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Volume 10
Issue 30
Wednesday, August 30 2006
This issue highlights:
ASEAN NATIONS SIGN TRADE AND INVESTMENT AGREEMENT WITH US WHILE SACU MEMBERS DELAY DECISION ON TICA
The United States and the member nations of the Association of Southeast Asian Nations (ASEAN) 1 last week signed a Trade and Investment Framework Agreement (TIFA). The agreement is expected to facilitate market access; promote trade in key areas such as agriculture and pharmaceuticals and eventually result in a regional free trade agreement.
Meanwhile, the five member Southern African Customs Union (SACU) 2 has yet to reply to a United States draft proposal submitted on April 26, 2006 to establish "building blocks" that could lead to a free trade agreement (FTA), while taking meaningful trade and investment enhancing steps in the interim. The American proposal provides for the establishment of a "Trade and Investment Cooperation Agreement," (TICA) with SACU.
Two-way trade between the United States and the ASEAN countries amounted to US$149 billion in 2005, a 9% increase over the previous year and an increase of some 75% over the last decade. US foreign direct investment in the region was almost $80 billion in 2004, an increase of 13% over the previous year. Two-way trade between the US and the five SACU nations are rising, but is much smaller than US-ASEAN two-way trade. South Africa is the largest SACU recipient of US foreign direct investment but there is generally concern about the level of US foreign direct investment.
In a statement released on August 25, US Trade Representative (USTR), Susan Schwab, said in Kuala Lumpur that economic and geopolitical relations with the ASEAN region are a high priority for her country.
The US-ASEAN framework agreement provides for the establishment of a ministerial-level dialogue that will address areas of mutual concern, improve coordination on regional and multilateral trade issues and establish a course of action for building trade and investment relations.
Paving the way to a regional free trade agreement
Initially the participating countries will concentrate on three projects, the USTR's office said.
One initiative would establish an "ASEAN Single Window," which would facilitate trade within the region and between the US and ASEAN countries by implementing a common system for entry of goods.
A second priority is the development of a framework agreement on sanitary and phytosanitary (plant health) issues - health and food safety regulations that are essential to agricultural trade.
The third project would be an effort to coordinate standards for pharmaceutical registration and approval, accelerating the delivery of medical innovations in the ASEAN region.
The TIFA is expected to help pave the way for the two sides to negotiate a full-fledged regional free trade agreement (FTA).
US-SACU "Trade and Investment Cooperation Agreement"
The question is why are SACU members slow in responding to the US proposal for an agreement that has much in common with the TIFA agreement approved by the ASEAN member countries? The US proposal to establish a joint US-SACU Trade and Investment Cooperation Agreement (TICA) was made on April 26 in a draft concept paper after it became clear that the long drawn out US-SACU free trade agreement negotiations would not be concluded before the "fast track" legislation lapses. This enables the US President to negotiate free trade agreements without undue interference by the US Congress.
The United States Trade Representative (USTR) office is still awaiting a reply, or counter proposals, to its suggestion of establishing a TICA.
The latest development was during the week of July 17, when US Department of Commerce's Holly Vineyard, International Trade Administration Deputy Assistant Secretary for Africa, the Middle East and South Asia, travelled to Namibia and South Africa. As part of her consultations, she met in Windhoek with Southern African Customs Union Executive Secretary Connie Moremi and Namibian Minister of Trade and Industry Immanuel Ngatjizeko. She also met in Pretoria with Chief Director for African Economics Relations of the South African Department of Trade and Industry (DTI), George Monyemangene. Both in Windhoek and Pretoria the US proposal for a TICA was generally referred to, amongst many bilateral issues.
Apparently there was positive feedback about the TICA proposals in all three meetings, but no firm commitments. The SACU ministers are likely to meet during the first week of September. The TICA proposals may be on the agenda.
The United States proposed that under its TICA proposal a forum would be established for consultative discussions on a wide range of trade issues. These discussions would include but not be limited to free trade agreement issues. It would also develop work plans in areas mutually agreed upon that could lead, through agreements or understandings, to increased trade and investment as well as cooperation.
Areas, issues or possible work might include, for example, customs cooperation and trade facilitation, technical barriers to trade, intellectual property rights, and other areas that would enhance market access for goods, services and investment. (The US suggests focusing on areas that could be addressed through "executive agreements", rather than those requiring legislative approval.)
The proposed TICA would include provisions to establish a Consultative Council. The Council would oversee the implementation of the TICA, set up working groups, and monitor progress through the negotiation of various trade and investment related agreements. The working groups would be established by the Consultative Council to:
- allow for detailed expert discussion of specific trade related issues, outlining policy objectives and approaches in each area;
- establish a work programme for exchanging information, discussing respective regimes, and determining types of agreements or understanding in each area, if any, that could enhance the US-SACU trade and investment relationship, and, consequently, help in concluding an FTA;
- discuss cross-cutting principles and points of departure with regard to each issue area, as well as the possible implications of various approaches;
- offer trade capacity building as appropriate and as resources permit;
- reach mutual trade and investment enhancing agreements, e.g. memoranda of understanding, mutual assistance agreements, cooperation agreements in areas of common interest, etc; and
- set the stage and build common understanding for the resumption of formal FTA negotiations.
The US draft proposal emphasises that TICA would not represent an early harvest or some form of scaled-down free trade agreement. It could, however, provide SACU and the US with a framework and a formal forum for developing steps and new trade and investment enhancing commitments that would be building blocks, supporting conclusion of a US-SACU FTA in the future.
