Cablegate: South Africa: Officials Outline Positions On Wto

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 03 PRETORIA 004607

SIPDIS

DEPT FOR AF/S, PLEASE PASS TO USTR
USDA FOR FAS/ETERPSTRA,KROBERTS, AND FAS/ITP

E.O. 12958: N/A
TAGS: ETRD EAGR ECON SF
SUBJECT: SOUTH AFRICA: OFFICIALS OUTLINE POSITIONS ON WTO
AGRICULTURE NEGOTIATIONS

1. (U) Summary: At a roundtable on WTO agricultural
negotiations on November 16, Chief Negotiator Xavier Carim
and National Department of Agriculture Deputy Director Gunter
Muller discussed a number of South African positions and
views. In particular, they discussed market access,
subsidies, special and sensitive products, preference
erosion, food aid, and special and differential treatment.
Both Carim and Muller roundly criticized the EU's proposal on
agriculture, but also criticized the U.S. proposal for
allowing the United States to increase total agricultural
subsidies above current levels. Carim claimed that the G-20
proposal represented the "middle ground" in WTO negotiations
on agriculture, and the "closest approximation of what could
actually be done." Carim thought that high-level political
intervention was needed to move negotiations forward, and
generally tried to lower expectations for the Hong Kong
Ministerial in December. End Summary.

2. (U) At a roundtable on WTO agricultural issues sponsored
by the Southern African Institute for International Affairs
(SAIIA) and Oxfam America, Chief Director for Multilateral
Trade Xavier Carim and the National Department of
Agriculture's Deputy Director for International Trade Gunter
Muller shed some light on South African thinking. Others
participants included President of AgriSA (a federation of
agricultural trade associations) Hans van der Merwe,
President of the South African Sugar Association Johann van
der Merwe, and SAIIA researcher Catherine Grant.

Summary of South African Positions
----------------------------------

3. (U) Xavier Carim looked on as Catherine Grant summarized
South Africa's positions on WTO negotiations on agriculture.
On market access, Grant said that South Africa supported the
concept of "proportionality," or special and differential
treatment. She said that South Africa was focused on
removing tariff peaks and escalations. In general, South
Africa was "not keen" on the designation of special products,
and wanted to place limits on the designation of sensitive
products. She said that trade preferences and preference
erosion was a difficult issue for South Africa, especially as
a member of the African Group, within which a number of
countries greatly depended upon a few products, such as sugar
and bananas.

4. (U) On subsidies, Grant said that South Africa sought
substantial reductions in the real level of trade distorting
subsidies, greater disciplines on domestic subsidies to avoid
"box switching," and special and differential treatment for
developing countries.

5. (U) On export subsidies, Grant said that South Africa
wanted to see the elimination of all export subsidies in five
years -- to be front loaded as much as possible. Food aid
was a key issue for the Africa Group, but at this time South
Africa had no clear position on whether aid should only be in
the form of cash grants. South Africa wanted greater
controls on developed country state trading enterprises, such
as those in Australia, New Zealand, and Canada.

6. (U) In summarizing stakeholder views, Grant said that she
believed that the private sector and labor generally
supported government positions, especially when it came to
export subsidies. Nevertheless, some farmers sought specific
tariff protections, and in policy circles there was concern
about how to go about protecting smallholders and advancing
land reform in the face of market liberalization.

7. (U) Xavier Carim then clarified a few things. He
explained that the driving force behind South Africa's
positions in the WTO was to achieve a development outcome.
In this vein, Carim characterized South African trade policy
as a central element within South African foreign policy
rather than a competing force with foreign policy -- thus the
emphasis on advancing south-south trade. He said that South
African views fed into SACU, SADC, Africa Group positions, as
well as the Cairns Group, the G-20, and the G-90. In the
case of SACU, South Africa had to forge common positions on
external tariffs, agricultural access, as well as non
agricultural market access, safeguards, and sensitive
products.

8. (U) Carim summarized a recent meeting of the National
Executive Council of the African National Congress (the
ruling party), where Trade and Industry Minister Mandisi
Mpahlwa outlined South Africa's WTO positions. They included
achieving market access in agriculture, removing imbalances
caused by trade distorting subsidies, obtaining greater
market access for industrial goods, and assuring that
developing country commitments were commensurate with their
capacity to make them.

Preference Erosion
------------------

9. (U) Carim noted that all bilateral, regional, and
multilateral trade agreements all fed into gradual trade
preference erosion. For many developing countries, this was
a serious issue. South Africa felt that compensation was
needed to cover ensuing adjustment costs and proper supply
side management. He thought there was growing support for
this approach. Carim added that Mpahlwa embraced the notion
of "Aid for Trade" programs to compensate for preference
erosion.

