DEPARTMENT: AGRICULTURE LATEST DEVELOPMENTS IN AGRICULTURAL TRADE DIPLOMACY Presentation to the Select Committee on Land and Environmental Affairs Cape Town, Tuesday, 23 August 2005 Directorate International Trade Department of Agriculture

DEPARTMENT: AGRICULTURE South African Agricultural Trade Strategy Vision  A globally and competitive and profitable sector with equitable access and participation in the opportunities afforded by agricultural trade  The strategy should lead to an environment in which the sector can exploit comparative and competitive advantages on local and expanding regional and global markets leading to growth in export volumes and income, domestic value addition and fairly competing imports. Objective  Eventual multilateral free trade in agricultural goods on the basis of fairness and equity taking our development needs into account.  Until multilateral free trade can be achieved, Government will provide a balance of protection and support of domestic agriculture in the light of subsidies and unfair trade practices applied by others.

DEPARTMENT: AGRICULTURE Trade and Regional Policy Aims South Africa’s trade and regional policies aim at:  Improving the efficiency and competitiveness of South and Southern African agriculture  Stabilising / reducing the cost of nutrition in the region  Creating employment opportunities  Creating opportunities for new entrants, particularly small-scale farmers  Improving domestic and regional food security, i.e. accessibility and nutrition  Minimum and decreasing tariff protection

DEPARTMENT: AGRICULTURE SACU AGREEMENT Work to be done:  The institutions of SACU: SACU Tariff Board – ITAC is acting but the procedures need to be set SACU Tribunal Secretariat  Annexes for the establishment of the institutions and procedures: Establishment of the Tariff Board Establishment of the Tribunal Establishment of National Tariff Bodies Trade Negotiating Mechanism

DEPARTMENT: AGRICULTURE SACU AGREEMENT Policy harmonization  Harmonization of policies is discussed in the areas of: Agricultural development Trade and Industry Land and Natural Resource protection  Work on annexes for the harmonization of policies in the following areas has already started: Competition policies within the Customs Union Unfair Trade Practices SPS standards

DEPARTMENT: AGRICULTURE SADC PROTOCOL ON TRADE  Implemented on 1 September 2000  SACU tariffs are all reduced to zero for all agricultural products with the exception of sugar (Sugar Protocol) and wheat flour (no rule of origin) Issues as identified by the Mid-term Review of 2005:  Implementation of the tariff phase down by several countries: Zimbabwe, Malawi and Tanzania  Angola’s offer of tariff phase-down  Modification of the rules of origin to make them more flexible and easier to apply  Non-tariff barriers to be reported, negotiated and eliminated  Facilitating trade amongst SADC countries as priority sources of commodity

DEPARTMENT: AGRICULTURE SADC PROTOCOL ON TRADE – WORK IN PROGRESS  Drafting of an Annex on harmonizing SPS standards  Amendment of the Sugar Agreement to accommodate the interests of all Member States  Compliance of DRC to the terms of the SADC Trade Protocol as an active member  Addressing the question of multiple trading arrangements and overlapping interests of Member States  Conformity of all Member States to the latest Harmonized System of Tariffs  Harmonization of standards and metrology in general  Amendment of the Trade Protocol resulting from the amendment to the SADC Treaty – the institutions under the Protocol are affected

DEPARTMENT: AGRICULTURE KEY PROBLEMS AND CHALLENGES FOR AFRICA  Fragmented small markets with narrow base for exports  Declining terms of trade (2% of world trade, still declining)  Low levels of institutional and physical infrastructure  Low investment and FDI inflows (only 2% of world FDI)  Intra-Africa trade is low (only 10% of Africa’s trade)  Human capital quality very basic  70% people are dependant on agriculture, but governments invest only few percentages of their budgets in the industry  Low levels of industrialization and diversification in high growth sectors Lack of savings Lack of entrepreneurial middle class Very short history since independence compared to the developed world  Most of these aspects affects Africa’s declining global competitiveness

DEPARTMENT: AGRICULTURE GOVERMENT STRATEGY FRAMEWORK FOR AFRICAN ECONOMIC DEVELOPMENT  Seeks to advance the goals and objectives of NEPAD; Market Access, intra-regional trade, regional integration, infrastructure development, industrialization  Africa’s challenges are complex and well documented and result in slow economic growth  South Africa is a leading powerhouse on the continent  The DTI was commissioned by Cabinet to draft a Strategy on African Economic Development and to coordinate interdepartmental involvement, to promote intra-regional trade and regional economic integration.  The Document is still at the interdepartmental Economic Development Cluster (EDC) Committee and will be send to Cabinet once finished.

