United States – South Africa Trade Relations on a Downturn?

In March this year the free trade agreement (FTA) negotiations between the United States and South Africa (with its SA Customs Union Partners) essentially collapsed. There were two main reasons for this. Firstly SACU is not yet structurally able to take joint negotiating positions outside of tariffs in goods and agriculture because the SACU treaty is restricted to this competence. The Customs Union therefore felt uncomfortable in accepting what has been termed a ‘one size fits all’ FTA template from the United States that included topics like trade in services, investment and competition. Secondly the United States is faced with the expiry of the Presidents so called ‘trade promotion authority’ which allows the executive to fast track trade deals through congress. This expiry has been an influencing factor on the need to urgently progress the WTO’s Doha negotiations, but also applies to bilateral trade deals. The US negotiators thus need to focus their energies on bilateral deals that they can conceivably conclude within the scope of the fast track authority. SACU was simply proving to be too much of a ‘Jonny come lately’ on their menu of potential partners.

Speaking at the parliamentary standing committee on trade and industry on 24 May 2006, South Africa’s lead trade negotiator, Xavier Carim, told the committee that the final session with the US negotiators had been ‘very frank – perhaps for the first time’. The dialog will now continue in a non-negotiating setting, which it is hoped might deliver more constructive engagement and a better understanding by the US of SACU’s development needs. A face saving retreat could not have been couched in more diplomatic terms. Professor Ben Turock commented from the ANC caucus that he felt some discomfort in the fact that the US could essentially hold the global trading system to ransom through its trade promotion authority, and commented that the demise of the US-SACU talks was symptomatic of the fact that trade negotiations need to realigned with the political process between the countries and not left to flounder at a technocratic level outside of the obvious and immense goodwill that exists at a political level.
Perhaps he is correct in this assertion. This week saw the introduction of a new piece of legislation by the Democratic caucus in the US Congress called ‘The African Entrepreneurship Act’. The draft legislation aims to ‘nurture economic growth and diversification in sub-Saharan Africa by focusing assistance on small business entrepreneurs’. The legislation foresees that this could happen in 3 ways:
• Firstly it will facilitate the creation of centers in sub-Saharan Africa to provide technical assistance to small businesses entrepreneurs;
• Secondly it aims to provide technical assistance to improve trade capacity in sub-Saharan Africa, in the area of agricultural trade;
• Thirdly a US – African Private Sector Council is to facilitate the discovery of private sector partnerships for US businesses.

While this legislation is seen to augment the Africa Growth and Opportunity Act (AGOA) to some degree, it is not merely an ‘economic’ package, but reflects a wider political imperative in which it is couched. The proponents envisaged this dynamic in the classic post 9-11 genre of poverty being a breeding ground for terrorism, a spur to conflicts as is the case in Darfur and poverty breeding the pandemic of Hiv-Aids. The legislation may also have a oil related component in reversing the decline in non-oil trade between the United States and the region. This is pertinent as research has indicated that countries that rely on a single natural resource, like oil, 20 times more likely to experience civil conflict.

So we still have AGOA even if the FTA is off? Frankly this is not such a sure deal anymore, and the reason lies in international law. In the WTO preference schemes like AGOA are seen to discriminate unfairly between groups of poor countries taken strictly by the book. However the WTO Members as a body have seen fit to condone these deviations at times by way of what is called a ‘waiver’. Recently the US has been in Geneva trying to get this waiver for AGOA extended. To the surprise of many the passage of this request has not been ‘business as usual’. Reflecting separate unhappiness’s with US trade policy China and Paraguay blocked a WTO general council vote to renew the waiver of the US to continue with special treatment of selected developing countries. The final implication of this is not clear. What is clear is that a signed and sealed free trade agreement as intended between the US and SACU would have been legal under WTO rules and could not have been stymied at the behest of Chinese and Latin American beefs with the US!