US embassy cable - 04PRETORIA4042

UNCLAS SECTION 01 OF 03 PRETORIA 004042 
 
SIPDIS 
 
SENSITIVE BUT UNCLASSIFIED 
 
DEPT PASS USTR FOR DUSTR SHINER AND AUSTR LISER FROM AMB 
FRAZER 
 
E.O. 12958: N/A 
TAGS: ETRD, ECON, SF 
SUBJECT: STRATEGY ON THE WAY FORWARD FOR THE FTA 
 
 
1. (SBU) Summary.  In order to reinvigorate the Free Trade 
Agreement talks between the United States and the Southern 
African Customs Union (SACU), post proposes the following way 
forward:   (A) clarifying senior political buy-in, including 
possibly raising the level of the negotiators; (B) changing 
the negotiating environment to gain greater leverage; and (C) 
reinforcing the need for a definite deadline to energize and 
push the talks to conclusion.  End summary. 
 
2.  (SBU) What can the United States do to make progress on 
the Free Trade Agreement negotiations with the Southern 
African Customs Union?  So far, there has been little 
movement.  The media reported recently that as a result of 
the Paris talks in July between senior U.S. and SACU 
officials both sides "had agreed to focus on a number of 
issues that could be dealt with quickly -- market access, 
industrial tariffs, agriculture and services."  There needs 
to be more than "focus."  We have focused on these issues for 
over a year.  We need to negotiate based on clear guidance 
from senior leadership that SACU wants an FTA with the United 
States.  With a renewed SACU political commitment, we think 
both sides can negotiate a clear win-win agreement.  In order 
to get there, the United States will have to push by: 
 
-- Clarifying senior political buy-in, including possibly 
raising the level of the negotiators; 
 
-- Changing the negotiating environment to gain greater 
leverage; and 
 
-- Reinforcing the need for a definite deadline to energize 
and push the talks to conclusion. 
 
In this cable, post presents (a) the problems/obstacles to 
the negotiations, (b) an approach to gain leverage, and (c) 
suggested next steps. 
 
Problems/obstacles 
----------------------- 
 
3.  (SBU) There are many reasons for lack of progress on the 
FTA talks.  SACU has less expertise and experience in 
negotiating.  There are capacity and logistical constraints. 
SACU is also negotiating as SACU for the first time.  In 
spite of these limitations, most of the working groups have 
managed to examine in detail the issues that need to be 
negotiated.  After six rounds of negotiations it is not a 
question of understanding the issues.  After the last round 
in June, SACU negotiators asserted they had gone as far as 
their negotiating mandate allows.  To get over this obstacle, 
we need to take the negotiations to a higher level.  SACU 
leaders need to recommit to the FTA and to direct their 
negotiators accordingly, or to negotiate at a higher level. 
 
Key analytical assumptions 
--------------------------------- 
 
4. (SBU) Differences in the respective goals and posture by 
the United States and SACU have to be considered in 
determining the way forward.  The main issue blocking 
progress is a fundamentally different point of view about the 
goals of the FTA.  The United States is ambitious and wants 
total liberalization in as many sectors as possible.  SACU, 
on the other hand, is very much lacking in ambition.  It 
wants to give as little as possible and protect as many 
sectors and products as it can.  As a result, the U.S. 
posture is offensive and the SACU posture is defensive. 
 
5.  (SBU) SACU's defensiveness comes through on virtually 
every single issue.  While the United States is trying to 
find a way forward, SACU is continually telling us why it 
cannot do certain things.  The SACU refrain is asymmetry, 
special and differential treatment, partial liberalization, 
exclusions, and balance.  The major area where SACU has been 
offensive is in making the unrealistic demand that the United 
States amend its trade remedy laws on dumping and 
countervailing duties. 
 
Stick to goals 
-------------- 
 
6. (SBU) The United States should stick to all of its 
original goals as announced at the outset of the 
negotiations.  An FTA with SACU should meet the same 
standards as the FTAs that we have negotiated with other 
developed countries.  There is no compelling reason why the 
first comprehensive U.S. FTA in sub-Saharan Africa should 
come with an asterisk (*FTA-lite).  This could set a bad 
precedent for other FTA negotiations. 
 