DEPARTMENT: AGRICULTURE IN PROGRESS AND PLANNED DEPARTMENTAL ACTIONS 2005/06  Inter-departmental cooperation on the Strategy for Africa Development  African country studies on opportunities and challenges  Exchange with African countries through visits  Multilateral visits to institutions for Africa Development  Regional Conference in Mali 2006  Regional integration initiatives (SADC and SACU)

DEPARTMENT: AGRICULTURE WTO: DOHA DEVELOPMENT ROUND HIGHLIGHTS  Agricultural negotiations started in 2000  Incorporated into broad-based WTO Round, Doha, Qatar, November 2001  Formation of the G20 (August 2003)  July Framework, concluded July 2004  Achievement: Agreement on the elimination of all forms of export subsidies  Negotiations currently 2 years behind schedule, agriculture and other areas (NAMA, Trade and Development, Services, etc.)  Objective remains: modalities to be agreed at Hong Kong Ministerial (December 2005)

DEPARTMENT: AGRICULTURE WTO: DOHA DEVELOPMENT ROUND MAJOR CHALLENGES Market Access  Tariff bands and formulas for reduction  Treatment of sensitive products Export Competition  Date for elimination of all forms of export subsidies  Food aid and State Trading Enterprises Domestic Support  Tiers and level of reduction  Criteria for blue box  Review and clarification of green box

DEPARTMENT: AGRICULTURE SA-EU TDCA REVIEW Background  SA-EU TDCA implemented from 2000  Review no later than five years after implementation- Articles 17 and 103  Exchange in ambition papers between SA and EU- July 2005: SA Ambitions 1)Offensive - fast-tracking liberalization- quota restricted products - reduce review list products - further liberalization of processed agric products - removal of tariff quotas or reduce all in-quota tariff rates to zero and increase in quota volumes based on to current trade; 2) Defensive - Rectify technical errors in TDCA - Tariff phase down sustainability for certain products EU Ambitions - Fast-tracking/ further liberalisation for processed agricultural products and certain basic agric products - Consolidating GSP into TDCA preferences - Improve safeguards and dispute settlement provisions - Market access- 2 nd generation issues e.g. IPR, competition, services, investment, government procurement - Streamline TDCA review with EPA negotiations

DEPARTMENT: AGRICULTURE SA-EU TDCA REVIEW Other issues to be addressed during review Harmonization/ update tariff nomenclature- use 2002 HS code classification Rules of Origin: Cumulation and harmonisation with SADC & ACP, plus review of rules SPS cooperation with the EC Trade related agric issues on the agenda since implementation Resolved:  EC tariff quota on Canned fruit (gross weight vs. net weight)  Citrus black spots  EC cheese exports to SA  Management of cheese quota Outstanding:  Amendment to EC reserve and exclusion list  SA preferential beef and mutton exports to the EU Future First technical meetings in October 2005 to decide on technical prerequisites and modalities and draw up a work program Further meeting towards the end of October to discuss ambitions to harmonize MTR with SADC EPA process Outcome of the meeting to be reported to SA-EU Joint Cooperation Council in November 2005 in order to receive guidance on the way forward Negotiations to continue in 2006

DEPARTMENT: AGRICULTURE SACU-EFTA FREE TRADE AGREEMENT  EFTA- European Free Trade Association (FTA, comprising Iceland, Liechtenstein, Norway and Switzerland)  Several negotiating sessions took place, with a final round scheduled for May 2005  Will be a FTA focusing mainly on trade in goods – industrial and agriculture  Includes evolutionary clauses, mandating both sides to continue discussions on trade in services and so-called second generation issues, with the possibility of including them at a later stage.  Free trade area will be based on four agreements A general free trade agreement, covering industrial, fisheries and processed agricultural products 3 Bilateral agricultural agreements with Switzerland/Liechtenstein, Norway and Iceland respectively, covering basic agricultural products  All the agreements include a revision clause aimed at further liberalising trade in the future

