US embassy cable - 04PRETORIA5238

C O N F I D E N T I A L SECTION 01 OF 02 PRETORIA 005238 
 
SIPDIS 
 
DEPT PLEASE PASS TO USTR AMB ZOELLICK FROM AMB FRAZER 
 
E.O. 12958: DECL: 12/02/14 
TAGS: ETRD, PREL, SF 
SUBJECT: SCENESETTER FOR SACU FTA MEETING IN WALVIS BAY 
 
REF: A. PRETORIA 4042 
 
     B. PRETORIA 4689 
     C. PRETORIA 5218 
 
Classified By: AMB. JENDAYI E. FRAZER FOR REASONS 1.4 (B) AND (D). 
 
1.   (SBU) We welcome USTR Ambassador Robert Zoellick's 
upcoming visit to southern Africa.  The U.S.-SACU FTA 
negotiations are at a crossroads.  Ambassador Zoellick's 
initiative to meet with SACU trade ministers on December 10 
in Walvis Bay is critical to any hope for re-establishing 
momentum for a successful FTA.  Over the last four months, we 
have achieved buy-in from South Africa's senior political 
leadership to move forward.   This was evident in President 
Bush's phone call with President Mbeki, in Ambassador 
Frazer's meeting with new Trade and Industry Minister Mandisi 
Mpahlwa in October (Reftel B), and just last week at the 
Amcham Thanksgiving dinner, where former Trade Minister and 
current Public Enterprises Minister Alec Erwin stated SACU's 
interest in making the AGOA benefits permanent through an FTA 
(reftel C).  It is important for ultimate success that a good 
relationship is established between Amb. Zoellick and South 
Africa's new Trade Minister Mandisi Mpahlwa. 
 
2.  (C) South Africa remains the biggest stumbling block to 
progress.  It is a corollary that South Africa is also the 
key to getting an FTA done.  South Africa sees the FTA as 
symbolic.  They do not believe they or the United States 
really need it.  But prestige is important for South Africa 
and, given the extension of AGOA, at this point South Africa 
wants an FTA for the prestige it bestows on the country as a 
global player rather than for the economic benefits.  The 
United States similarly has important geopolitical reasons 
for advancing an FTA with South Africa in addition to the 
trade advantages. 
 
3.  (C) When Ambassador Frazer met new Minister of Trade and 
Industry Mandisi Mpahlwa in late October (reftel B), he 
admitted there were capacity issues as well as chemistry 
problems between the negotiators.  Still, he acknowledged the 
need to raise the FTA politically in order to give fresh 
political direction on areas where we agree in the FTA.  He 
regretted that he had not been able to meet with Ambassador 
Zoellick before.  Mpahlwa feels he has been turned down twice 
in requests to meet with USTR Zoellick, in Brazil during the 
June UNCTAD XI meetings and in Mauritius during the July ACP 
meetings. 
 
4. (C) Walvis Bay presents an opportunity to grant Mpahlwa's 
meeting request and thereby improve the bilateral trade 
relationship and prospects for ultimate success negotiating 
the U.S.-SACU FTA.  We strongly recommend that Ambassador 
Zoellick meet with Minister Mpahlwa, perhaps as a pull aside 
in addition to the SACU ministers meeting, or during a flight 
layover in Johannesburg or Cape Town.  This would allow both 
Ministers to develop the relationship that will be needed to 
achieve a successful FTA.  It is important that the USTR have 
the Trade Minister's ear, particularly to provide needed 
balance to the broken record "can't do" soundtrack of his 
chief negotiator.  Two key objectives in a meeting with 
Minister Mpahlwa would be to:  (1) get South Africa to commit 
to a more ambitious FTA and (2) get clarity on the exceptions 
desired in market access most important to South Africa. 
 
5.  (C) In the past the stumbling block presented by South 
Africa's lead negotiator, Xavier Carim, at the rhetorical 
level is getting an FTA that in his view is "balanced" and 
accommodates South Africa's demands for asymmetry and special 
and differential treatment.  He wants an agreement that falls 
far short of the "template" FTAs that the United States has 
reached with other trading partners.  Achieving this goal 
will burnish South Africa's credentials as a G20 leader of 
developing countries.  It will also further the strategy to 
liberalize as little as possible beyond what the WTO 
requires.  The existing FTA with the EU covers only 90% of 
trade.  South Africa's vision to negotiate trade agreements 
with other developing countries, as well as with EFTA, is 
marked by modesty rather than boldness. 
 
6.  (C) On a practical level, this overall low level of 
ambition translates into demands for partial liberalization 
and exclusions regarding market access in goods and services 
in a U.S.-SACU FTA.  South Africa has given no indication of 
the depth or breadth of these exceptions.  On agriculture, 
however, the negotiator specifically wants to deny benefits 
to any U.S. goods that benefit from subsidies.  Besides 
securing access to the U.S. market, he would also like 
special treatment from U.S. trade remedies, such as 
countervailing duties and anti-dumping.  South Africa sees 
the United States as the demandeur on all the other issues: 
investment, dispute settlement, labor, environment, IPR, 
procurement, e-commerce.  South Africa believes an FTA 
covering these subjects would require SACU to make 
substantial changes in its laws and policies while providing 
marginal, if any, additional access to the U.S. market and 
little, if any, requirements on the United States to change 
its laws and policies.  Lastly, South Africa has argued that 
because SACU does not have any common policies on these 
issues it is premature to negotiate on them. 
FRAZER