VZCZCXRO2706
PP RUEHAG RUEHAP RUEHDE RUEHDF RUEHGI RUEHHM RUEHLZ RUEHMA RUEHMR
RUEHPA RUEHPB RUEHRN
DE RUEHSA #3247/01 2191416
ZNR UUUUU ZZH
P 071416Z AUG 06
FM AMEMBASSY PRETORIA
TO RUEHC/SECSTATE WASHDC PRIORITY 4970
INFO RUCNWTO/WORLD TRADE ORGANIZATION COLLECTIVE
RUEHTN/AMCONSUL CAPE TOWN 3203
RUEHDU/AMCONSUL DURBAN 8029
RUEHJO/AMCONSUL JOHANNESBURG 5012
RUEHRC/DEPT OF AGRICULTURE WASHDC
RUCPDC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 02 PRETORIA 003247 
 
SIPDIS 
 
SIPDIS 
 
DEPT PLEASE PASS USTR 
USDOC FOR 4510/ITA/IEP/ANESA/OA/DIEMOND 
 
E.O. 12958: N/A 
TAGS: ETRD EAGR ECON WTO SF
SUBJECT: SOUTH AFRICA TO USE DOHA DELAY TO NEGOTIATE BILATERAL 
AGREEMENTS 
 
PRETORIA 00003247  001.2 OF 002 
 
 
¶1. (U) Summary. Xavier Carim, chief trade negotiator for South 
Africa, said in Johannesburg August 2 that South Africa would use 
the opportunity provided by the stalled Doha round to intensify 
trade talks with a variety of partners, including SACU, India, and 
to make preliminary assessments of a trade deal with China.  It 
would also improve neglected aspects of its economic policy such as 
services and intellectual property rights enforcement.  End 
Summary. 
 
---------- 
Background 
---------- 
 
¶2. (U) The South African Institute of International Affairs (SAIIA), 
part of Johannesburg's University of the Witwatersrand, held a 
seminar entitled "South African Trade Strategy: Rearranging the Deck 
Chairs?" on August 2.  Some 65 people attended from government 
agencies, diplomatic missions, and the university to hear 
presentations by four speakers.  Xavier Carim, the chief South 
African trade negotiator, spoke on the effects that the Doha Round's 
difficulties would have on South African policy.  Dr. Lawrence 
Edwards of the University of Cape Town expounded on the scope for 
unilateral trade reform in South Africa.  Peter Draper of SAIIA 
talked about the country's free trade negotiation agenda.  Finally, 
Mark Pearson, the director of the UK's Regional Trade Facilitation 
Programme, gave a short presentation on the importance of southern 
and eastern Africa to South Africa's trade policy.  Questions 
following each presentation varied, but the audience was uniformly 
sympathetic to neoliberal economic theory, favoring free trade over 
protectionism in principle. 
 
--------------------------------------------- -------- 
Xavier Carim: SA will build bilateral trade relations 
--------------------------------------------- -------- 
 
¶3. (U) Xavier Carim stressed that historical experience indicates 
that the Doha talks will resume eventually.  Fundamentally, all 
countries have an interest in reviving talks, and nobody wants to 
lose the considerable progress already made through negotiations. 
He expects more clarity about the status of talks by September, when 
the WTO reconvenes after its August recess, but talks are unlikely 
to reopen before the American elections.  In the next 5-8 months the 
U.S. legislature may change dramatically, Congress will discuss 
extending fast-track trade negotiating powers, and the U.S. Farm 
Bill may be changed or extended.  If conditions in the U.S. are not 
amenable to a resumption of talks by next spring, Carim stated that 
the WTO might be forced to wait for the next U.S. administration in 
¶2009. 
 
¶4. (U) Dismissing Pascal Lamy's concept of a "triangle of issues" 
holding up Doha (U.S. agricultural subsidies, EU market access, and 
developing countries' industrial tariffs), Carim said that 
agriculture is the single issue that will decide the future of the 
Doha round.  The industrial tariffs were not a topic of discussion 
in the last days of negotiation.  According to Carim, the final 
proposals made by the EU and U.S. are "an inversion" of the original 
Doha rhetoric, which recognized that developed states must accept 
less than full reciprocity from poorer countries for the sake of 
development.  Many concessions will have to come from the developed 
states to make an agreement worthwhile for G-20 and NAMA-11 states. 
Carim also defended high tariffs in targeted economic sectors, 
claiming that no late-industrializing state has ever built a 
competitive export economy without government intervention. 
 
