Monday, October 12, 2009

Mercosur deal with Sacu to lift trade

October 12, 2009 - By Donwald Pressly

President Jacob Zuma returned from Brazil over the weekend with an agreement in the bag between Mercosur and the Southern African Customs Union (Sacu) that will liberalise trade for about 1 000 tariff item lines.

Accompanied by International Relations Minister Maite Nkoana-Mashabane and Trade and Industry Minister Rob Davies, Zuma strengthened ties with a key player in the South-South trading bloc and cemented political relations.

Trudi Hartzenberg, the executive director of the Trade Law Centre, said Brazil was the major economy in South America's Mercosur bloc, which had signed a preferential trade agreement with Sacu. "This is a limited focus agreement, partially liberalising trade in goods." She noted that a key exception was the touchy issue of trade in beef products.

"Brazil specifically is a key player not only among the emerging market group of economies, but globally, and therefore a key country to forge a relationship with in the context of South Africa's focus on South-South relationships.

"It is important to keep in mind that we compete directly with Brazil in some of South Africa's most sensitive sectors - motor vehicles, clothing and textiles and agriculture, including sugar," said Hartzenberg.

South Africa needed to do its "homework", she said, and explore other opportunities, such as further potential for trade relationships in services.

Peter Draper, of the SA Institute of International Affairs, said the visit was significant because it had completed negotiations between Mercosur and Sacu that had been 10 years in the making. However, he said it was a limited agreement compared with the trade agreement with the EU, which involved about 6 500 tariff line items.

He said the agreement was likely to be beneficial to exports from South Africa. "I don't see a huge jump in trade, but the trading relationship (with Brazil) has been chugging along and it will now receive a small boost."

On the political front, he noted that both South Africa and Brazil had undergone economic reforms under the Washington Consensus. Both South Africa and Brazil had ameliorated the negative impact of the reforms by expanding the social welfare grant net.

The Department of Trade and Industry also signed a memorandum of understanding for the promotion of trade and investment with the Brazilian Ministry of Development, Industry and Foreign Trade.

In 2008 total trade between Brazil and South Africa reached $2.52 billion (R18.4bn) from $2.2bn in 2007. Mercosur has four full members and five associate members. Venezuela's full membership is pending.