SOUTH AFRICA: CHIEF NEGOTIATOR ADDRESSES WTO ISSUES

UNCLAS SECTION 01 OF 03 PRETORIA 004756 SIPDIS SENSITIVE DEPT FOR AF/S, AF/EPS, EB/TPP/MTA AND BTA DEPT PLEASE PASS TO USTR COMMERCE FOR ITA/JDIEMOND USDA FOR FAS/ETERPSTRA, KROBERTS, AND FAS/ITP E.O. 12958: N/A TAGS: ETRD EAGR ECON SF SUBJECT: SOUTH AFRICA: CHIEF NEGOTIATOR ADDRESSES WTO ISSUES REF: A. PRETORIA 4607 ¶B. STATE 211956 ¶C. STATE 210829 ¶D. STATE 209236 ¶E. STATE 208981 ¶F. STATE 207068 ¶G. STATE 204611 ¶H. STATE 199861 ¶I. STATE 199791 ¶1. (SBU) Summary. Chief Trade Negotiator Xavier Carim told Econoff that the United States' proposal on agriculture had helped it reclaim the moral high ground in WTO negotiations and put the EU on the defensive. Nevertheless, analysis indicated that the United States could actually increase its level of domestic subsidies under the proposal. Carim assured Econoff that despite lowered expectations for the Hong Kong Ministerial, South Africa was continuing to apply pressure on the EU to improve its agricultural offer. Carim lamented the fact that South Africa had not yet submitted a services offer, but said that he expected it to be submitted soon. On services negotiations, Carim said that the discussion of quantitative targets for developing countries was "worrying" and "threatened to change the framework of GATS negotiations." He also said that South Africa was uncomfortable with the line that LDCs should not be looking to the developed countries for greater market access, but rather to the larger developing countries, such as South Africa. He said that South Africa and other developing countries wanted to "reclaim the aspect of development" in the Doha Round. End Summary. ¶2. (SBU) South Africa's Chief Director for Multilateral Trade Negotiations, Xavier Carim, sat down with Econoff for an hour and forty-five minutes on December 1 to discuss a number of issues related to Doha Round negotiations and talking points from the United States. Carim opened by saying that while there was much in agreement between South Africa and the United States, there were "a couple of differences." He particularly wanted to highlight his interest in finalizing a TRIPS and Medicines deliverable for the Hong Kong Ministerial, his displeasure at U.S. and EU efforts to sow dissension among developing countries, and the internal difficulties that South Africa had in submitting its services offer. When it came to geographical indications, Carim said that South Africa was "on side" with the United States. Agriculture -------------- ¶3. (SBU) Carim told Econoff that the United States' proposal on agriculture had clearly helped it to reclaim the moral high ground in WTO negotiations. There was the sense, he said, that the United States had lost the high ground when the 2002 Farm Bill increased subsidies, brought back deficiency loans, and instituted counter cyclical payments. A joint U.S.-EU paper on agriculture followed that, according to Carim, "led to the failure in Cancun." In contrast, the United States' October proposal, setting forth specific figures, was a major move. Thus far, Carim thought that the United States had played a constructive role in negotiations, and had managed to re-establish negotiating credibility. ¶4. (SBU) Carim said that South Africa viewed the U.S. proposal on agriculture in the context of ongoing negotiations. While analysis indicated that the United States could actually increase its level of domestic subsidies under the U.S. proposal, he said, "We knew that under the July Framework counter cyclical payments could be moved into the Blue Box." He added, "We also know that counter cyclical payments are not the same as set asides." There was more negotiating to do, including on definitions and box criteria. ¶5. (SBU) Carim said that he understood that for the United States to eliminate export subsidies and reduce domestic support, it needed other countries to offer greater market access. However, the only defense that developing countries had against subsidized imports came in the form of tariffs. The question was which side should move first? Carim felt that developed countries had to move first by declaring reductions in subsidies. Only then could developing countries determine how much they could reduce tariffs. ¶6. (SBU) Carim noted that the EU was clearly on the defensive after the United States submitted its proposal on agriculture. The EU's offer of October 28 simply did not measure up. He assured Econoff that South Africa was continuing to apply pressure on the EU to improve its offer. He noted strong statements recently made by the Africa Group in Arusha, the Africa Caribbean and Pacific Group in Brussels, and Commonwealth Heads of State in Malta. He said that South African ministers were also aware of the need to press the EU at the political level, and that he and his colleagues continued to press EU counterparts at different levels. ¶7. (SBU) Carim did not think that lowering expectations for the Hong Kong Ministerial necessarily reduced the pressure on the EU to submit a better offer on agriculture. That said, the notion of lower expectations for Hong Kong did not make South Africa happy. It was a reality, however. Services -------------- ¶8. (SBU) Carim said that he had the opportunity to discuss services in passing with William Jackson of USTR at the meeting of the Africa Group in Arusha the previous week. He added that Jackson's presentation in Arusha on how the WTO related to Africa was very useful. Carim lamented the fact that South Africa had not yet submitted its services offer, but said that he continued to expect it would be submitted soon. All the substantive work had been completed. What remained was "procedural, a political assessment." ¶9. (SBU) Carim wanted to respond to a recent statement made by a USTR official to the effect that one of the biggest disappointments so far in the Doha Round was South Africa's failure to submit a services offer. Carim explained that preparing the offer had been a difficult process internally for South Africa. There had not been a good domestic understanding of trade-in-services nor of the WTO. There