Wednesday, October 21, 2009

SACU-Mercosur deal to lift trade

Pressly, Donwald (Business Report, Cape Town); BuaNews, from Sao Paulo

According to President Jacob Zuma, South Africa and other African countries have begun to explore more trading and export opportunities with countries in the South.

“Africa is beginning to explore the potential for trade and investment among countries of the South. More than ever before, the nations of the developed and developing world are considering how best to work in concert as Africa’s partners”, he said.

Zuma attended the South Africa -Brazil Roundtable Business Forum on Thursday during an official state visit. He returned over the weekend after sealing an agreement between Mercosur and the Southern African Customs Union (SACU) that will liberalise trade for some 1 000 tariff lines.

Accompanied by Trade and Industry Minister Rob Davies and International Relations Minister Maite Nkoana-Mashabane, Zuma strengthened ties with Brazil and cemented political relations.

Trade Law Centre (tralac) Executive Director Trudi Hartzenberg said that Brazil is the major economy in South America’s Mercosur bloc, which has signed a preferential trade agreement with SACU. “This is a limited focus agreement, partially liberalising trade in goods”, she said, noting that a key exception is the sensitive 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 within 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 needs to do its “homework” and explore other opportunities, such as further potential for trade relationships in services, she said.

Peter Draper of the South African Institute of International Affairs said that the visit was significant as it had completed negotiations between SACU and Mercosur that have been 10 years in the making. However, the agreement is limited compared with the European Union (EU) trade agreement, which involves about 6 500 tariff lines, he said.

Nevertheless, he said the agreement is 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, South Africa and Brazil have undergone economic reforms under the Washington Consensus, he noted. Both countries have 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, bilateral trade between South Africa and Brazil reached US$2.52 billion (R18.4 billion), marking a 10 percent increase from US$2.2 billion in 2007. South African exports to Brazil have been growing at a steady rate for the past six years although there is still room for improvement.

“There is clearly great potential for South African products to find markets in Brazil”, said Zuma.

Mercosur currently has four full members (Argentina, Brazil, Paraguay and Uruguay) and five associate members (Bolivia, Chile, Colombia, Ecuador and Peru), with Venezuela’s full membership pending.