Sunday, December 31, 2000

South Africa Looks West for

Some Economic Muscle

By HENRI E. CAUVIN

JOHANNESBURG, Dec. 26 South Africa, long dependent on Europe and the United States for most of its trade, is casting its eyes elsewhere - and not simply in search of new markets.

Seeking allies in the free-trade fight that has been stewing since the World Trade Organization's meeting a year ago in Seattle, South Africa is turning to its fellow economic powers in the developing world, looking east to India, north to Egypt and especially west to Brazil.

In a long step toward building such an alliance, South Africa agreed this month to begin negotiations on joining Mercosur, the six-country South American trading bloc anchored by Brazil.

Little trade currently crosses the Atlantic between South Africa and its prospective partners: modest amounts of industrial metals and chemicals from South Africa and some transportation equipment and other machinery from Brazil.

Even if an agreement flourished, South America would be hard pressed to supplant the United States or the European Union as a more active trading partner. But in what South Africa and its allies envision as a new era in trade, South America would be a strategically essential partner for Africa's biggest and most advanced economy.

Developing nations are increasingly frustrated by the developed world's power in setting the standards for what is and is not fair trade. They say that such standards, on issues like workers' rights and environmental regulations, have hurt developing nations while benefiting industrial ones, and many leaders across the developing world say collective action is the only way to change that.

In his first 18 months in office, President Thabo Mbeki has taken a lead role in pushing for more economic solidarity among developing nations, many of which are in the Southern Hemisphere. During a visit to Brazil this month, he continued to push for South-South cooperation.

"As developing countries, we have to radically restructure our economic relations and increase economic cooperation, investments and trade flows between our countries," Mr. Mbeki said in a speech on Dec. 15 to a Mercosur summit meeting in Florianopolis, Brazil.

Such efforts are the only hope for developing countries if they want to gain ground with the world's economic powers when the next round of world trade talks come around, Mr. Mbeki said.

"We will have to have a close and continuous tactical and strategic interaction," he said. "We have no effective mechanism to achieve this at present. Some of us in the developing world must engage in a dialogue aimed at changing this situation."

Hammering out a free-trade pact between South Africa and Mercosur is an integral part of that strategy, Tshediso Matona, South Africa's chief trade negotiator, said in an interview.

"This notion of South-South cooperation has really been on a rhetorical level," he said, "and we believe that by entering into truly genuine and practical cooperation in trade, we will advance South-South cooperation."

Michael McDonald, chief economist for the Steel and Engineering Industries Federation in South Africa, said the trade meeting in Seattle had given impetus to trade talks between countries like Brazil and South Africa.

"Before Seattle, the developing countries did not band together for anything," he said. Now, they realize that going it alone is not an option. "We can't push our weight that way," he said. "The only way is through alliance and taking the moral high ground. The developing countries got a raw deal in previous rounds, and we're looking for something better."

Europe's agriculture market in particular is where countries like South Africa and Brazil are desperate to make inroads. With planting schedules that run counter to the Northern Hemisphere's, the countries here in the South should, they say, be a viable option for Europe.

But it has yet to happen. South Africa made little headway on agriculture in its trade talks with the European Union, and Mr. Matona says Mercosur will find it a very tough road when the South Americans open talks with the Europeans.

For South Africa, six years into its post-apartheid existence, a free trade accord with Mercosur would mark its third such agreement, after pacts with the European Union and South Africa's home base, the Southern African Development Community. Mercosur, made up of Brazil, Argentina, Uruguay, Paraguay and two associate members, Chile and Bolivia, would offer South Africa more evenly matched trading partners than either the European Union or the southern African group.

Aside from South Africa, the regional development community is a collection of small, mostly weak economies, and the limitations of regional trading opportunities played a part in pushing South Africa to look farther afield. Certainly neighbors like Botswana and Mozambique have promising economies. But as markets for South Africa and its 44 million people, Botswana is tiny, with just over a million people, and Mozambique is desperately poor, with most people still untouched by the country's remarkable recent economic growth.

Zimbabwe, which should be a fertile market for South Africa but is economically stagnant and politically unstable, is even less promising. South Africa's biggest regional trading partner, Zimbabwe, in fact accounts for only 3.5 percent of South Africa's total trade.

So as strategic as its courting of Mercosur is, South Africa certainly hopes that along with the respect the developing world is seeking, such an agreement will yield more trade as well.