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### Viewing cable 05PRETORIA4607, SOUTH AFRICA: OFFICIALS OUTLINE POSITIONS ON WTO

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
05PRETORIA4607 | 2005-11-18 14:55 | 2011-08-24 01:00 | UNCLASSIFIED | Embassy Pretoria

`

    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."
    TEITELBAUM

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