Trade pact with southern African customs union may get delayed

Trade pact with southern African customs union may get delayed

New Delhi: India’s efforts to gain greater access to the African market may get delayed further as a proposed trade agreement with the South African Customs Union, or Sacu, is facing hurdles due to the latter’s reluctance to open its market wide enough.

“We have asked Sacu to offer tariff concessions on 30-50% of its total 6,500 traded goods," said a commerce ministry official who did not want to be identified. “However, they are ready only to offer tariff concessions on less than 10% of total traded goods. It does not make sense to sign a trade agreement when the offer is so low."

Established in 1910, Sacu is the oldest customs union, comprising South Africa, Namibia, Botswana, Lesotho and Swaziland. India and Sacu started negotiations on a preferential trade agreement in 2005 following the India-South Africa Joint Ministerial Commission. A memorandum of understanding was signed between the two in 2008 to facilitate the negotiations. So far, four rounds of talks have been held.

The accord will be based on a “positive list" approach, along the lines of India’s pact with Mercosur, under which only sectors listed in the agreement were liberalized. The treaty was agreed between India and Mercosur on 19 March 2005 and the pact came into effect on 1 June 2009. Mercosur—a regional trade grouping consisting of Argentina, Brazil, Paraguay and Uruguay—offers tariff concessions for 452 Indian products under the agreement.

Sacu’s imports from India include textiles, clothing, food products, live animals, beverages, tobacco, machinery, cotton products, pharmaceuticals, rice, vegetable products and spices. Sacu’s exports to India include raw materials such as gold and silver, coal, iron, steel and non-ferrous metals, sugar, vegetable products, as well as arms and defence material.

“As South Africa is a member country in Sacu, it is a significant market for India," said Abhijit Das, deputy project coordinator, Unctad (United Nations Conference on Trade and Development) India project. “Sacu is also a good entry point for India to increase its trade ties with the African continent."

Sacu is also considered an important market for India to reduce its dependence on the developed world and expand into developing countries through trade diversification.

Apart from offering mutual benefits, the trade agreement is expected to be an important link in the trilateral India-Brazil-South Africa (Ibsa) initiative to increase South-South trade, Das said.

In 2008-09, India’s total trade with the Sacu region stood at $7.7 billion (Rs35,574 crore), out of which trade with South Africa was $7.5 billion.