US-SACU trade deal: what’s in it for us?

Lukanyo Mnyanda | Sunday Times | Johannesburg | 26 September 2004

New US trade deal: what’s in it for us?

Very little was expected of the World Trade Organisation (WTO) talks in Cancun, Mexico last year, and there was no surprise when they collapsed. But there was also no argument that their collapse would help no one, especially not the poorer members, who could find themselves forced into unfavourable bilateral deals by the rich and powerful.

The collapse of the Cancun talks was also seen as reinforcing the unilateral instincts of the US government under President George W Bush. And the administration has already concluded a number of bilateral and regional free trade agreements since then - with questionable benefits for its partners.

Even Australia, a developed economy and a staunch supporter of US policy in Iraq, could not get concessions for its sugar. Farmers in other countries that have concluded free trade deals with the US - like Chile - probably also feel aggrieved.

Some commentators argue that the interests of huge American companies, most notably drug makers, have received too much attention, while the US has managed to leave the one factor most crucial to developing countries - agriculture - largely out of discussion outside the multilateral forums.

Chester Crocker, the US assistant secretary of State for Africa in the 1980s, said during a visit to SA this week that he does not believe the US has a strong preference for either the bilateral or multilateral approach. But, he says, it has to use all instruments at its disposal to pursue its national interests. If the WTO works, it will go along with it, but is not averse to going it alone or with a few chosen friends in bilateral deals either.

But the long-term benefits of such deals are questionable, especially when the other option is commitment to work towards a system of international trade that is more fair to developing countries.

The danger is that in bilateral talks characterised by unequal power relations, the rich will force their will on the poor and the "development" element of trade deals will be diluted to the point of being meaningless. This is especially so when dealing with a country like the US that believes more trade, on its own, equals more development.

That is why attempts to get the Doha development round back on track are important.

But for now, bilateral or regional free trade deals like the one the US is negotiating with the Southern African Customs Union (Sacu), are likely to continue to be the main form of engagement as the WTO continues to be bogged down by its members’ diverse set of interests and ambitions.

Even these talks face similar obstacles with US demands seemingly out of line with the region’s development goals. Black economic empowerment in SA, for example, has emerged as a complicating issue - Pretoria’s use of procurement policy to redistribute wealth to black-owned business is apparently out of line with the WTO rule about a level playing field.

With the conclusion of the talks likely to necessitate legislative changes in areas seen as key to SA and Sacu’s development goals, one might ask why they are even bothering with the talks.

As things stand, Sacu exporters already have favourable access to the US market, with about 95% of their goods having duty-free access. The region has a comfortable and growing trade surplus with the US, mainly on the back of the African Growth and Opportunity Act (Agoa), which has liberalised access to US markets for 37 African countries.

According to latest SA Chamber of Business (Sacob) figures, SA’s exports to the US grew 1.4% in July compared to the same period last year, and are 23% higher for the year to date. SA’s trade surplus was 14% higher for the month and increased 28% for the year to date.

Sacu members are by far the biggest beneficiaries of Agoa, and not much has been expected from them in return. With the US expecting the deal to be as inclusive as possible, covering issues like trade on services where Sacu does not even have common policies, it is worth asking why they even bothered pursuing the talks. A free trade deal with the US seemingly holds promises of very few benefits they do not already have.

The answer probably lies in the nature of Sacu’s existing preferential access to US markets - it is unilateral and not governed by a set of binding rules, meaning it could potentially be taken away with little or no notice. And the Americans have shown themselves not to be averse to using their economic clout to get their way in other spheres - such as their so-called war on terror.

A country like SA that values its right to formulate its own policies on key issues such as the war on Iraq probably does not want to be beholden to the generosity of the US. Very few countries would be willing to voluntarily put themselves in that position and that is why, for developing countries at least, a successful conclusion of the Doha round, irrespective of what happens with bilateral free trade deals, remains the top prize.

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