R 181300Z DEC 08
FM AMEMBASSY MBABANE
TO SECSTATE WASHDC 3361
INFO SOUTHERN AF DEVELOPMENT COMMUNITY

UNCLAS MBABANE 000389 
 
 
DEPT FOR AF/S (MHARRIS); AF/EPS; EB/CBA; EB/TPP; DEPT PASS TO 
USTR FOR WJACKSON 
 
E.O. 12958: N/A 
TAGS: ETRD ECON EFIN WZ
SUBJECT: COMESA GIVES SWAZILAND TIME TO MANEUVER 
 
¶1. SUMMARY. The Government of the Kingdom of Swaziland's (GKOS) 
trade office has secured a two year extension of its Common Market 
for Eastern and Southern Africa (COMESA) derogation. The derogation 
gives Swazi goods preferential price treatment on a non-reciprocal 
basis. COMESA's intention to create a customs union in 2009 would 
have forced Swaziland to choose between the Southern Africa Customs 
Union (SACU) or COMESA membership. The derogation is subject to 
review in 12 months. END OF SUMMARY. 
 
¶2. On December 10, GKOS trade officials confirmed to Emboff that 
SACU allowed Swaziland to negotiate with COMESA, and COMESA agreed 
to a two year extension of Swaziland's derogation, but this is 
subject to review after 12 months. Since 2001, Swaziland has enjoyed 
a non-reciprocal COMESA derogation, but COMESA's intention to 
establish a customs union in 2009 might have forced Swaziland to 
choose between COMESA or SACU membership. Trade Promotion Unit 
official Mluleki Dlamini said Swaziland wants to open bilateral 
trade negotiations with East African countries (EAC), as they are 
Swaziland's primary trading partners under COMESA.  Mr. Dlamini 
hopes to begin trade negotiations with these primary East African 
trading partners within two years. Swaziland exports mainly sugar, 
drink concentrate, refrigerators, freezers, and zippers to the 
COMESA market. 
 
TRADE OPTIONS 
 
¶3.  In June, the USAID Southern Africa Trade Hub conducted an 
assessment of Swaziland's COMESA membership. It found COMESA makes 
up less than seven percent of Swaziland's total exports to the world 
and contributes to about 5.25 percent of Swaziland's GDP, while SACU 
membership provides for 60 percent of total government revenue and 
17 percent of GDP. The assessment also found that for some 
industries, such as Conco (a Coca-Cola subsidiary) and freezer and 
zipper manufacturers, COMESA membership is more beneficial. The 
study found that losing the COMESA derogation should not have a 
major impact Swazi economy because COMESA is a relatively small 
portion of total exports, and Swaziland's access to Southern African 
Development Community and SACU trade protocol preferential pricing 
should mitigate the impact. 
 
¶4. COMMENT:  Decreasing EU preferential prices in sugar, increasing 
competition in other markets, and the threat of fewer exports to its 
neighbor South Africa, due to the global economic downturn, makes 
Swaziland's need to actively begin trade negotiations with EAC more 
pressing. Unfortunately, Swaziland's trade policy is usually 
reactive instead of proactive and, with ministry re-alignments 
taking place under the new Swazi government, efforts to begin 
negotiations in a timely manner will be hindered. 
 
 
PARKER