DEPARTMENT: AGRICULTURE SACU-EFTA: Issues  Balance of agreement is agriculture SACU already enjoys zero duties for industrial products under EFTA GSP schemes, but SACU willing to pay price of reciprocity if EFTA opens markets for agricultural products Switzerland and Iceland made agricultural offers that substantially improve market access; Norway still lagging, especially regarding. needs of BLNS (red meat) Balance not yet achieved  EFTA domestic support and export subsidies: EFTA agreed to include a provision that prevents exporters utilizing support measures when trading with SACU under the agreement In effect no preferential trade will take place until a satisfactory WTO agreement eliminating subsidies has been reached.  Finalisation of negotiations Final round of negotiations takes place from 24 – 26 August 2005 in Pretoria Aim is to have a draft agreement, which will then be submitted to the normal ratification process Implementation scheduled for 1 January 2006

DEPARTMENT: AGRICULTURE SACU/MERCOSUR FIXED PREFERENCES AGREEMENT  Concluded in December 2004  Total tariff lines: ±955  Agricultural tariff lines: 151  Issues: Tariff preferences: broaden and deepen the Agreement Rules of Origin SPS Automotives Customs administration and co-operation

DEPARTMENT: AGRICULTURE SACU/MERCOSUR FIXED PREFERENCES AGREEMENT  Status: Tariff preferences: –Additional request lists exchanged in June 2005 (25 agricultural lines) –Under consideration at present Rules of Origin: –Some rules agreed in May 2005 –Revised positions exchanged in July 2005 –Some positions still apart; further negotiations at next round SPS: –General guidelines for a SPS protocol exchanged in May 2005 –Will exchange information on respective SPS systems Automotives: –To be discussed at next Round Customs administration: –Discussions to start at next Round  Prognosis: Will be submitted to Parliament within the next couple of months Aim: Implementation on 1 January 2006

DEPARTMENT: AGRICULTURE SACU/USA FREE TRADE AGREEMENT  Six negotiating rounds from December 2002 to June 2004  Stalled in June 2004 SACU position of no preferences for subsidized agricultural products US ambitions versus SACU difficulties regarding Phase II issues US inflexibility on Rules of Origin certification  Issues: Recent decision to resume in September 2005; set schedule for further negotiations; target date December nd generation agreement Positions and ambitions on Phase II issues far apart Difference in level of development between US and SACU, and within SACU US position: full inclusion of all agricultural products versus SACU position: no preferences for subsidized products

DEPARTMENT: AGRICULTURE SACU/USA FREE TRADE AGREEMENT  Status: Preparations for September Round: –review tariff offer –review reference date  Prognosis: US showed sympathy for SACU perspectives and challenges Claims flexibility in its mandate Stills wants comprehensive FTA, but flexibility in timing Degree of flexibility is unknown No common SACU policies on Phase II issues Agriculture could be very difficult

DEPARTMENT: AGRICULTURE SACU-INDIA FIXED PREFERENCES AGREEEMENT  Issues: Framework Agreement for negotiating a Fixed Preferences Agreement signed in March 2005 Possible agricultural technical visit  Status: First round to take place in August/September 2005 –Purpose: establish scope of Agreement, and work program –Need for technical visit to be determined once scope is agreed upon DoA is conducting research to determine the impact Industry is preparing inputs towards offensive and defensive positions  Prognosis: Early in process Market potential for some agricultural products in India

DEPARTMENT: AGRICULTURE SACU-CHINA FREE TRADE AGREEMENT  Issues: China acceded to WTO in December 2001 Subsequent SA Presidential visit; established Joint Economic and Trade Commission (DTI & Chinese counterparts); proposed an FTA  Status: Preparatory & research phase; could include a technical visit DoA is conducting research to determine the impact Industry is aware of this FTA, and doing early-stage preparations  Prognosis: Early in process Market potential for some agricultural products in China

DEPARTMENT: AGRICULTURE Conclusion  All trade negotiations are done in close collaboration with the Department of Trade and Industry  Industry is kept informed and consulted through out the negotiations using the Agricultural Trade Forum  Participate in NEDLAC’s technical committee on trade TESELICO