NEPAD SUMMIT TO REVIEW ACHIEVEMENTS AND DISCUSS POSSIBLE IMPROVEMENTS
A Summit of NEPAD Heads of State and Governments Implementation Committee will shortly brainstorm a review of its achievements. The Summit, to be held in Abuja, Nigeria in October 2006, will also discuss possible improvements on the NEPAD programmes and operations.
Since its inception the NEPAD agenda and advocacy by NEPAD leaders has kept Africa and its imperatives visible on the world agenda. The current issue of NEPAD Dialogue comments that this achievement is an important signal which demonstrates that the partnership with the highly industrialised countries is delivering - in spite of other pressing problems emerging elsewhere on the globe.
The dialogue and partnership started in 2001 with the invitation by the architects of NEPAD to the leaders of the Group of Eight (G-8) countries to partner with Africa in the implementation of NEPAD.
The response was the release of the G-8 Africa Action Plan in June 2002. Through this plan the G-8 made commitments to support the implementation of NEPAD and to produce regular reports on their progress in so doing.
At the G-8 Summit held at Evian, France, in 2003, it was decided to extend the dialogue between the G-8 and NEPAD to all countries of the Organisation for Economic Cooperation and Development (OECD) that contribute substantially to development assistance.
The increased engagement of the G-8 and other OECD leaders by the NEPAD architects has also contributed to reversing the decline in development assistance flows to Africa. While the African leaders are not claiming sole credit for this achievement, the NEPAD policy framework has provided a common focal point and clarity regarding what Africa wants.
Following the adoption of Resolution 57/7, the Secretary General of the United Nations established the Office of the Special Advisor on Africa (OSAA). An important element of the mandate of this Office is the promotion of NEPAD in the UN system and internationally, in partnership with NEPAD structures.
Among the achievements has been the NEPAD Business Group launched in 2002 under the leadership of the African Business Roundtable. Many African countries now have NEPAD Business Chapters.
NEPAD has demonstrated its effectiveness in fast-tracking implementation through the NEPAD e-Schools Programme and the NEPAD GAIN Food Fortification Initiative.
In addition to oil exploration in Africa, private sector investment in mining has also increased significantly in the past few years. Associated with these developments are accelerated policy and regulatory reforms. African Ministers of Mining increasingly play a key role and have established a forum to promote harmonisation of policies, increased investment and enhancement of the skills required for the accelerated development of the mining sector.
Amongst the international achievements are the annual NEPAD events and the promotion of investment in Africa by their members of the World Economic Forum, the Commonwealth Business Council, the US Corporate Council on Africa and the Canadian Corporate Council.
EXCLUSIVE POINTERS
- The South African International Business Linkages (SAIBL) project impressed US senator Barack Obama (Democrat, Illinois) during his visit last week to South Africa. SAIBL is a programme initiated by the United States Agency for International Development (USAID) to assist small and medium business clients with training, mentoring and connections to achieve commercial viability and export status. The Corporate Council of Africa (CCA) and Ebony Consulting International Africa (ECI) are partners in the SAIBL project. Visiting Petite Designs and Upholsterers near Soweto, Johannesburg, Senator Obama congratulated the enterprise owned and operated by award-winning entrepreneur, Issy Penniken. His parents founded the business more than 30 years ago. When Issy needed business expertise, he found it through USAID's SAIBL project, which organised a training programme that permitted him to upgrade Petite's work standard to ISO 9000 accreditation through linkages to US firms. As a result more than R3, 5 million (US$500 000 in offshore orders alone were conducted in USAID's first year of assistance. Petite is at present exporting to the US, Europe, the Middle East and African countries, and his sales now exceed US$286 000 monthly. In South Africa, the company's creative and professional expertise can be seen in the refurbishing of South Africa's famous Blue Train and in the furniture featured in Sun City's Lost Palace and Sandton's new Hilton Hotel.
- The boom in US corporate mergers is creating concern that illicit trading ahead of deal announcements is becoming a systemic problem. An analysis of the biggest mergers over the last 12 months in the US indicates that the securities of 41% of the companies receiving buyout bids exhibited abnormal and suspicious trading in the days and weeks before those deals became public. For those who bought shares during these periods of unusual trading, quick gains of as much as 40% were possible. The study, conducted for The New York Times by Measuredmarkets Inc., an analytical research firm in Toronto, scrutinised mergers with a value of US$1 billion or more that were announced in the 12-month period that ended in early July 2006. The firm analysed the price, the total number of shares traded and the number of individual transactions in each stock during the weeks leading up to the announcement. It looked for large deviations from trading patterns going back as far as four years. Of the 90 big mergers in the period, shares of 37 target companies exhibited abnormal trading in the days and weeks before the deals were disclosed.
- South Africa is likely to fund the second phase of the Lesotho Highlands Water Project. The R16, 7 billion first phase was completed in 1998, and at that stage economic growth was low, so the second phase was put on hold. Forecaster Weekly Review, Johannesburg, comments that with South African economic growth now near 5%, it makes sense to reassess that decision as it will take some five years before the first dam of the second phase is completed.
- Ghana will host the sixth African Growth and Opportunity Act (AGOA) Summit, probably in June next year, according to AGOA.info.
1 Brunei, Darussalam, Burma, Cambodia, Laos, Malaysia, the Philippines, Singapore, Thailand & Vietnam
2 Botswana, Namibia, Lesotho, South Africa & Swaziland
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