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Cablegate: South Africa: Chief Negotiator Addresses Wto Issues

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 004756

SIPDIS

SENSITIVE

DEPT FOR AF/S, AF/EPS, EB/TPP/MTA AND BTA
DEPT PLEASE PASS TO USTR
COMMERCE FOR ITA/JDIEMOND
USDA FOR FAS/ETERPSTRA, KROBERTS, AND FAS/ITP

E.O. 12958: N/A
TAGS: ETRD EAGR ECON SF
SUBJECT: SOUTH AFRICA: CHIEF NEGOTIATOR ADDRESSES WTO ISSUES

REF: A. PRETORIA 4607
B. STATE 211956
C. STATE 210829
D. STATE 209236
E. STATE 208981
F. STATE 207068
G. STATE 204611
H. STATE 199861
I. STATE 199791

1. (SBU) Summary. Chief Trade Negotiator Xavier Carim told
Econoff that the United States' proposal on agriculture had
helped it reclaim the moral high ground in WTO negotiations
and put the EU on the defensive. Nevertheless, analysis
indicated that the United States could actually increase its
level of domestic subsidies under the proposal. Carim
assured Econoff that despite lowered expectations for the
Hong Kong Ministerial, South Africa was continuing to apply
pressure on the EU to improve its agricultural offer. Carim
lamented the fact that South Africa had not yet submitted a
services offer, but said that he expected it to be submitted
soon. On services negotiations, Carim said that the
discussion of quantitative targets for developing countries
was "worrying" and "threatened to change the framework of
GATS negotiations." He also said that South Africa was
uncomfortable with the line that LDCs should not be looking
to the developed countries for greater market access, but
rather to the larger developing countries, such as South
Africa. He said that South Africa and other developing
countries wanted to "reclaim the aspect of development" in
the Doha Round. End Summary.

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2. (SBU) South Africa's Chief Director for Multilateral Trade
Negotiations, Xavier Carim, sat down with Econoff for an hour
and forty-five minutes on December 1 to discuss a number of
issues related to Doha Round negotiations and talking points
from the United States. Carim opened by saying that while
there was much in agreement between South Africa and the
United States, there were "a couple of differences." He
particularly wanted to highlight his interest in finalizing a
TRIPS and Medicines deliverable for the Hong Kong
Ministerial, his displeasure at U.S. and EU efforts to sow
dissension among developing countries, and the internal
difficulties that South Africa had in submitting its services
offer. When it came to geographical indications, Carim said
that South Africa was "on side" with the United States.

Agriculture
-----------

3. (SBU) Carim told Econoff that the United States' proposal
on agriculture had clearly helped it to reclaim the moral
high ground in WTO negotiations. There was the sense, he
said, that the United States had lost the high ground when
the 2002 Farm Bill increased subsidies, brought back
deficiency loans, and instituted counter cyclical payments.
A joint U.S.-EU paper on agriculture followed that, according
to Carim, "led to the failure in Cancun." In contrast, the
United States' October proposal, setting forth specific
figures, was a major move. Thus far, Carim thought that the
United States had played a constructive role in negotiations,
and had managed to re-establish negotiating credibility.

4. (SBU) Carim said that South Africa viewed the U.S.
proposal on agriculture in the context of ongoing
negotiations. While analysis indicated that the United
States could actually increase its level of domestic
subsidies under the U.S. proposal, he said, "We knew that
under the July Framework counter cyclical payments could be
moved into the Blue Box." He added, "We also know that
counter cyclical payments are not the same as set asides."
There was more negotiating to do, including on definitions
and box criteria.

5. (SBU) Carim said that he understood that for the United
States to eliminate export subsidies and reduce domestic
support, it needed other countries to offer greater market
access. However, the only defense that developing countries
had against subsidized imports came in the form of tariffs.
The question was which side should move first? Carim felt
that developed countries had to move first by declaring
reductions in subsidies. Only then could developing
countries determine how much they could reduce tariffs.

6. (SBU) Carim noted that the EU was clearly on the defensive
after the United States submitted its proposal on
agriculture. The EU's offer of October 28 simply did not
measure up. He assured Econoff that South Africa was
continuing to apply pressure on the EU to improve its offer.
He noted strong statements recently made by the Africa Group
in Arusha, the Africa Caribbean and Pacific Group in
Brussels, and Commonwealth Heads of State in Malta. He said
that South African ministers were also aware of the need to
press the EU at the political level, and that he and his
colleagues continued to press EU counterparts at different
levels.

7. (SBU) Carim did not think that lowering expectations for
the Hong Kong Ministerial necessarily reduced the pressure on
the EU to submit a better offer on agriculture. That said,
the notion of lower expectations for Hong Kong did not make
South Africa happy. It was a reality, however.

Services
--------

8. (SBU) Carim said that he had the opportunity to discuss
services in passing with William Jackson of USTR at the
meeting of the Africa Group in Arusha the previous week. He
added that Jackson's presentation in Arusha on how the WTO
related to Africa was very useful. Carim lamented the fact
that South Africa had not yet submitted its services offer,
but said that he continued to expect it would be submitted
soon. All the substantive work had been completed. What
remained was "procedural, a political assessment."

