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Statement by David P. Shark on the WTO Trade Policy Review of the Southern African Customs Union

November 04, 2009

Geneva, Switzerland - Thank you, Chair.

The United States is pleased to welcome the distinguished delegation from the SACU countries, led by Deputy Permanent Secretary Laletsang from Botswana, Principal Secretary Ramotsoari from Lesotho, Permanent Secretary Lindeque from Namibia, Chief Commissioner Tsengiwe from South Africa, and Principal Secretary Kunene from Swaziland to this review of the trade policies and practices of the Southern African Customs Union. We would also like to thank the governments of the five SACU member countries and the WTO Secretariat for the excellent and comprehensive reports that they prepared for this review and circulated before this meeting. We acknowledge with appreciation the considerable effort that the Secretariat invested in this particular trade policy review, which required reports on five separate countries as well as these countries' common policies under the Customs Union. Finally, we would like to thank the discussant, Ambassador Agah, for his insightful introduction to our deliberations.

I would like to begin by acknowledging that SACU - which is believed to be the oldest customs union in the world - has made great strides since its last TPR in 2003. As noted in the Secretariat's report, economic growth across SACU since 2003 has averaged about four percent. SACU has also advanced the process of integrating member economies, aided in part by the 2002 SACU agreement. While many aspects of that agreement have yet to be fully implemented - which is the focus of some of the questions that my government has submitted - there has been noteworthy progress in various areas. For example, as a group, SACU countries have together undertaken several free trade and preferential trade negotiations over the last six years, reflecting their shared objectives and common purpose. SACU has also generally lowered and simplified its applied tariffs and has seen its participation in international trade increase significantly. As the Secretariat report notes, the simple average rate of SACU's applied MFN common external tariff decreased from 11.4% in 2002 to 8.1% in 2009 and 96.8% of all tariff lines now carry ad valorem rates, up from 75% in 2002. Intra-SACU trade has also increased, reflecting the deepening economic integration among the SACU members.

At the same time, we recognize that the SACU countries continue to face serious challenges that have kept them from achieving their full economic potential. Most notably, each of these countries continues to struggle with the impact of HIV/AIDS, which has taken a particularly heavy human, social, and economic toll in the SACU region. The SACU governments are investing substantial resources to address HIV/AIDS and other health issues and the U.S. government is pleased to support these efforts through the President's Emergency Plan for AIDS Relief and other programs.

We also acknowledge that the SACU countries, like many other countries across the world, have felt the impact of the global economic crisis, which has resulted in a sharp decline in their exports this year. We urge the SACU countries to consider ways to use trade to help pull their economies out of the crisis, and not to resort to trade-restricting or trade-prohibiting measures.

The United States is pleased to have a vibrant trade and investment relationship with each of the SACU countries. Overall, two-way US-SACU trade in goods more than doubled between 2003 and 2008, reaching almost $18 billion. All five SACU members are beneficiaries of the African Growth and Opportunity Act (AGOA), and each has exported a variety of products to the United States under AGOA and GSP. South Africa is the largest exporter of non-energy products under AGOA, sending a broad array of goods to the United States duty-free under AGOA and GSP, including motor vehicles, metals and minerals, apparel, citrus fruit, wine, chemicals, nuts, and jewelry. Lesotho has long been the largest exporter of apparel to the United States under AGOA. Swaziland exports apparel, sugar, and prepared food products under AGOA and GSP. Botswana exports apparel under AGOA; and Namibia exports worked marble and granite as well as wood products under GSP. All told, over 97 percent of SACU exports to the United States in 2008 entered our market duty-free.

Chair, I would also like to draw attention to certain errors in the description of AGOA in the Secretariat's report. Specifically, the Secretariat's report (paragraph 59 on page 13) states that AGOA's "special dispensation relating to apparel was extended to 2007, but has since expired." In fact, the Africa Investment Incentive Act of 2006 extended this provision - AGOA's special third-country fabric provision - to September 30, 2012. Also, the report states in the same paragraph that 37 sub-Saharan African countries are eligible for AGOA trade benefits. The actual number, as of today, is 40. We trust that the Secretariat will amend its report accordingly when the report is undergoing final scrutiny and before it is released to the public.

