Civil Society Statements on the USA/SACU Free Trade Agreement

Equitable Trade and Southern Africa: A Cookie Cutter Approach Will Cost Lives and Livelihoods

The United States-Southern Africa Customs Union free trade agreement (US-SACU FTA) negotiations began in June 2003 to create the first US free trade area with Africa. The Southern Africa Customs Union, which originated in 1889, is one of the oldest formal trading blocks and includes Botswana, Lesotho, Namibia, South Africa, and Swaziland. As organizations that have worked for many decades in Southern Africa and in the US on issues that concern this region, we share goals of a more just, sustainable and prosperous human society in the region. In this spirit, we raise serious concerns related to the negotiations of the U.S.-SACU FTA and offer recommendations that are essential to a more just trade relationship between the United States and the nations of Southern Africa.

Although the negotiations continue to start and stall and the text remains a total secret, based on the experience and precedent of other US FTAs, it is not difficult to anticipate how the U.S.-SACU FTA will unfold. Looking at the North American Free Trade Agreement (NAFTA), US-Chile FTA, and Central American Free Trade Agreement (CAFTA) models helps us anticipate what will be included. After twelve years, the accumulated evidence surrounding NAFTA demonstrates that any agreement crafted along the lines of that accord would have potentially adverse environmental, economic and human consequences for many people in the United States and Southern Africa.

US-SACU governments should take active steps to facilitate direct and meaningful engagement from civil society in negotiating the proposed US-SACU FTA. The exclusion of both U.S. and SACU workers, women, indigenous, ethnic populations, and others whose community will be affected by the FTA is unacceptable.

Although South Africa has established The National Economic Development and Labour Council (Nedlac) to serve as a mechanism for civil society to discuss social and economic policy concerns with government, broad participation and full transparency between all parties remains a hurdle.

The U.S. and other SACU countries do not have such formal structures. U.S. and SACU governments and trade officials must bridge the gap between the formal negotiating process and civil society by formally establishing a mechanism allowing affected sectors in all countries direct influence in negotiations. Further, US-SACU negotiations have not made available draft texts, proposals, timelines or agendas for the established channels of civil society to have an informed debate. It is essential that U.S.-SACU FTA negotiations extend, beyond the business sector, the appropriate mechanisms for democratic participation.

Negotiations should not move further without direct involvement from the affected communities and civil society groups in both the United States and SACU countries. We call for access to draft texts as they develop so that an informed public discussion can shape the outcome of negotiations.

The U.S.-Jordan Free Trade Agreement (2000) was the first trade agreement that contained an enforceable commitment to respect the International Labor Organization (ILO) core labor standards, as well as enforce domestic labor laws, in the core of the agreement that were subject to the same dispute settlement as the commercial provisions. Since that time, every FTA negotiated has dramatically weakened the Jordan provisions, by making only one commitment in the labor chapter subject to dispute settlement or enforcement (to enforce own laws), and setting up a parallel and inferior dispute settlement mechanism. In this model, the only worker rights requirement is that countries should effectively enforce their own labor laws. Although provisions in CAFTA show an attempt to use fines as an enforcement mechanism, they will likely be ineffective because penalties are levied on governments of the countries where the violations occur, not the companies that violate.

With corporations' increased ability to relocate in search of lower labor costs, a "race to the bottom" has ensued. This trend is disproportionately felt by low-skilled labor that are forced to compete for jobs. Communities are also forced to compete for investment by requiring less of employers. The global race to the bottom has been a significant factor in the stagnation of job quality in the U.S. and the spread of sweatshop labor in Southern Africa. With no existing social provisions in the SACU mandate and the lack of resources for enforcement of member country labor laws, the U.S.-SACU FTA is likely to perpetuate rather than help this problem.

Lesotho saw an increase in jobs under the Africa Growth and Opportunity Act, but many of these jobs had people working under sweatshop conditions, including coercion. With the demise of the global Multi Fiber Agreement and its quota system, investment became more volatile with factories closing literally overnight and managers leaving the country without fulfilling their obligations to pay employees. Those that did not leave use the threat of doing so as a way to gain leverage over workers, thereby preventing them from organizing or joining unions. With little job security and low wages many women in Lesotho paid for food through sexual favors leading to increased HIV/AIDS infection rates.

