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Cablegate: South African Business Views On Tidca and Trade

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ZNR UUUUU ZZH
R 310815Z OCT 08
FM AMEMBASSY PRETORIA
TO RUEHC/SECSTATE WASHDC 6221
INFO RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHOR/AMEMBASSY GABORONE 5377
RUEHMR/AMEMBASSY MASERU 2768
RUEHMB/AMEMBASSY MBABANE 4474
RUEHWD/AMEMBASSY WINDHOEK 4940
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 02 PRETORIA 002382

SENSITIVE
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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.

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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.
LA LIME

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