USTR - Background Information on the U.S.-SACU FTA
                 
The Office of the United States Trade Representative

Background Information on the U.S.-SACU FTA
06/02/2003


The United States and the five member countries of the Southern African Customs Union (SACU) -- Botswana, Lesotho, Namibia, South Africa and Swaziland- launched negotiations toward a free trade agreement (FTA) in Pretoria, South Africa on June 2, 2003. This historic initiative represents an exciting new beginning in the growing trade and investment partnership between the United States and southern Africa and a tremendous opportunity for all Parties. It will be the first U.S. FTA in sub-Saharan Africa and the first time the SACU nations have jointly negotiated such an agreement. By building on the success of the African Growth and Opportunity Act (AGOA) and creating a comprehensive infrastructure for trade and investment, the FTA will bring new hope and prosperity to southern Africa and the United States, further drive regional growth and development, and provide for a common economic future.

New Opportunities

Free trade with southern Africa is a vital part of the Bush Administration's broader effort to drive global trade liberalization, to lower consumer costs, to create new commercial opportunities for U.S. companies, farmers and workers in fast growing regions of the world, and to draw developing countries into the mainstream of the global economy.

Through an FTA, the United States would gain guaranteed preferential access to its largest export market in sub-Saharan Africa – worth more than $2.5 billion in 2002. An FTA is also an opportunity to level the playing field in areas where U.S. exporters were disadvantaged by the European Union's free trade agreement with South Africa and to create an environment that enables an expanded U.S. trade and investment. Leading U.S. sales to the region include machinery, vehicles, aircraft, medical instruments, plastics, chemicals, cereals, pharmaceuticals and wood and paper products. U.S. foreign direct investment in the SACU countries totaled $2.8 billion in 2000.

An FTA will also help to forge and advance common objectives in the WTO Doha Development Agenda. Bilateral and regional FTA's create valuable competition for liberalization. They can serve as laboratories for liberalization and models for global negotiations by establishing innovative new disciplines, especially to deal with fresher topics on the globalization agenda – such as e-commerce, intellectual property in a digital economy, labor and environmental cooperation and expanding services trade.

Building on the Success of AGOA

For southern Africa, the FTA is an opportunity to build on the success of AGOA and to move the growing commercial ties between southern Africa and the United States from one way preferences to full partnership. The SACU countries are leading AGOA beneficiaries, accounting for more than 70 percent of U.S. non-fuel imports under this program in 2001. South Africa is the largest supplier of non-fuel AGOA goods to the United States. Lesotho is top apparel exporter, and Botswana, Namibia, and Swaziland have seen their total exports to the U.S. increase by 40 to 75 percent in the last year. These countries have seen the positive role that trade can play in promoting economic growth and development. Now, they're taking an important step toward deeper commercial engagement with the United States.

Free trade is an opportunity to improve southern Africa's commercial competitiveness and to better position the region for success in the U.S. market and the global economy. An FTA can also help these countries attract much needed new foreign direct investment. International investors prefer access to a large and integrated market. Guaranteed duty-free access to the world's largest market will further increase the attractiveness of the region as a link in the increasingly integrated global supply chain. The FTA can help drive economic integration in southern Africa and promote the goals of the New Partnership for Africa's Development (NEPAD). It also offers an opportunity to further link trade to the region's own economic growth, development and poverty alleviation strategies.

A Partnership for Prosperity

The U.S. is committed to provide the technical assistance necessary for SACU to assume the responsibilities of full partnership and to share in the benefits of free trade. The United States and SACU have established a special cooperative group on trade capacity building specifically for these negotiations, with $2 million in initial funding from the U.S. Agency for International Development. The cooperative group will meet regularly during the negotiations to identify needs and swiftly direct technical assistance resources to help SACU countries better prepare for and participate in negotiations, implement agreed commitments, and take advantage of free trade. This effort builds on the longstanding U.S. commitment to trade capacity building in southern Africa and across the developing world. The United States is the largest donor of trade-related technical assistance, accounting for more than 37 percent of the $1.48 billion in global funding in 2001.