The U.S.-SACU FTA should provide the space for participating countries to create policies that retain and create jobs that respect ILO labor standards.

Small Farmers in the United States and Southern Africa

In Southern Africa, where about 70 percent of the population lives in rural areas and suffers the greatest poverty levels, the impact of a trade agreement which does not address all farmers, especially poor ones, will lead to increase inequalities. In the region, the average per capita dietary energy supplies have declined over the past 15 years, to 2,160 calories per day against a requirement of 2,700; endemic drought turns chronic hunger into serious malnutrition, for the young and the weak (e.g. people living with HIV/AIDS). Impoverished and small-scale farmers (often female heads of households) produce primarily for local and national markets and simply cannot compete with large agribusinesses on the national or world markets. Regional food security relies most on access by rural women to productive resources, such as land, credit, farm inputs and market infrastructures.

Any trade agreement on agriculture must recognize national food sovereignty by guaranteeing governmental authority to pursue tariffs and subsidies that safeguard food security, increase food crop diversification and protect the environment. The United States government must prevent private and public dumping of U.S. grains in the region that adversely affects small scale farmers. Such farmers are unable to compete against imported agricultural goods sold below their own production costs or indeed, below the cost of agribusiness production in the U.S.

Current U.S. domestic farm policy, despite subsidies of billions of taxpayer dollars, is destructive of small and medium producers as well as the environment, and therefore, if exported via trade agreements, this agro-system could become harmful to other regions. Free trade agreements are inappropriate instruments to provide sustainable rural development and entitlement to food, either in the U.S. or in Southern Africa.

The U.S.-SACU FTA must contribute to rural development strategies, in the U.S. and Southern Africa, that promote subsistence and small-scale farms, dedicated to enhance food sovereignty and environmental sustainability. Countries should be able to enact legislation that protects products with special economic, social or cultural importance, such as corn and beans, from trade liberalization.

The SACU agreement must not promote the monopolized control over nature, science and technology by global corporations. Instead, the fundamental right of governments to safeguard traditional knowledge, protect public health, and expand access to essential medicines must be upheld.

The SACU countries have the highest rates of HIV in the world and AIDS, as well as other treatable diseases, threaten to devastate the societies and economies of the region. Any trade treaty must not diminish Southern African countries� rights to secure the production, import, export and provision of affordable medicines to respond to the HIV/AIDS epidemic and other public health problems. The 2001 WTO Doha Declaration, to which the U.S. and SACU countries are signatories, explicitly reaffirms governments� rights to �protect public health and, in particular, to promote access to medicines for all.� The United States must not pursue provisions, known as "TRIPS plus," that would undermine countries� rights to act in the interest of public health. These TRIPS plus provisions include restricting compulsory licensing or preventing access to test data by governments and potential generic manufacturers.

Given the concerns around intellectual property and access to necessary medicines especially in this vulnerable region of the world, the U.S. should take Intellectual Property provisions out of the current negotiations.

The Africa Union has long opposed patents on life and therefore, no trade agreement should require private intellectual property rights over bio-resources (seeds, plants, animals). In Southern Africa, the Africa Model Legislation provides legal alternatives for protecting breeders� rights, while fully honoring farmers� rights over seeds. Private intellectual property rights over bio-resources rewards transnational corporations, not small scale farmers growing food crops from saved seeds.

Southern African governments must be allowed to enact restrictions on genetically-modified organisms that they deem necessary to sustain regional crop varieties. Any US-Southern African trade agreement must recognize governments� authority to determine and implement publicly legislated safety standards for imported food products and not require abrogation of other international treaties, such as the Cartagena Biosafety Protocol. Under this Protocol, member governments cannot be required to permit entrance of food or agricultural products whether as food aid or commodities--treated with specific forms of technology that are of public concern, such as genetically modified organisms and irradiated foods.

In the U.S.-SACU FTA, small agricultural producers� rights should take precedence over Intellectual Property Rights where agricultural genetic resources are concerned. Additionally, the U.S.-SACU FTA should not interfere with a country�s ability to live up to the commitment it made in ratifying the Cartagena Protocol and its parent Convention on Biological Diversity.