From 2004 to 2008, the United States provided $135 million in trade capacity building (TCB) assistance to SACU governments and businesses to help them make the most of global trade opportunities, including those under AGOA. Trade-related assistance under Lesotho's Millennium Challenge Corporation (MCC) compact accounts for nearly $100 million of this amount. Namibia signed an MCC compact in July 2008; and trade capacity building assistance will constitute a substantial portion of its five-year, $304.5 million compact. Other U.S.-funded TCB activities for SACU countries include programs to assist historically disadvantaged small and medium-size enterprises in South Africa, technical assistance related to SPS issues and financial sector development in Botswana and Namibia, and a wide range of technical assistance, including export diversification and promotion programs, carried out by the USAID-funded Southern African Trade Hub in Botswana.

In July 2008, the United States and the five member countries of SACU signed a Trade, Investment, and Development Cooperative Agreement (TIDCA). The TIDCA establishes a forum for consultative discussions, cooperative work, and possible agreements on a wide range of trade issues, with a special focus on customs and trade facilitation, technical barriers to trade, sanitary and phytosanitary measures, and trade and investment promotion. Work is now under way to identify specific activities and possible agreements under the TIDCA, guided in part by direction provided when Ambassador Kirk and the trade ministers of the SACU countries met at the AGOA Forum in Nairobi in August of this year.

The United States has submitted some questions about policies and processes at both the SACU-wide level and in individual SACU countries, and I would like to thank the Members of SACU for providing responses, which we will study carefully. Our questions, a few of which I would like to highlight today, touch on issues such as import licensing, technical barriers to trade, SPS, intellectual property rights, state-owned enterprises, tariffs, and export subsidies. Specifically, -- We call attention to the Secretariat's report that cites a number of cases in which SACU member countries have apparently failed to notify the WTO of certain measures relating to such areas as agriculture, rules of origin, import licensing, industrial subsidies, and TBT. In the secretariat's words, "Numerous notifications remain outstanding." The report also notes that SACU members exceed bound rates in several tariff lines and that the use of formula duties based on reference prices "does not ensure conformity with the provisions of the WTO Customs Valuation Agreement." We would like to hear what steps are being taken to address these apparent variances from core WTO commitments.

With respect to South Africa, I would like to draw attention to four areas:

-- First, according to the Secretariat's report, South Africa bases its animal health requirements on OIE guidelines and on risk assessments. Unfortunately, that has not been our experience, although the United States acknowledges South Africa's recent movement to bring import requirements in line with OIE guidelines. But, the process that South Africa intends to follow to allow for market access remains unclear. We look forward to South Africa's clarification in this regard.

-- Second, the Secretariat report states that South Africa's Black Economic Empowerment (BEE) Codes of Good Practice "allow global and multinational companies some flexibility in how they structure their empowerment deals." While the United States generally supports the objectives of South Africa's BEE policies, which are intended to promote the economic empowerment of the historically disadvantaged population in South Africa, some U.S. companies have expressed concern about how South Africa has implemented its BEE policies. They assert that the process for approving "equity equivalent" plans has been slow and non-transparent. We would like to know how the South African Department of Trade and Industry plans to address these concerns.

-- Third, we have posed several questions related to regulation of South Africa's telecommunications sector. We are especially interested in learning what specific steps South Africa's Department of Communications has taken since the last TPR to strengthen the Independent Communications Authority of South Africa (ICASA).

-- Fourth, the Secretariat notes that South Africa continues to be one of the major users of anti-dumping measures in the WTO. The United States' experience with South Africa's measures bears out the Secretariat's statement. South Africa currently maintains anti-dumping duties on four U.S. products, including chicken meat. We are disappointed that the South African government has chosen to leave in place anti-dumping measures on these products despite a September 2007 South African Supreme Court of Appeal ruling that would appear to invalidate the basis for the continuation of the antidumping measure. We would be interested in learning more about the implementation of the Supreme Court of Appeal ruling, especially with respect to the antidumping measures against the U.S. products.

Finally, with respect to SACU writ large, we are interested in hearing how plans for wider regional economic integration in Africa might affect SACU's future, including plans for a customs union encompassing the Southern African Development Community (SADC) and the planned merger of the free trade areas of SADC, the East African Community, and the Common Market for Eastern and Southern Africa.

Chair, the Doha Round will set the terms of trade for decades to come. The United States remains committed to achieving a balanced and ambitious completion of the Round as soon as possible. But we cannot accomplish this alone. We are convinced that the creation of new trade flows and meaningful market openings is required to accomplish trade-generated economic growth and development. We look forward to working with SACU countries to achieve this outcome.

In closing, the United States appreciates the opportunity to participate in this review of SACU's trade policy, and we look forward to further discussions on trade matters with the delegation from the SACU countries.

Thank you, Chairman.