US embassy cable - 05PRETORIA4607

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." 
TEITELBAUM