Any trade agreement should preserve government authority to regulate foreign investment in order to achieve national sustainable development policies. Governments should be able to protect public interest laws from suits and establish performance requirements in order to support an emerging productive sector or meet community development plans. This includes using government contracts to promote gender equality, social justice and respect for human rights. Equally, governments should be able to impose capital controls to protect their economies and citizens from destructive flows of speculative investment.

Despite the need to offset the economic legacy of colonialism, conflict and apartheid, participating countries could lose the right to enforce their affirmative action policies. This includes programs like South Africa's Black Economic Empowerment initiative that asks companies doing business in the country to grant equity ownership to black business partners and appoint black executives to company boards.

The rights established under international human, labor and environmental agreements and conventions should take precedence over investor rights. The Investor-State clause in NAFTA, the US-Chile FTA and CAFTA grants foreign investors the right to sue governments for compensation over public-interest laws that could undermine their potential profits. Alarmingly, 42 cases have been filed thus far by corporate interests and investors under NAFTA's "Chapter 11" investor provision, many against local environmental, public health and safety laws. With only 11 of the 42 cases finalized, some $35 million in taxpayer funds have been granted to five corporations that have succeeded with their claims. Investment disputes between countries should be resolved in an accountable and transparent manner, and with the participation of all affected parties.

The U.S.-SACU FTA should preserve government authority to regulate foreign investment, avoid prohibiting performance requirements, and have no investor-state clause.

Essential services are services that help meet peoples� human rights to food, education, health and basic utilities like water and electricity. Fundamentally, services are not tradable commodities and access to basic necessities must not be subject to the negotiated rules of free trade. As such, they should not be included in FTA negotiations.

At a minimum, essential services must be exempt from the "national treatment" standards, which mandate foreign service providers be treated at least as well as domestic providers. Unlike in CAFTA and the U.S.-Peru FTA, it is also essential that a blanket "negative list" approach to service sector liberalization, which would apply to all services not specifically excluded by the state party, be rejected.

Previous liberalization and commodification of essential services in Southern Africa has been deeply contentious and led to increased prices, stratification of service levels by wealth, and inability of governments to effectively and pro-actively protect health and safety of people through these services.

Fundamentally, the rights of governments to decide which, where, when or whether to open services to foreign providers must be upheld. All services essential to the people and development needs should be excluded form the U.S.-SACU FTA.

In 2002 when the US Trade Representative notified Congress that the Administration intended to initiate free trade negotiations with Sub-Saharan nations, the claim was that this FTA would �bring new hope and prosperity to Southern Africa,� and �further drive regional growth and development.� By excluding the principles laid out in this statement, the resulting FTA will fail to provide sustainable development. Unfortunately, indications are that current US-SACU negotiations will model other FTAs (such as the CAFTA and the US-Chile FTA) that ignore these principles. This is a matter of grave concern to all who seek equitable and just trade relationships between the U.S. and the nations of Southern Africa.

The elements and standards in this statement are essential to a trade agreement that could foster a more just, sustainable and prosperous human society, and U.S.-SACU FTA negotiations must be evaluated on the basis of their inclusion. To summarize, these include:

This Statement is endorsed by the following U.S.-SACU FTA Working Group Members:

Trade Strategy Group (TSG) South Africa
PO Box 32571
Braamfontein 2017
Republic of South Africa

SOUTHERN AFRICAN CUSTOMS UNION (SACU) � UNITED STATES (US) FTA NEGOTIATIONS

As you are well aware, the SACU-US FTA negotiations are currently at a critical juncture. The US Trade Representative, Rob Portman, has raised the possibility of discontinuing formal FTA negotiations in light of the difficulties in agreeing on the scope and architecture of the proposed trade deal. In response, Representatives Charles B. Rangel and Jeff Flake have written to President Bush encouraging Washington not to give up on SACU, holding that the FTA will substantially contribute to the growth and development of the region�s economy. While we warmly welcome and appreciate this effort by a leading member of the US Congressional Black Caucus, we do believe that there is now a strategic political moment for us � in both SACU and the US, government and non-government � to critically re-think this approach to SACU-US relations and to adopt a more pro-poor perspective on the profound implications and outcomes of an FTA. For this reason, we as the Trade Strategy Group (TSG) are addressing this letter to you.

The TSG, based in South Africa, encompasses a collection of policy NGOs, trade unions, faith-based networks, women and environmental organisations that are broadly committed to the sustainable, equitable and people-centred development of South Africa and the Southern African region.