¶5. (U) The Department of Trade and Industry (DTI) anticipates an 
opportunity to work with the WTO on several technical issues before 
the main talks recommence, particularly on antidumping measures. 
Carim also expressed hope that some WTO subsidiary bodies, 
particularly the dispute resolution mechanism, would enjoy some 
progress as member states would be able to devote attention to 
issues marginalized by the greater priorities of Doha.  The pause in 
negotiations may also give South Africa time to stop "playing 
catch-up" on intellectual property, services, and other neglected 
portions of foreign trade policy and resolve ambiguities in its 
development strategy.  The DTI also plans to finalize its industrial 
development strategy before talks resume, clarifying South Africa's 
priorities for negotiations.  The Cabinet rejected a draft 
industrial policy last week, but declared that the plan's flaws are 
relatively minor. 
 
¶6. (U) South Africa will also use the WTO lull to pursue a variety 
of regional and bilateral trade agreements.  In southern Africa, 
Carim pledged to build common cause within SACU before Doha talks 
 
PRETORIA 00003247  002.2 OF 002 
 
 
resume and resolve trade issues within SADC.  Carim emphasized that 
South Africa must pursue initiatives through SADC, SACU, and COMESA; 
no one body is strong enough yet for South Africa to abandon the 
others.  However, he also admitted that a country cannot belong to 
more than one customs union; some consolidation or harmonization 
among the trade blocs is inevitable.  SACU may also enter into 
negotiations with the EAC.  Outside of Africa, South Africa will 
seek to deepen relationships with the EU through Economic 
Partnership Agreement negotiations.  India is another possible 
partner for a bilateral deal, though no dates are set for talks. 
Carim also stated that South Africa is preparing for negotiations 
with China, though a great deal of internal assessment would be 
necessary before negotiations could begin.  Economic cooperation 
will be a major focus of talks, rather than traditional free trade 
or preferential trade areas. 
 
-------------------------------------------- 
Lawrence Edwards: Unilaterally lower tariffs 
-------------------------------------------- 
 
¶7. (U) Dr. Lawrence Edwards, of the University of Cape Town, spoke 
on the benefits of unilateral trade reform.  South Africa has a 
complex tariff structure, with 14% of tariff lines peaking over 30%. 
 It is also a world leader in business complaints, largely due to 
its import/export policies.  Although market access is important for 
manufacturers, Edwards claimed that lower tariffs on intermediate 
goods could be more valuable.  In particular, research indicates 
that agriculture and textiles, two heavily-protected sectors of the 
SA economy, are uncompetitive primarily because expensive 
tariff-protected inputs raise the cost of production.  While lower 
tariffs would probably raise GDP, he also acknowledged that the net 
effect on jobs is unclear and that employment losses would primarily 
hit vulnerable unskilled and semi-skilled workers.  Adjustment 
policies would be necessary to offset negative social effects. 
 
--------------------------------------------- ------ 
Peter Draper: Protectionist policies are failing SA 
--------------------------------------------- ------ 
 
¶8. (U) Peter Draper is a Research Fellow for SAIIA's "Development 
Through Trade" program.  His speech stressed that South Africa's 
trade strategy, focused largely upon maintaining high tariffs to 
protect key sectors, was not an effective way to deal with the 
country's problems.  South Africa, he said, assumed market failure 
in building its sector strategies, thereby inviting state capture, 
inefficiency, higher prices, and a host of other economic evils.  He 
was particularly critical of South Africa's Motor Industry 
Development Program (MIDP) (Pretoria 3203.)  Although the MIDP has 
certainly attracted investment, its effects on employment are 
unimpressive, the sector's trade deficit is growing, vehicle prices 
are certainly higher, and South African transport costs are higher 
than they need be, making all other business less competitive by 
extension. 
 
--------------------------------------------- ------- 
Mark Pearson: SADC is "an afterthought" in SA policy 
--------------------------------------------- ------- 
 
¶9. (U) Mark Pearson is the director of a UK development agency for 
southern Africa, the Regional Trade Facilitation Program.  His 
presentation on the place of southern and eastern Africa among South 
Africa's trade priorities concluded that Africa was relatively minor 
market for South Africa, though its trade was highly significant to 
the region's other countries.  Zambia and Malawi, for instance, 
obtain 40% of their imports from South Africa.  Although 19% of 
South African exports go to southern Africa, the economic status of 
its neighbors makes major expansion unlikely.  Furthermore, South 
Africa is a sufficiently major producer in the African context to 
easily discount bilateral trade agreements with other African 
states.  In general, major South African companies will move into 
promising markets with or without a regional trade agreement, 
opening the doors for other South African businesses.  The effect of 
SADC on international trade is marginal, according to Pearson. 
Seventy percent of interstate trade within SADC stems from regional 
trade agreements predating SADC or negotiated outside of its 
framework and all but two of its members are presently negotiating 
other customs union agreements. 
BOST