9. (SBU) Carim wanted to respond to a recent statement made
by a USTR official to the effect that one of the biggest
disappointments so far in the Doha Round was South Africa's
failure to submit a services offer. Carim explained that
preparing the offer had been a difficult process internally
for South Africa. There had not been a good domestic
understanding of trade-in-services nor of the WTO. There was
no statistical base upon which to structure an analysis. He
felt that there was a lot more work for him to do at home in
this area, and noted that local industry was "a long way"
from producing the type of sophisticated analysis that the
U.S. Coalition of Service Industries (CSI) was capable of.
(Note: Carim said that CSI had requested a meeting with him
in Hong Kong and that he would try.) Carim added that there
was also the notion that now was not necessarily the time to
submit a services offer, given the inadequacy of EU offer on
agriculture and the fact that other countries had not stepped
up to the plate.

10. (SBU) Carim said that the discussion of quantitative
targets for developing countries was "worrying" and
"threatened to change the framework of GATS negotiations."
He said South Africa had enough difficulty in putting its
initial offer on the table, and could not now try to match
quantitative targets. He pointed out that compared to other
countries, South Africa had already made substantial
commitments in the Uruguay Round. Fortunately from his
perspective, he believed that the offending reference to
quantitative targets had been removed from papers prepared
for the Hong Kong Ministerial.

Development Dimension
---------------------

11. (SBU) Carim said that he thought that the development
dimension of the round was getting lost in negotiating
details and the immediacy of certain issues. For this
reason, South Africa and other developing countries wanted to
"reclaim the aspect of development" in the Doha Round. In
fact, this was the theme of a recent speech by Deputy
Minister for Trade and Industry Dr. Rob Davies (Septel).

12. (SBU) Carim said that while development was the mandate
of the Doha Round, over time different approaches and
concepts had eroded it. He felt that certain key points
needed to be reinserted into the dialogue. Doha should
provide better market access for developing countries across
the board. Critical to achieving this was the removal of
trade distortions in agricultural through the elimination of
export subsidies and the reduction of domestic subsidies. To
increase developing country access to nonagricultural
markets, tariff peaks and tariff escalations on products of
export interest to developing countries needed to be
eliminated or reduced.

13. (SBU) He added that the EU was acting as if it were time
to negotiate on nonagricultural market access and services
issues. However, EU demands for nonagricultural market
access were excessive, hardly warranted by its proposal on
agriculture. Carim said that the EU's approach was a "recipe
for an antidevelopment round." He believed that a
negotiating framework was needed to achieve a market outcome.
Along these lines, developing countries had distributed a
paper in Geneva on bringing back the development agenda.

Divide and Conquer
------------------

14. (SBU) Carim told Econoff that one point that made South
Africa uncomfortable was the line that LDCs should not be
looking to developed countries to make greater tariff cuts,
but rather to large developing countries, such as South
Africa. He mentioned the AGOA meeting in Senegal, where the
United States was trying to align itself with subSaharan
African countries, and the effort by the EU and the United
States to argue that further reductions in developed country
tariffs would only erode LDC trade preferences. He said that
this sort of talk was part of an effort to shift the focus
away from the major powers and toward the advanced developing
countries. "It created divisions among developing countries
and confused the message," he said. "The ACP shouldn't put
pressure on (the larger developing countries) not to lose
trade preferences."

15. (SBU) Carim asserted that advanced developing countries
were prepared to make offers according to "proportionality,"
i.e., their capability to do so. He agreed that advanced
developing countries did have an important role to play. He
realized that a number of LDCs and smaller developing
countries were vulnerable, and did not possess the productive
capacity or infrastructure to take advantage of market access
provided by the Doha Round. He also realized that some LDCs
would incur adjustment costs stemming from the loss of trade
preferences. In this vein, Carim viewed as useful USTR
Portman's suggestion to scope the costs of trade preference
losses.

16. (SBU) Carim added, "Bearing in mind that we are SACU (the
Southern African Customs Union), and that SACU contained one
LDC, South Africa should nonetheless be looking for ways to
assist LDC's." Carim claimed that South Africa had already
made substantial agricultural and nonagricultural market
access offers. Noting Brazil and India's recent announcement
on LDCs, Carim was sure that these countries were also
willing to do more.

TRIPS and Medicines
-------------------

17. (SBU) Carim said that he wanted to see the medicines
issue as it related to TRIPS resolved in time for the Hong
Kong Ministerial. He explained that with U.S. involvement,
the issue was resolved in August 2003. Two and a half years
later, however, the resolution still has not been translated
into the legal text of TRIPS. There were some procedural
issues around the fact that reference was made to the
Chairman's statement in the text of the agreement. The
preamble needed to be changed and some other text shifted
around. He said that over the weekend, involved parties
agreed that the Chairman would simply re-read the same
statement made in 2003. The problem was that some countries,
such as Brazil and India, had not been as involved as they
might have been. South Africa was speaking to Brazil and
India, as it was to members of the Africa Group. Carim hoped
that it was not too late for this to be a deliverable for
Hong Kong.

Geographic Indications
----------------------

18. (SBU) When it came to geographic indications, Carim said
that South Africa was "on side" with the United States. He
specifically said that South Africa "was burnt" on
geographical indications in its bilateral trade agreement
with the EU, and the whole notion of expanding this in to the
WTO "did not sit well." (REF D)
TEITELBAUM

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