positive spin-offs for development.

Pragmatism rules

Be that as it may, both Sacu and the US have agreed to a pragmatic route, given the timeframe difficulties and have, therefore, scaled back the negotiation framework from an all-encompassing FTA to one that seeks partial deals on subjects that do not require sanction by the lawmakers.

The new discussions, proposed by the US earlier this year, will be less formalistic and will focus on trade-and-investment-promotion activities. In addition, they will seek to advance exploratory discussions on some of the key FTA stumbling blocks.

The idea, Carim explains, would be to arm trade negotiators from both sides with the wherewithal to accelerate FTA discussions again, should Congress agree to extend the TPA. But this would also depend on the nature and constraints placed on any extension.

So, while changes to the rules of trade, such as tariffs or the investment regimes, will not be entertained, deals on other trade-facilitation issues, such as improved customs mechanisms and standards alignment, will be sought. In addition, it is possible that trade networking events could be organised for Sacu and US businesses, with a number of American firms said to be extremely interested in South Africa’s R400-billion-plus public-infrastructure investment programme. In fact, the US Trade and Development Agency recently hosted a conference in Midrand, attended by a number of US firms, which gave specific attention to Eskom’s R97-billion power investment.

“The idea is to continue to strengthen contacts and increase trade and investment opportunities between Sacu and the US,” Carim explains, adding that participants will also seek common ground on FTA-type issues in a bid to create the framework for the fast-tracking of any possible future talks.

“We will not, however, entertain any agreements that require ratification by either Congress or the various Parliaments within Sacu,” Carim says.

Carim agrees that the rationale for a permanent trade deal with the US, currently governed by the generous, but unilateral, discretionary and temporary, Africa Growth and Opportunity Act (Agoa), remains as Agoa is set to expire in 2015.

But the US is also believed to be keen to pursue a deal that improves access to the region, particularly given that European Union companies are beginning to receive preferential access to Sacu as the Sacu-EU FTA matures. For this reason, the US is looking to keep trade discussions simmering through Tica.

The Americans are apparently keen for the negotiations to interrogate the entire subset of FTA issues and assess whether there is desirability to progress talks on any or some.

Other negotiating priorities

Carim says that Sacu takes the US offer seriously, but agrees that both sides have other negotiating priorities, not least being the multilateral Doha Development Agenda, which are currently suspended.

Carim believes there will be greater clarity on whether progress is possible after the conclusion of a General Council of the World Trade Organisation (WTO) in December and when the new US Congress sits early in 2007.

He adds that, in the meantime, South Africa is directing its energies towards laying the foundation for the negotiations of a preferential trade agreement with India, similar to the one concluded with Mercosur ; as well as to ensuring aligning Sacu’s FTA with the EU to the Economic Partnership Agreement process currently being pursed by the EU with the Southern African Development Community.

Negotiations with India should begin early in 2007.

On the contentious issue of trade relations with China, Carim says far more research and consultation is needed before proceeding with any bilateral talks. He argues the immediate issues in the relationship with China have been dealt with under a recently concluded memorandum of understanding, which seeks to set limits on clothing and textile imports from China so as to protect the local industry from collapse. Importers now require Special Import Permit Certificates, specifying the quotas that each registered importer will receive, and a committee to monitor the implementation of the quotas is being established.

 source: Mining Weekly