USITC STUDY ON U.S.-SUB-SAHARAN AFRICAN TRADE AND

UNCLAS SECTION 01 OF 02 PRETORIA 003480

SIPDIS

DEPT FOR AF/S TCRAIG; AF/EPS DKRZYWDA
USDOC FOR 4510/ITA/IEP/ANESA/OA/J DIEMOND
COMMERCE ALSO FOR HVINEYARD
TREASURY FOR JEWEL
DEPT PASS USTR FOR PCOLEMAN
DEPT PASS USITC, ATTN.: L. SCHLITT

E.O. 12958: N/A
TAGS: ETRD EAID XA SF AGOA USTR
SUBJECT: USITC STUDY ON U.S.-SUB-SAHARAN AFRICAN TRADE AND
INVESTMENT

REF: (A) State 137500, (B) Pretoria 695, (C) Pretoria 3113


1. This cable responds to Reftel A request for post's input for the
fifth annual USITC study on AGOA.


A. Major developments in host country economic, trade and/or
investment policies, or U.S. policies directly affecting host country
-------------- --------------

South Africa welcomed the visit of the U.S. Trade Representative,
Ambassador Robert B. Zoellick, in February 2004, who met with then
Trade and Industry Minister Alec Erwin to discuss the way forward on
the Doha Agenda. The Minister publicly welcomed Ambassador
Zoellick's initiative to move the negotiations forward so that 2004
would not be a lost year. The private sector worked with the
government to produce a new charter for the financial services sector
that promotes Black Economic Empowerment (BEE). Representatives of
U.S. companies in the information, communications and technology
(ICT) sector continue to meet with their South African private sector
counterparts to develop and ICT Black Economic Empowerment (BEE)
charter. The government indicated there would be more BEE charters
developed for other sectors, including agriculture. The government
announced a new program in the film industry that would allow foreign
investors to a rebate of up to 15% of their costs for qualifying
productions.


B. Developments in major regional groupings (COMESA, EC, ECOWAS,
IGAD, SACU, SADC, WAEMU, IOC, and CEMAC) (where applicable)
-------------- --------------

SACU continued to negotiate with the United States for a Free Trade
Agreement with six rounds of talks from June 2003 to June 2004. The
first two rounds were held in South Africa. The FTA negotiation
marks the first time that SACU is acting as a single body in trade
talks.


C. Updated Information on privatization efforts
-------------- --------------

Privatization efforts have been slow. In the telecommunications
sector, there has been little progress in resolving concerns over
operational control of the Second National Operator (SNO).
The government has said it will continue to implement
concessions, joint ventures, and public private
partnerships (PPPs) in the case of Eskom, Transnet and
Denel over the next five years. The Congress of South
African Trade Unions (COSATU),however, claimed that the
government has backed away from its commitment to
restructure state-owned enterprises. (See reftel C.)


D. Status of and developments in the host country's relationship
with the United States and AGOA, especially examples of AGOA-related
investment, non-traditional export developments, government reform
efforts, or regional cooperation (where applicable)
-------------- --------------

President Bush visited South Africa in July 2003 and
advanced our bilateral economic relationship. South Africa
continues to take advantage of the duty-free preferences of AGOA by
exporting in all sectors. A major U.S. clothing manufacturer, Levi
Strauss SA, began exporting its 501 jeans to the United States under
AGOA in mid-2003 using fabric imported from the Levi's textile plant
in Greensboro, North Carolina. South African clothing exporters
appreciated AGOA for enabling them to continue to export to the
United States, which the stronger rand has made more difficult. The
recently declining exports of AGOA clothing is largely due to the
strong rand.


E. Examples of U.S. trade capacity-building efforts in the host
country, and associated effects (where applicable)
-------------- --------------

Septel to follow.


2. In the Economic Update section (chapter 6, page 95) of the
USITC's Fourth Annual Report on U.S. Trade and Investment with Sub-
Saharan Africa country profile for South Africa, post suggests
replacing the first two sentences in the third paragraph (the one
beginning "The manufacturing sector, which is heavily capital-
intensive.) with the following: "The manufacturing sector, which is
heavily capital-intensive in such areas as automobile manufacturing,
heavy chemicals, and textiles, also includes the labor-intensive
apparel sub-sector, and represented approximately 20 percent of GDP.
A shortage of skilled labor continued to constrain the sector.
Although the 28% appreciation of the rand in 2003 has put pressure on
both the mining and manufacturing sectors, strong global and domestic
growth in early 2004 has ameliorated negative impacts from the
strengthening of the rand. Lower inflation and interest rates
contributed to strong consumer demand."


3. Post suggests the following paragraph to replace the fifth
paragraph in the Trade Update section (page 97): "In November
2002, the United Nations Convention on International Trade
on Endangered Species of Wild Fauna and Flora (CITES)
approved proposals from Botswana, Namibia and South Africa
for a one-time sale of ivory from national stockpiles,
sourced from culling of elephants or death by natural
causes. CITES attached conditions to the sales, which were
not to take place before May 2004. The CITES Standing
Committee met in March 2004 and determined that the
conditions had not yet been met, so the sales have not
taken place. The issue will be revisited at the October
2004 CITES Conference of Parties in Malaysia."

MILOVANOVIC