Given the unique developmental profile of SACU � including a least developed country, Lesotho � we confront a plethora of socio-economic challenges, aggravated by the unfair and scandalous trade practices of our development partners in the North. The evidence from past FTAs � such as CAFTA - leads us to firmly believe that the competitive liberalisation paradigm favoured by the US and its standard template premised on deep WTO-plus commitments will not resolve the urgent objectives of reducing unemployment, eradicating poverty and promoting fair, equitable and balanced economic growth in our region. The asymmetrical market openings often demanded by the US and its insistence on the inclusion of onerous new trade issues in FTAs � such as investment, services, intellectual property rights, competition policy, public procurement, and labour and environmental standards � will merely deepen and compound many of these socio-economic deficits and overwhelm our national and regional institutional capacities. Even within NAFTA, the experience of Mexico has demonstrated that although trade liberalisation can create conditions conducive to growth, it is no panacea for development problems.

As you are aware, trade is hardly an end in itself; appropriately framed, it may be a means to promote jobs, sustainable livelihoods and development. For this reason, we believe it is imperative that the SACU nations maintain their right to sufficient policy space and flexibilities to promote domestic and regional industrialisation and diversification, and balanced economic growth. We need to urgently consolidate and cement an approach that is sensitive to the developmental needs and requirements of our region.

Our TSG Group shares the following concerns about the current trajectory and implications of the SACU-US FTA negotiations:

1. SACU and the US are at very different levels of development, and even within SACU there are wide divergences in the size of economies. Despite these realities, the current negotiating dynamic seems to be highly unbalanced. SACU is being requested to make complex, onerous and unreciprocated WTO-plus commitments in the new areas � especially services and investment � while the US is offering tariff reductions on goods. However, the latter is likely to be accompanied by complex rules of origin, as in the case of the US-CAFTA FTA. The benefits for SACU will be temporary should there be multilateral liberalisation of non-agricultural tariffs by 2015.

2. The US approach to agricultural liberalisation in FTAs is also a matter of concern. In these FTAs, market access liberalisation commitments are highly skewed in favour of the US. For example, in the US-Chilean FTA, agricultural duties disappear after a 4 year period, while bilateral US duties disappear in 12 years. This means that the SACU market would be open to subsidised agricultural dumping by US producers, as well as the entry of GMO goods that may constrain SACU export options to the EU. The TSG thus strongly holds that:

2.1 SACU countries should only open up their markets according to internally determined and flexible modalities reflecting and responding to industrial development and diversification, food security, poverty eradication and other concerns.

2.2 Any market openings should take into account the priority importance of SACU member countries� trade and other cooperation relations with fellow members of SADC.

2.3 Subsidised US agricultural products such as beef, lamb, poultry and dairy products should be excluded from any agreement, as long as the US is not ready to reform its agricultural regime.

2.4 Any agreement with the US should facilitate real, meaningful and improved market access in the US for SACU sugar producers, such as South Africa and Swaziland

3. The reduction of tariffs through the FTA would imply a reduction of tariff revenue, a critical consideration for some of the smaller SACU members who are highly dependent on these streams, particularly Lesotho and Swaziland. This will be aggravated by the recent job losses in the mining and textiles and clothing sectors � the latter due to the expiry of the MFA quotas and enhanced competition from China. Hard hit countries would be pressed to develop alternative revenue sources, such as a value-added tax.

4. SACU is only a customs union covering trade in agricultural and industrial goods � the agreement does not extend to non-commodity trade issues such as services, investment, intellectual property and the other new generation trade issues that the US seeks to negotiate and include in an FTA. Should these onerous new issues be substantively included in an FTA, there would first have to be a complex internal process of harmonising the different SACU national regulations and positions. This would take time and considerable human and financial resources, diverting attention away from more pressing socio-economic concerns.

5. The US has strong offensive interests in services, which we strongly affirm to be fundamental rights (water, electricity, health, education, etc) and not simply tradable commodities. Should we be led by the experiences of the Chile and Singapore FTAs, it is clear that requested liberalisation is likely to be highly asymmetrical and in some areas (e.g. banking, securities, insurance, etc) involve larger (and even unilateral) concessions by SACU. As you are aware, such onerous demands led Costa Rica to temporarily withdraw from the US-CAFTA negotiations. The openings of services markets through a negative list approach � the preferred US route � may well hasten the privatisation of essential social services, making delivery of these rights unaffordable to poor and rural communities. It is even worth noting that the EU-SA Trade, Development and Cooperation Agreement of 1999 does not extend to the services sector.

