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India-SACU free trade agreement needs ‘fine-tuning’

New Era, Namibia

India-SACU free trade agreement needs ‘fine-tuning’

By Edgar Brandt

6 February 2014

WINDHOEK – The increasing amount of trade between Namibia and India is expected to balloon even further once the India-Southern African Customs Union (SACU) Preferential Free Trade Agreement (PTA) is finalised. “It is important to reach an understanding that has a reasonable level of ambition,” said India’s Minister of Commerce and Industry, Anand Sharma, yesterday while paying a courtesy call on Prime Minister, Dr Hage Geingob.

Sharma added that the details of the agreement still have to be ‘fine tuned’ and emphasized that such an agreement should be beneficial for both India and Namibia. “This (PTA) will connect our people through both regional and global value chains, which would be hugely beneficial for both economies,” Sharma added. Also commenting on the agreement Minister of Trade and Industry, Calle Schlettwein, who accompanied Sharma to the PM’s office, said South-South cooperation is very important for Namibia. Schlettwein added that it is crucial that the agreement recognizes the different developmental stages of the all countries involved. Prime Minister Geingob also remarked that SACU is a building block for an eventual Southern African Development Community (SADC) agreement with India. Geingob reminded all parties that any SACU agreement will most likely be transferred over to SADC in due course.

The agreement is however still at the negotiation stage, but the PTA could see the light of day sooner than later with the official visit of the Indian minister. Namibia, as the chief negotiating party within SACU, has been working on the preferential trade agreement with India, and the final Memorandum of Understanding was initially set for conclusion in December 2013. Imports from India in 2012-2013 were valued at just over US$74 million, while during 2013-14 this figure stood at about US$64 million and it is estimated that Namibia exported close to US$10 million worth of goods to India during the same period. Last week members of the Indian business community remarked that bilateral cooperation in the energy and agricultural sectors has excellent prospects. Accordingly, business owners expressed the opinion that the volume of trade between Namibia and India could be much more than the reflected figures.

India’s principle commodities exported to Namibia include drugs and pharmaceuticals, inorganic/organic/agro chemicals, glass and glassware, plastics and linoleum products, manufactured metals, machine tools, machinery and instruments, transport equipment, manufactured rubber goods and electronics. The main products exported from Namibia to India include non-ferrous metals, ore and metal scraps, transport equipment and machinery. The Southern African Customs Union (SACU) currently consists of Namibia, South Africa, Botswana, Lesotho and Swaziland. A customs union is a type of trade bloc composed of a free trade area with a common external tariff. The member countries set up a common external trade policy, but in some cases they use different import quotas. Reasons for establishing a customs union normally include increasing economic efficiency and establishing closer political and cultural ties between member countries.

SACU is the oldest existing customs unions in the world and was established in 1910 pursuant to a Customs Union Agreement between the then Union of South Africa and the High Commission Territories of Bechuanaland, Basutoland and Swaziland. When these territories gained independence the agreement was updated on 11 December 1969. The customs union was relaunched as SACU with the signing of an agreement between the Republic of South Africa, Botswana, Lesotho and Swaziland. The updated union officially entered into force on 1 March 1970 and after Namibia’s independence from South Africa in 1990, it joined SACU as the fifth member. SACU meets annually to discuss matters related to the customs agreement. There are technical liaison committees such as the customs technical liaison committee, the trade and industry liaison committee and the ad hoc sub-committee on agriculture, which meet three times a year. SACU’s aim is to maintain the free interchange of goods between member countries and enforces the common external tariff, as well as a common excise tariff to this common customs area. All customs and excise duties collected in the common customs area are paid into South Africa’s National Revenue Fund. The revenue is then shared among members according to a revenue-sharing formula as described in the agreement. SACU revenue constitutes a substantial share of state revenue in Botswana, Lesotho, Namibia and South Africa.