Special and Sensitive Products
------------------------------
10. (U) On special and sensitive products, Carim said that
South Africa realized that special products were important to
a number of developing countries for food security and rural
development. As for sensitive products, South Africa agreed
with the United States and the G-20 that the EU's request for
an 8% cap on the number of line items subject to this
designation was too high; rather, it should be 1%.

Food Aid
--------

11. (U) On food aid, Carim confessed that South Africa did
not have a well-defined approach at this time. Gunter Muller
later elaborated by saying that "no one wanted to limit
emergency food aid." South Africa's "focus was on preventing
commercial displacement and preserving production capacity in
the countries and/or regions of need. Muller noted that the
SADC position was that food aid should be untied and in the
form of grants. At same time, he acknowledged that South
Africa's position was changing in that it, too, was
generating a surplus that could be used for food aid. More
research was needed to find the best way forward. Comment:
In 2003, South Africa donated R170 million to the World Food
Program (WFP), primarily to purchase maize for Zimbabwe.
When the WFP sourced the maize from Zambia rather than South
Africa, South African farmers created a huge uproar. Since,
South Africa has instructed the WFP to purchase South African
maize with the cash that it donates. End Comment.

Market Access versus Subsidies
------------------------------

12. (U) Muller said that the "crunch" was on the EU to
provide greater market access and to reduce its domestic
agricultural subsidies. He criticized the United States for
having submitted a proposal that would "not bring about a
reduction in overall domestic support." He later elaborated
to Econoff that this assessment was based upon an analysis
performed by the Brazilian Institute for the International
Trade Negotiations, which he later shared via e-mail. In
short, the analysis adds amber and blue boxes to de minimis
subsidies to conclude that under the U.S. proposal, the
United States could actually spend more on subsidies, if it
wanted to, than it currently did. (Note: this analysis has
been shared with first points of contact at USTR and USDA via
e-mail from post.)

13. (U) Both Carim and Muller said that matching agricultural
tariffs against non agricultural tariffs would not resolve
the impasse in negotiations; there had to be more movement on
agricultural subsidies for the Doha Round to progress.
Muller said that other issues such as phytosanitary standards
and technical barriers to trade also had to be addressed. In
addition, negotiating parties had to look at supply side
measures to stimulate trade capacity in developing countries.
On cotton, Muller admitted that South Africa had not done
enough to support the African position.

14. (U) Johan van der Merwe of the Sugar Industry said that
the South African sugar industry received very little
domestic support from the government. The industry was
essentially competing with the rest of the world. In this
respect, its offensive interest was to remove subsidies and
lower tariffs in other countries, and its defensive interest
was to seek protection from subsidized imports. Van der
Merwe commented that no one seemed to be willing to make any
real cuts to applied tariffs at this time.

15. (U) While the U.S. proposal was the first one out of the
chute, Carim criticized it as "insufficient" and "very late
in coming." He described the G-20 proposal as "more
reasonable" and, in the face of EU limitations, was probably
the "closest approximation of what could actually be done" in
agricultural negotiations. Carim said that the strength of
the G-20 was that it was able to balance offensive and
defensive interests, and represented the middle ground for
the WTO as a whole. Carim thought that high-level political
intervention was needed to move negotiations forward, and
generally tried to lower expectations for Hong Kong
Ministerial in December.

16. (U) Carim said that the United States and G-20 proposals
had clearly caught the EU "offguard" and "backfooted." Carim
described the EU agricultural proposal as a "very, very poor
offer." He said that the EU had demanded extensive cuts on
industrial tariffs, especially from larger developing
countries, and insisted on numerical targets in services. He
said that the proposal did not take into account developing
country realities, and made additional demands concerning
geographical indications. Carim added that the "strange
part" of the EU's proposal was that it was presented as a
final offer, almost as if to shift the blame elsewhere. "If
one took a Machiavellian view," he added, "(the offer) seemed
designed to destroy the negotiations." He said that everyone
needed to be aware of the media spin that countries were
giving to the negotiations, and that "responsibility for
failure must be part of the negotiations."

The G-20 and Special and Differential Treatment
--------------------------------------------- --

17. (U) Carim declared that the larger developing countries
were willing to make commitments, but only in "alignment with
special and differential treatment, commensurate with
institutional capacity and the level of economic
development." In this vein, he complained that the
development content of the round had been eroded, partly
because developing countries could not arrive at a common
view, and partly because developed countries had seized on
this to promote the notion that least developed countries,
having extensive preferential access to developed country
markets, should focus on obtaining greater market access from
the larger developing countries like Brazil and India. Carim
said that "while no one said it, they also meant South
Africa."
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