Identifier
Created
Classification
Origin
08MBABANE389
2008-12-18 13:00:00
UNCLASSIFIED
Embassy Mbabane
Cable title:  

COMESA GIVES SWAZILAND TIME TO MANEUVER

Tags:  ETRD ECON EFIN WZ 
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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

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