SA's trade negotiators once again confront a daunting trade landscape. As the year unfolds, it is useful to chalk up key challenges and markers in this regard.
At the multilateral level, the World Trade Organisation's (WTO's) Doha Round now enters its seventh year of protracted negotiations. Billed fancifully as yet another "final" year for concluding an ambitious trade deal, in reality the round is in the doldrums. Having seemingly jettisoned its development mandate, there appears to be little appetite -- from either the developed or developing worlds -- to conclude the negotiations under current conditions and demands.
Simon Evenett of the University of St Gallen recently argued that four factors account for this malaise, that is for the traditional tool of reciprocal trade negotiations yielding so little to date. First is the choice of a complex negotiating agenda -- agriculture, industry, services and more -- coupled with the principles guiding the negotiations. Second, specific protectionist political economy forces that continue to resist reform. Third, the extent of unilateral trade reform that took place over the past 10 years, and fourth the fast growth of the world's leading emerging markets.
With respect to the latter, a failed round will not cost China or India much, but this is not true for Brazil. Evenett calculates that if the Doha Round is not concluded, and World Bank estimates (of the gains foregone) are correct, China would lose about three days of economic growth, and India the equivalent of three weeks. Brazil, on the other hand, would lose the equivalent of one to three months of growth -- at least twice as much as India.
With the US presidential primaries now underway, the Doha Round may well have reached its stasis. Democrat hopeful Hillary Clinton has promised to take a "hard look" before reviving Doha's fortunes, and wants future deals to include tougher conditions on workers' rights and environmental standards. Barack Obama, her main challenger, has taken a similar position.
While most Republican candidates -- including Rudy Giuliani, Mitt Romney and John McCain -- preach free trade, many of their supporters take a dimmer view. In one poll, 55% judge globalisation to have caused more harm than good.
A new US administration may well refocus its energies on securing a trade deal, but not before next year or 2010.
With elections expected in India before next summer, negotiators may become even more constrained.
The XII UN Conference on Trade and Development (Unctad) summit, to be held in Ghana in April 2008, will also allow developing countries to reflect on globalisation's opportunities and imponderables. As a former president of Unctad -- Alec Erwin chaired the body from 1996 to 2000 -- SA has a responsibility to help shape this debate, particularly to establish the importance of "policy space" for economic development, diversification and technological upgrading, as the East Asian Tiger economies so optimally harnessed.
At the regional level, the Southern African Development Community (SADC) will this year officially launch a free trade area (FTA). But implementation still lags -- four countries are behind in their obligations, while another five have heavily back-loaded their commitments, with over 50% tariffs due to be eliminated. For SA, the next step is to strengthen the FTA process with a Protocol on Industrial Policy and Sectoral Co-operation, and pay greater attention to reducing prohibitive non-tariff barriers (NTBs).
However, the de facto balkanisation of the SADC by the recently signed interim Economic Partnership Agreement (EPA) with the European Union (EU) has dealt a blow to the region's integration project. SA has, on principle, not yet signed this EPA, citing the EU's unreasonable demands, particularly its insistence on the most-favoured nation clause.
With goods trade now scheduled, pressure will next mount on both SA and the SADC to sign on to comprehensive WTO-plus commitments in their relations with the EU, including investment provisions and services liberalisation.
Any commitments -- with the EU or even the US under a Trade and Investment Co-operation Agreement (TICA) -- must support our "developmental state" agenda.
In this regard, it is disturbing that a group of European mining companies are suing SA under a bilateral investment treaty. They argue that the country's black economic empowerment laws violate treaty undertakings by SA to provide fair and equitable treatment to foreign investors.
At the bilateral level, trade pacts with China and India are finally on the cards, with actual talks having begun last year. The government is keen also to underline its political commitment to Africa by negotiating a similar agreement with a strategic African partner, such as Nigeria, Egypt or Kenya.
Importantly, these south-south trading arrangements have been reconceptualised, from extensive tariff negotiations to co-operative agreements that should facilitate trade and better address NTBs. Important markers in this regard are: preferential trade agreements -- rather than FTAs -- allow for more strategic integration among developing countries; NTBs must be addressed as significant barriers in foreign markets; sectoral co-operation and mineral product-supply linked to investment in beneficiation are to be encouraged; and greater attention should be given to reducing the costs associated with trade diversion, complex customs administration and rules of origin.
Dr Brendan Vickers is senior researcher: multilateral trade at the Institute for Global DialogueAfrica News
