COMESA GIVES SWAZILAND TIME TO MANEUVER

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