Trilateral treaty of the South

Inter Press Service | 2 December 2009

TRADE: Trilateral Treaty of the South

By Gustavo Capdevila

GENEVA, Dec 2 (IPS) — Negotiations to form a trade alliance between countries of Africa, Asia and South America stepped up to a political level when ministers discussed the issue this week, giving the initiative a further boost.

The idea of establishing a preferential trade agreement between India, the five countries of the Southern African Customs Union (SACU - Botswana, Lesotho, Namibia, South Africa and Swaziland) and the four full members of South America’s Mercosur trade bloc (Argentina, Brazil, Paraguay and Uruguay) was first discussed formally at technical meetings in 2007.

Now it is no longer an idea, but a reality, Brazilian Foreign Minister Celso Amorim, a keen promoter of the trilateral trade treaty, told IPS.

At a meeting in Geneva Monday, the ministers of India, Mercosur and SACU instructed their government experts to "conduct technical work, including studies, to explore possible tracks for the envisaged Trilateral Trade Arrangement."

"This aim reflects the new reality we are experiencing," Amorim said. For example, world opinion has already realised that the fast-growing emerging economies of the BRICS countries (Brazil, Russia, India, China and South Africa) are probably more important to the recovery of global economic activity "than many, not all, but many of the industrialised economies," he said.

"The same is true for India, Mercosur and SACU, which are potentially a great economic area, where we can reach agreements," he added.

"The Trilateral Trade Arrangement under discussion will unite developing countries from three continents," said Néstor Stancanelli, head of international economic negotiations at the Argentine Foreign Ministry. And each country will contribute its own unique culture, he added.

Negotiations on preferential trade agreements began with trilateral technical meetings in Pretoria, South Africa in October 2007, and were followed up in Buenos Aires, Argentina in April 2008.

Ministers were in the driving seat at the meeting on Monday, but they delegated the pursuit of studies and discussions back to the technical experts, who will probably meet again in Uruguay in the first half of 2010, Amorim said.

The early technical meetings were exploratory, but "now the ministers have charged the technical experts to come up with specific mechanisms to meet common goals," he said.

The desired agreement needs to "build complementarities among the participating members, giving due recognition, among others, to the asymmetries in the levels of development of all the participating members," says the joint communiqué released after the meeting.

In particular, the technical studies are to take account of the presence of a least developed country, Lesotho, among the members of the future agreement, the communiqué instructs.

The United Nations recognises countries with annual per capita gross national income (GNI) below 750 dollars, and very low indices for nutrition, health, education and adult literacy, as least developed countries (LDCs).

Prospects for a trilateral accord are bolstered by the existing preferential trade agreements between Mercosur and India and between Mercosur and SACU, and ongoing trade negotiations between India and SACU.

The ministers noted that these three bilateral negotiations could form the basis for future progress towards an India-Mercosur-SACU Trilateral Trade Arrangement.

A Latin American negotiator told IPS that the issues of complementarity and competition would be key factors in the content of the agreement and its eventual implementation.

In many ways, the economies of the future partners to the agreement may be complementary. For instance, South Africa and its SACU partners are highly competitive producers of minerals and non-ferrous metals, as well as vegetable oils.

On the other hand, the African countries are weaker in steel, several industrial products, cereals and sugar.

India, in turn, depends on imports of oilseeds and vegetable oils, but its strength lies in electronics, machinery and equipment industries, as well as production of all kinds of meat, except beef.

The Indian clothing industry is especially dynamic. The Latin American expert predicted that Indian textile exports may create difficulties for Brazil and Argentina.

As for Brazil, Mercosur’s dominant partner, the expert said its weak flank was wheat, leather goods and non-ferrous metals, while it excels in production of vegetable oils and oilseeds.

But the idiosyncracies of individual national markets may fade into insignificance if the trilateral treaty turns out to be, as Amorim predicted, a "new generation" agreement. "That is to say, it will not be limited to free trade," he explained.

"New generation agreements must be a different kind of understanding, based on economic cooperation and including technology, investment and joint ventures, all within a common vision," he said.

For example, talks between Mercosur and the southern African states indicated a potential for complementarity in the automotive industry, and "a similar agreement for the same industry could be reached with India," the source said.

But not everything will be plain sailing for this initiative. Experts point out a serious obstacle in the low frequency and freight capacity of sea and air transport between the three regions.

There is also a lack of adequate information about trade possibilities and the countries’ import policies.

Amorim brushed aside the suggestion that this regional trade agreement might jeopardise multilateralism, the principle ascribed to by all members of the World Trade Organisation (WTO).

"I think it does quite the opposite, because by reinforcing cooperation between the countries of the South, we are strengthening them to resist the onslaught of multilateralism, in which there has always been an imbalance. Now our relative positions will be more balanced," said the foreign minister.

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source: IPS