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Trade Accord Boosts Latin America Ties

Business Day, Johannesburg

Trade Accord Boosts Latin America Ties

30 June 2008

By Mathabo Le Roux, Johannesburg

While acrimony persists over trade talks with the European Union (EU), the Southern African Customs Union (Sacu) has had a breakthrough with bilateral negotiations with the Latin American trade bloc Mercosur.

After nearly three years of negotiations, Sacu has finally concluded a preferential trade pact with Mercosur, which comprises Argentina, Brazil, Paraguay and Uruguay. The deal is an extension of the original trade deal between Sacu and Mercosur concluded in 2004, which drew criticism for its low level of ambition.

Speaking after a Sacu council meeting in Midrand on Friday, SA’s chief trade negotiator, Xavier Carim, said all technical negotiations had been concluded on the deal, which includes 2000 product lines. The agreement would now be submitted to the national authorities to ensure compliance with national laws, after which a date would be decided for ministerial signature and ratification.

But a hefty portion of goods manufactured in the two trade regions will still face tariff barriers upon entry, notably automotive products, which remain heavily protected in SA and which were excluded from liberalisation because this could undermine the Motor Industrial Development Programme . New-generation issues such as services and investment were also not included.

Carim said, however, that the agreement included a provision for the future broadening of the deal, should the parties wish to pursue that. The deal is expected to be in force before the end of the year.

In the meantime, negotiations on the economic partnership agreement (EPA) will resume this week.

The parties will meet in Gaborone from tomorrow, where the concerns of some Sacu members are expected to be discussed.

SA and Namibia balked at initialling the interim EPA over the EU’s demand for most-favoured nation (MFN) treatment (which would see preferences given to other countries in future free trade agreements automatically extended to the EU), the restriction of export taxes, infant industry protection concerns and some legal and administrative issues.

Carim said the European Commission (EC) had agreed that the integrity of Sacu needed to be respected and had indicated that it was ready to accept a single tariff offer from Sacu. This could see SA included in the market access side of the interim EPA initialled at the end of last year without SA.

Moreover, the EC has relinquished the July 1 deadline for the interim EPA to be signed. With the timeline for the formalisation of the interim EPA now more flexible, Namibia’s and SA’s concerns could be addressed and Sacu could cement a more common approach, Carim said.

Sacu has also concluded a trade, investment and co-operation agreement with the US.

While the agreement did not include an opening-up of trade, Carim said its significance was an agreement to identify technical barriers in areas such as sanitary and phytosanitary products , to facilitate trade.