SA upbeat over free-trade pact with South American bloc

FMCG SUPPLIER NEWS

Business Day - Nov 15th 2011, 10:16

Trade and Industry Minister, Rob Davies, says SA stands to accelerate its share of exports with South America’s largest economies, through a free-trade agreement with Mercosur due to come into force next year 

SA stood to accelerate its share of exports with South America’s largest economies through a free-trade agreement with Mercosur due to come into force next year, Trade and Industry Minister Rob Davies said last week.

Mercosur has a combined gross domestic product of $2,8-trillion a year and an estimated population of 267-million people.

Its members are Argentina, Brazil, Paraguay and Uruguay.

Countries such as Chile, Ecuador, Colombia, Peru and Bolivia have been granted associate membership of the organisation.

The agreement is between Mercosur and the Southern African Customs Union (Sacu), made up of five countries: SA, Namibia, Botswana, Swaziland and Lesotho.

The free-trade agreement would potentially reduce tariff rates that South African exporters pay to the South American countries. Brazil, which is the biggest economy in South America, levies a tariff of up to 12% on South African products.

Trade policy analyst Peter Draper yesterday said that the trade agreement was largely "political, what trade economists would call a trade- lite agreement".

He said there were up to 7000 tariff lines that needed to be dealt with between Mercosur and Sacu.

Still, Mr Davies was optimistic the agreement would soon be in place.

"I’m certain that we will conclude this agreement next year, which will pave the way for us to trade with South America’s strongest economies," he said.

"Furthermore, this agreement will allow us to be exposed to advanced techniques in agroprocessing in countries like Argentina," he said.

South America could also tap into SA’s deep-mining technology, which has been used to mine up to 4km underground.

Mr Davies was speaking from Argentina, where he participated in a trade seminar titled SA and Argentina: Gateway Countries to Continental Opportunities .

The seminar was organised by SA’s mission to Argentina, headed by former Democratic Alliance leader Tony Leon.

"When we were at the conceptualisation of the seminar, the Gateway concept struck us as a useful envelope in which to enclose the two countries’ bilateral relationship and to project its forward momentum," Department of International Relations and Co-operation spokesman Clayson Monyela said.

Argentina and SA are at similar stages of economic development. A bi-national commission to discuss measures to increase trade between the two countries is scheduled to be held in SA next year.

Annual two-way trade between Argentina and SA stands at $2bn, according to figures from the Department of Trade and Industry.

Sacu is also negotiating with India for a preferential trade agreement.