6. The inclusion of onerous investment provisions, guarantees and dispute settlement � such as investor-state arbitration � are unacceptable and may also clash with socio-economic development objectives of SACU member states. This is particularly the case in South Africa, which has adopted a policy of broad-based Black Economic Empowerment (BEE), affirmative procurement and sector transformation charters. While it is argued that an FTA will enhance levels of inward investment into SACU, it is worth noting that recent research[1] holds that even the EU-SA Trade, Development and Cooperation Agreement of 1999 has had limited impact on inflows of foreign direct investment. Of even greater concern � given the FTAs with Chile and Singapore � is the prohibition on the use of capital controls. SACU countries should not be required to give up this instrument to deal with international financial disturbances and to promote domestic development.

7. From the SACU trade perspective the US is a demandeur of an environment chapter. Four main issues on the environmental implications are of importance for SACU:

7.1 SACU countries are rich in biodiversity and many rural communities depend on natural resources for their livelihoods, therefore the focus is on the protection of SACU�s environment and natural resources.

7.2 Environment provisions should not ensue in trade restrictions as difficulties in enforcement in developing countries are often due to lack of capacity and not political will. Caution should be taken so external standards and environmental laws of foreign markets do not dictate that certain environment-related conditions be met as condition of market access.

7.3 The environmental chapter of an FTA should not be subject to a separate dispute settlement mechanism.

7.4 Improved cooperation and positive measures should be pursued through efforts to meet the multilateral environmental agreements. These include building institutional capacity, transferring of �clean� and appropriate technology, and providing technical and financial assistance.

8. US insistence on including �TRIPS-plus� intellectual property rights provisions, and undermining the rights of countries to use public health flexibilities described in the WTO Doha Declaration on the TRIPS Agreement and Public Health will have a negative impact on access to AIDS drugs and other important medicines, by driving up the costs of these essential products and curtailing the market entry of cost cutting generic medicines. Lack of access to medicines has created an urgent public health crisis in the region. In the case of HIV/AIDS alone, more than 3000 people in the Southern African Development Community died of AIDS daily in the course of 2003 � in terms of mortality. This is the equivalent of one 9/11 attack on SADC citizens every single day of the year, and this number is steadily rising. In particular because of the public health problems created by profound lack of access to treatment, this FTA must not require any IPR obligations beyond those set out in TRIPS as reaffirmed by the Doha Declaration on TRIPS and Public Health.

9. We would strongly urge you, upon serious reflection on the negative outcomes of past US FTAs, to ensure that in any partnership agreement negotiated between SACU and the US:

9.1.1 There is real and not simply nominal improved market access for all SACU products in the US market. This requires less the reduction of already low tariffs than the guarantee that SACU exports do not face non-tariff barriers to trade, such as technical standards and food safety requirements, or onerous rules of origin. Necessary quality and product standards should be clearly formulated in advance, and the US should provide comprehensive financial and technical assistance as part of the final agreement.

9.1.2 Asymmetry in the liberalisation schedule, particularly for implementation and content. To address the extremely divergent development status of the US and SACU economies, it is necessary that SACU opens its market � in each single sub-sector � to a lesser degree and has more time for market liberalisation than the US.

9.1.3 Support to address supply-side constraints and capacity to take advantage of market opportunities, particularly for small, medium and micro-enterprises.

9.1.4 Generous and flexible rules of origin that allow extensive cumulation. The AGOA rules of origin valid for �lesser developed countries� should be maintained for Botswana, Namibia, Lesotho and Swaziland to bolster their domestic manufacturing capacity.

You may liaise with Brendan Vickers (brendan@igd.org.za) of the Institute for Global Dialogue (IGD).

- USTR Rob Portman; Florie Liser, lead negotiator for SACU; Patrick Dean Coleman and William Jackson, African Affairs staff

[1] CREFSA, Foreign Direct Investment in South Africa. The initial impact of the Trade, Development and Cooperation Agreement between South Africa and the European Union, London, October 2005.