TRADE MINISTER ON THE FUTURE OF TIDCA AND AGOA

UNCLAS SECTION 01 OF 02 PRETORIA 001745

SIPDIS

USTR FOR BILL JACKSON

E.O. 12958: N/A
TAGS: ECON EFIN EIND EINT ETRD SF
SUBJECT: TRADE MINISTER ON THE FUTURE OF TIDCA AND AGOA

PRETORIA 00001745 001.2 OF 002



1. (U) Summary. The Southern African Customs Union (SACU)
will "engage energetically" on the U.S./SACU Trade,
Investment, and Development Cooperative Agreement (TIDCA),
said South African Minister of Trade and Industry Dr. Rob
Davies at a breakfast briefing for the American Chamber of
Commerce on August 13. Davies cautioned against graduating
South Africa from the African Growth and Opportunity Act
(AGOA) program benefits, and stressed that AGOA and other
trade preference arrangements should be used to advance
regional integration. He reiterated that South Africa is
committed to industrial policy and to specific interventions
in distressed sectors such as autos and textiles. Davies
also stressed that broad-based black economic empowerment
will be continued and must be aligned with industrial policy.
End Summary.

--------------
SACU to "Engage Energetically" on TIDCA
--------------


2. (U) The Southern African Customs Union (SACU) will
"engage energetically" on the U.S./SACU Trade, Investment,
and Development Cooperative Agreement (TIDCA) before the end
of October 2009, said South African Minister of Trade and
Industry Dr. Rob Davies at a breakfast briefing for the
American Chamber of Commerce on August 13. Progress on the
TIDCA has been slow because SACU "hasn't gotten its act
together," he admitted. Davies said that the TIDCA will
focus on sanitary/phytosanitary measures, technical barriers
to trade, information exchange on customs cooperation, and
programs to build private sector trading capacity.

--------------
Davies Opposed to Graduation from AGOA
--------------


3. (U) A broad range of South African sectors have benefited
from AGOA, Davies told the AmCham audience. He appealed to
the U.S. not to "graduate" South Africa from AGOA, explaining
that AGOA benefits have not yet trickled down to the
country's underdeveloped "second" economy. He also argued
that graduation of South Africa would disrupt regional
integration because other countries in the region would
remain members.

-------------- --------------
Trade Should be Used to Promote Regional Integration
-------------- --------------


4. (U) The South African Development Community (SADC) Free
Trade Area was launched in January 2008, but regional
integration remains a challenge, according to Davies. Plans
for a SADC Common Market by 2010 are "completely
unrealistic," he acknowledged. Accordingly, Davies reported,
the SADC Task Force on Regional Integration recently decided
to broaden rather than deepen regional ties. SADC will now
seek free trade agreements with the Common Market for Eastern
and Southern Africa (COMESA) and the Economic Community of
Western African States (ECOWAS),rather than aim at deepening
integration among SADC members. Davies emphasized that
outside trading partners must treat the entire region as a
single entity. He cited the European Union's Economic
Partnership Agreements with other SACU members as an example
of a trade arrangement that threatens to create different
sets of obligations and thereby disrupts regional integration.

-------------- ---
The Global Economic Crisis and Industrial Policy
QThe Global Economic Crisis and Industrial Policy
-------------- ---


5. (U) While South Africa has been "severely affected" by
the global economic crisis, Davies argued there is great
potential for post-crisis economic growth underpinned by
expanded infrastructure currently under construction. The
South African government, he promised, will assist sectors
struggling with the global recession, including autos and
clothing and textiles. Davies reiterated the government's
support for industrial policy in "strategic sectors" such as
tourism, chemicals and pharmaceuticals, autos, and inputs to
the infrastructure program (such as engineering and telecom).
Davies noted that the Department of Trade and Industry is
planning to attract investment by doing sector-specific
analysis and encouraging companies that are already doing
business in South Africa to expand their operations.

PRETORIA 00001745 002.2 OF 002



-------------- --------------
Broad-Based Black Economic Empowerment Still Necessary
-------------- --------------


6. (U) Broad-based black economic empowerment (BBBEE) will
end someday, but not any time soon, Davies said. "We still
have a significant backlog when it comes to black
participation in the economy. We are nowhere close to
saying, 'We don't need BEE,'" he stressed. He said that
BBBEE must now be aligned with industrial policy and support
tied between small firms and large established companies.

--------------
COMMENT
--------------


7. (U) South African government officials and members of
the business community have been quietly speculating about
the future of AGOA for several months. There is widespread
concern that South Africa will be graduated from the program
or that the program will not continue after it sunsets in

2015. Post is encouraged that AGOA is not being taken for
granted in South Africa.

GIPS