US begins latest round of free trade talks with SACU less hopeful about year-end deal

Intern’l Trade Reporter | 6 May 2004

U.S. Begins Latest Round of Free Trade Talks
With SACU Less Hopeful About Year-End Deal

By Gary G. Yerkey

The United States and the five members of the Southern African Customs Union (SACU) May 4 began four days of new talks aimed at concluding a free trade agreement by the end of this year, with some U.S. officials now saying, however, that the year-end deadline for completing the talks will likely be missed.

U.S. officials who asked not to be identified said that the United States for the first time will be submitting proposals dealing with all aspects of the negotiations, except intellectual property rights, in this latest round of talks—the fifth—which are being held in Lesotho.

The officials said that another round of negotiations has been scheduled for June 22-27 in Atlanta, Ga., to be followed by seventh and eighth rounds in Botswana and Swaziland and a final "super-round" in Washington, D.C., on Dec. 8.

But U.S. officials said that serious concerns continue to exist over whether the SACU member countries—Botswana, Lesotho, Namibia, Swaziland, and South Africa—remain committed to concluding a comprehensive market-opening deal that would be acceptable to the United States.

Further complicating the talks, the officials said, will be the Cabinet reshuffle that took place in South Africa following national elections there on April 14.

U.S. government and industry sources said that South Africa’s new trade minister—Mandisi Mpahlwa—remains a relatively unknown quantity despite having served as deputy finance minister from 1999 to today.

Mpahlwa has replaced Alec Erwin, who has moved on to become minister of public enterprises—although he will retain responsibility for issues related to the World Trade Organization.

An outspoken advocate of developing-country interests, particularly at the WTO, Erwin has served as South Africa’s trade minister since 1996.

He has also been mentioned as a possible successor to WTO Director-General Supachai Panitchpakdi, whose three-year term will expire at the end of August 2005.

J. Daniel O’Flaherty, executive director of the U.S.-South African Business Council, said that the U.S.-SACU free trade talks, which were launched in January 2003, have entered a critical stage. But he said that many questions remain over whether South Africa, which is by far the largest and most highly developed economy among the SACU member states, will be aggressive or not in pursuing the negotiations over the next few months.

Black Empowerment Law

O’Flaherty said that questions also remain over how South Africa’s new "black empowerment" law could impact the talks.

He said that the new South African government, which took office on April 29, has yet to make clear precisely how it plans to implement the measure.

U.S. negotiators in the U.S.-SACU talks—led by Florizelle B. Liser, assistant U.S. trade representative for Africa—will be seeking to clarify the new South African government’s intentions with respect to the black empowerment law as well as trade policy and priorities in general, O’Flaherty said.

Other industry sources said that the African National Congress’ overwhelming victory in the April 29 parliamentary elections, in fact, could "embolden" the new South African government to "push harder" to ensure strict implementation of the black empowerment law, which, among other things, calls on companies operating in South Africa and seeking government contracts to voluntarily turn over 25 percent of their equity to black partners and to set specific requirements for black participation on their boards of directors.

Talks Bogged Down

The sources said that the U.S.-SACU talks—even without an "emboldened" ANC in South Africa—have gotten off to a remarkably slow start and could bog down over the next few months, particularly over contentious issues of notable importance to U.S. business such as investment, government procurement, market access, and intellectual property rights.

"These talks should be much further along at this stage than they are," one industry source said. "Their future could depend to a large extent on what priority if any the new government in South Africa gives them."

The source said that South Africa may prefer instead to allocate a greater share of its scarce negotiating resources to free trade talks with fellow developing countries such as Brazil or China.

Other sources said that, in the meantime, U.S. negotiators in the U.S.-SACU free trade talks will seek to ensure that the South Africa’s implementation of its new black empowerment law does not conflict with what historically have been considered standard provisions of any basic trade agreement, which generally rule out mandating equity and board participation requirements.

U.S. officials have said that working groups have been set up to deal with various aspects of the negotiations, including market access for agricultural and nonagricultural products, technical barriers to trade, customs procedures, labor rights, environmental protection, sanitary and phytosanitary measures, investment, intellectual property rights, services, electronic commerce, and dispute settlement.

Lead U.S. negotiator Liser said at a conference sponsored by the American Enterprise Institute April 13 that the Bush administration wants the U.S.-SACU FTA to be a model for free trade agreements with other sub-Saharan African nations, covering a wide range of issues).

"We’re not going to leave any stone unturned," Liser said. End of article graphic

© 2004, The Bureau of National Affairs, Inc.

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