Reinforce a deadline 
-------------------- 
 
7. (SBU) It is vital that the United States maintain and 
reinforce the tool of the deadline.  If the U.S. team opts to 
play defense against a SACU team that is also playing 
defense, we are never going to move the ball forward. 
Moreover, without a clock ticking, there is no incentive to 
end the game.  The agreed upon December 2004 deadline for the 
negotiations has been a key factor driving the talks.  The 
deadline underscores the need to conclude the talks.  If at 
the eleventh hour we are convinced there is a way to get an 
acceptable agreement and the only obstacle is time, then we 
can agree to an extension of the deadline.  Alternatively, at 
that time we could assess that we tried our best but simply 
were not able to conclude a decent agreement; we terminate 
the negotiations and move on. 
 
8. (SBU) What has happened to relax the pressure on SACU? 
The passage of AGOA III extending AGOA benefits to 2015 has 
given SACU a longer comfort period for preferential access to 
the U.S. market.  As a result, SACU feels it can afford to 
allow the FTA talks to meander along indefinitely.  The 
record of the missed deadlines of the Doha Development Agenda 
(notwithstanding the progress in Geneva) has also created 
complacency about deadlines:  If the WTO can miss deadlines, 
so can SACU.  Lastly, both U.S. and SACU negotiators have 
been suggesting publicly that the December 2004 deadline will 
not be met. 
 
Play offense 
------------ 
 
9. (SBU) Unless Washington is prepared for endless rounds of 
FTA talks, we think the United States has to go on the 
offensive.  SACU will not give us anything unless they have 
to.  If we cannot get what we want, then we should divert our 
resources to do FTAs with countries that truly are 
"like-minded" trading partners.  Others in sub-Saharan Africa 
would welcome the opportunity to negotiate a gold standard 
FTA with the United States.  Other developing countries have 
managed to negotiate an FTA in less than a year.  The simple 
reason is they wanted it.  SACU's tactics raise doubts about 
whether SACU will agree to the FTA we envision, unless there 
is senior SACU political direction to do so.  Remarks by 
various SACU negotiators suggest they think the United States 
wants and needs this more than SACU does.  We need to 
disabuse everybody of this attitude.  We need to be prepared 
to walk away from these negotiations. 
 
Meet longer, if necessary 
------------------------- 
 
10. (SBU) We have worked to accommodate SACU, but there 
should be limits to our flexibility.  If SACU cannot 
negotiate with us because of other commitments, then the FTA 
is not a SACU priority.  Ministers need to redirect their 
negotiators on the end goal.  If there is to be a Round 7, it 
has to be more than a rehash of the exchange of views as in 
the previous six rounds.  There should be an agreement 
beforehand on the modalities for the negotiations in market 
access in goods, non-agricultural goods, textiles and 
apparel, and services.  The negotiators should also move 
forward on negotiating the Phase 2 issues (labor, 
environment, e-commerce, financial services, intellectual 
property rights, government procurement, legal framework); to 
do otherwise suggests these issues are less important to the 
United States.  If we need to meet longer than previous 
rounds, let us do so. 
 
Political level exchanges 
------------------------- 
 
11.  (SBU) There has to be a frank exchange at the political 
level on the need to negotiate and to conclude by a deadline. 
  We would propose that Deputy U.S. Trade Representative 
Josette Shiner visit southern Africa soon to meet with SACU 
trade ministers to discuss the way forward.  We would also 
recommend that senior U.S. officials raise the FTA in their 
bilateral meetings with their SACU counterparts from now 
until December.  The upcoming UNGA meetings in New York 
provide opportunities for Secretary Powell to push the FTA 
with the SACU heads of state and foreign ministers. 
 
12.  (SBU) In the AGOA Acceleration Act signed by President 
Bush in July, Section 3 (9) on the Statement of Policy states 
that Congress supports "a comprehensive and ambitious trade 
agreement with the Southern African Customs Union, covering 
all products and sectors, in order to mature the economic 
relationship between sub-Saharan Africa and the United 
States."  Our suggested approach aims for a successful 
agreement that will carry out the full ambition of AGOA. 
FRAZER