SOUTH AFRICAN BUSINESS VIEWS ON TIDCA AND TRADE

UNCLAS SECTION 01 OF 02 PRETORIA 002382 SENSITIVE SIPDIS PLEASE PASS TO USTR FOR BILL JACKSON E.O. 12958: N/A TAGS: ECON ETRD SF SUBJECT: SOUTH AFRICAN BUSINESS VIEWS ON TIDCA AND TRADE PRETORIA 00002382 001.2 OF 002 ¶1. (SBU) Summary: South Africa's business community is pleased that the Southern African Customs Union (SACU) SACU and the U.S. will begin talks under the U.S./SACU Trade, Investment and Development Cooperation Agreement (TIDCA),and hopes that TIDCA can pave the way to a free trade agreement. The business community did not lobby for the U.S./SACU free trade agreement when it was being negotiated, but it was disappointed when the talks were suspended in 2006. Now business sees the TIDCA as an opportunity to re-engage with the U.S. and ultimately lock in AGOA benefits. Labor unions, however, do not support the TIDCA. In general, factions within the South African business community have widely differing views of trade policy and varying degrees of sophistication about trade. Trade facilitation issues are of significant concern to South African business. End Summary. -------------- Better Late Than Never -------------- ¶2. (SBU) Business Unity South Africa (BUSA) Director of Trade Policy Catherine Grant (protect) met with Deputy Economic Counselor and Trade and Investment Officer on October 22 to discuss developments in South African trade policy. Grant said the South African business community is increasingly interested in the TIDCA that was signed at the AGOA annual forum in July. According to Grant, the business community's interest in the TIDCA is ironic because business showed little interest in the U.S./SACU free trade talks while they were actually taking place. However, the business community was disappointed when FTA talks were suspended in ¶2006. Grant commented that business is worried about losing AGOA benefits and therefore wants the TIDCA to be a success and to pave the way to a free trade agreement between the U.S. and South Africa. BUSA is currently canvassing its members for items to place on the TIDCA agenda. ¶3. (SBU) The Congress of South African Trade Unions (COSATU) "hates the TIDCA," according to Grant. When the National Economic Development and Labour Council (NEDLAC) reviewed the draft TIDCA, COSATU submitted a negative position paper complaining that the U.S. was pursuing a "template" approach to trade negotiations. She also said the complaint was essentially a renewed objection to a free trade agreement. Grant noted that when NEDLAC approved the TIDCA, COSATU complained that it had not been consulted. (Note: NEDLAC is a tripartite -- government, business, and labor -- body that, among other things, reviews trade agreements prior to adoption by the South African government (SAG). End Note.) Because South African business largely sat out the FTA talks with the U.S., opposition from labor unions went unchecked. Though business support of TIDCA is new, Grant expects that COSATU will continue to oppose TIDCA. -------------- Trade Politics -------------- ¶4. (SBU) Grant said the South African business community is divided on trade policy. Chemical, steel, and textile manufacturers are protectionist and view free trade agreements as threats to their well-being. The auto industry is somewhat protectionist, though it does have access to the global supply chain. Agriculture comprises the core free trade constituency. Banks are starting to organize positions on trade policy, as are telecommunications companies. Qon trade policy, as are telecommunications companies. However, Grant said the level of ignorance on trade issues is enormous, noting that CEOs have asked her, "So what is SADC, anyway?" (Note: SADC is the Southern African Development Community. End Note.) She said BUSA is going to work with a local business school to develop a program that will raise awareness of the importance of services agreements. ¶5. (SBU) Grant commented that South African companies are usually not involved with the government in the development of trade policy. She cited long-term isolation under apartheid and general distrust of the SAG as reasons for their lack of involvement. She also noted that business only comes to government when it has a particular problem that it needs to solve. The business community must focus more on trade in services, Grant stressed. While trade in goods "takes care of itself" because businessmen understand tariffs and other basic trade principles, they are much less PRETORIA 00002382 002.2 OF 002 sophisticated about trade in services. Labor unions, in particular, dislike the idea of services agreements, which they see as the "thin edge of the wedge" that will lead to comprehensive liberalization. ¶7. (SBU) BUSA (South Africa's foremost business body), agrees with the SAG position on Non-Agricultural Market Access (NAMA) negotiations in the Doha Round of WTO talks, Grant said. She explained that BUSA supports market access liberalization only if there is a special and differential treatment for South Africa, since South Africa liberalized voluntarily in the 1990s. According to Grant, Doha has not done enough on agricultural subsidies, and developed countries are pushing the developing world too aggressively on manufacturing tariffs. Grant commented that BUSA supports the Doha Round more strongly than the SAG does. She claimed that some SAG officials are "relieved" that Doha has foundered. -------------- Comment -------------- ¶8. (SBU) BUSA's support for TIDCA is encouraging. Grant recommended that U.S. trade officials engage not only with the private sector but also with COSATU on their next visit to the region to explain U.S. goals in TIDCA. Post agrees with this recommendation. 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