Trade agreement with SA Customs Union faces regulatory hurdles

Business Standard | March 29, 2011

Trade agreement with SA Customs Union faces regulatory hurdles

Nayanima Basu / New Delhi

The Preferential Trade Agreement (PTA) between India and South Africa Customs Union (SACU) has run into some regulatory issues even as both countries have vowed to achieve bilateral trade worth $15 billion by 2014 from around $10 billion at present.

The Southern African Customs Union (SACU) consists of Botswana, Lesotho, Namibia, South Africa and Swaziland.

“There are regulatory issues that we want to iron out first because we don’t want adulterated consequences to pop up after we sign the deal. We want to make sure that it is balanced, satisfies our appetite and addresses our developmental need,” South Africa’s Deputy Minister for Trade and Industry Elizabeth Thabethe told Business Standard in an interview.

Thabethe, who is on a week-long visit here, also said the next round of negotiations would take place soon and so far “considerable progress” had been made. However, she highlighted that the PTA should yield a win-win situation for both sides and boost bilateral trade and investment.

Under a PTA, both countries reduce their tariffs on a particular number of products from the level they maintain with countries that are not members of the agreement.

However, unlike Free Trade Agreement (FTA), PTA does not slash or eliminate duties from a large number of tariff lines. She also mentioned while the relationship at government-to-government level is growing stronger, the business-to-business interaction has not happened.

“There is interest from both countries. But governments alone cannot achieve the goals. We are making things easier and conducive for them (Indian businesses) to come there if we want to take our bilateral trading relationship to the next level,” she said.

Thabethe is leading a 35-member business delegation covering sectors such as agriculture, steel, agro-processing, information and communications technology and construction, among others. The delegation would now be travelling to Mumbai to explore more investment opportunities. India and South Africa have already had a bitter experience on regulatory issues concerning a merger between Indian telecom giant Airtel and South Africa’s MTN, which faced the problem of dual listing.

South African officials had urged India to consider dual listing of MTN so that it could retain its African ownership but Indian laws do not allow such a concept. Thus the deal, which was worth $23 billion and was expected to be the biggest merger ever, had to be called-off.

The Ministry of Commerce and Industry had earlier indicated that while the PTA would initially result in tariff cuts on a specific number of products, it could be expanded into a free trade agreement depending on progress of the PTA. Both sides are also discussing a bilateral investment promotion and protection agreement.

Commerce and Industry Minister Anand Sharma, during his visit to Johannesburg in January this year, had set up the target to achieve $15 billion in bilateral trade in the next three years with the signing of the PTA, which is expected to boost trade, particularly in automobiles, pharmaceuticals and machinery.

He had met South Africa’s President Jacob Zuma and Trade and Industry Minister Rob Davies.

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