was no statistical base upon which to structure an analysis. He felt that there was a lot more work for him to do at home in this area, and noted that local industry was "a long way" from producing the type of sophisticated analysis that the U.S. Coalition of Service Industries (CSI) was capable of. (Note: Carim said that CSI had requested a meeting with him in Hong Kong and that he would try.) Carim added that there was also the notion that now was not necessarily the time to submit a services offer, given the inadequacy of EU offer on agriculture and the fact that other countries had not stepped up to the plate. ¶10. (SBU) Carim said that the discussion of quantitative targets for developing countries was "worrying" and "threatened to change the framework of GATS negotiations." He said South Africa had enough difficulty in putting its initial offer on the table, and could not now try to match quantitative targets. He pointed out that compared to other countries, South Africa had already made substantial commitments in the Uruguay Round. Fortunately from his perspective, he believed that the offending reference to quantitative targets had been removed from papers prepared for the Hong Kong Ministerial. Development Dimension -------------- ¶11. (SBU) Carim said that he thought that the development dimension of the round was getting lost in negotiating details and the immediacy of certain issues. For this reason, South Africa and other developing countries wanted to "reclaim the aspect of development" in the Doha Round. In fact, this was the theme of a recent speech by Deputy Minister for Trade and Industry Dr. Rob Davies (Septel). ¶12. (SBU) Carim said that while development was the mandate of the Doha Round, over time different approaches and concepts had eroded it. He felt that certain key points needed to be reinserted into the dialogue. Doha should provide better market access for developing countries across the board. Critical to achieving this was the removal of trade distortions in agricultural through the elimination of export subsidies and the reduction of domestic subsidies. To increase developing country access to nonagricultural markets, tariff peaks and tariff escalations on products of export interest to developing countries needed to be eliminated or reduced. ¶13. (SBU) He added that the EU was acting as if it were time to negotiate on nonagricultural market access and services issues. However, EU demands for nonagricultural market access were excessive, hardly warranted by its proposal on agriculture. Carim said that the EU's approach was a "recipe for an antidevelopment round." He believed that a negotiating framework was needed to achieve a market outcome. Along these lines, developing countries had distributed a paper in Geneva on bringing back the development agenda. Divide and Conquer -------------- ¶14. (SBU) Carim told Econoff that one point that made South Africa uncomfortable was the line that LDCs should not be looking to developed countries to make greater tariff cuts, but rather to large developing countries, such as South Africa. He mentioned the AGOA meeting in Senegal, where the United States was trying to align itself with subSaharan African countries, and the effort by the EU and the United States to argue that further reductions in developed country tariffs would only erode LDC trade preferences. He said that this sort of talk was part of an effort to shift the focus away from the major powers and toward the advanced developing countries. "It created divisions among developing countries and confused the message," he said. "The ACP shouldn't put pressure on (the larger developing countries) not to lose trade preferences." ¶15. (SBU) Carim asserted that advanced developing countries were prepared to make offers according to "proportionality," i.e., their capability to do so. He agreed that advanced developing countries did have an important role to play. He realized that a number of LDCs and smaller developing countries were vulnerable, and did not possess the productive capacity or infrastructure to take advantage of market access provided by the Doha Round. He also realized that some LDCs would incur adjustment costs stemming from the loss of trade preferences. In this vein, Carim viewed as useful USTR Portman's suggestion to scope the costs of trade preference losses. ¶16. (SBU) Carim added, "Bearing in mind that we are SACU (the Southern African Customs Union),and that SACU contained one LDC, South Africa should nonetheless be looking for ways to assist LDC's." Carim claimed that South Africa had already made substantial agricultural and nonagricultural market access offers. Noting Brazil and India's recent announcement on LDCs, Carim was sure that these countries were also willing to do more. TRIPS and Medicines -------------- ¶17. (SBU) Carim said that he wanted to see the medicines issue as it related to TRIPS resolved in time for the Hong Kong Ministerial. He explained that with U.S. involvement, the issue was resolved in August 2003. Two and a half years later, however, the resolution still has not been translated into the legal text of TRIPS. There were some procedural issues around the fact that reference was made to the Chairman's statement in the text of the agreement. The preamble needed to be changed and some other text shifted around. He said that over the weekend, involved parties agreed that the Chairman would simply re-read the same statement made in 2003. The problem was that some countries, such as Brazil and India, had not been as involved as they might have been. South Africa was speaking to Brazil and India, as it was to members of the Africa Group. Carim hoped that it was not too late for this to be a deliverable for Hong Kong. Geographic Indications -------------- ¶18. (SBU) When it came to geographic indications, Carim said that South Africa was "on side" with the United States. He specifically said that South Africa "was burnt" on geographical indications in its bilateral trade agreement with the EU, and the whole notion of expanding this in to the WTO "did not sit well." (REF D) TEITELBAUM