Department of Trade and Industry deputy director-general of international trade Xavier Carim. Picture: SUNDAY TIMES
Department of Trade and Industry deputy director-general of international trade Xavier Carim. Picture: SUNDAY TIMES

BUSINESS and labour in South Africa are concerned that a preferential trade agreement between the Southern African Customs Union (Sacu) and India could harm local industry without providing much benefit.

The two parties to the talks therefore plan to limit negotiations to a reduced level of tariff exchanges, Department of Trade and Industry deputy director-general of international trade Xavier Carim said this week.

Instead of a "big bang" approach, preferential access would be granted incrementally.

The retreat comes despite high-level commitment to closer trade ties expressed by South Africa’s and India’s presidents, and despite intense bilateral exchanges.

South Africa, which is negotiating with other Sacu countries, and India are both part of the Brics (Brazil, Russia, India, China and South Africa) group of emerging economies.

The concerns of business and labour, raised in discussions in the National Economic Development and Labour Council (Nedlac) last year, were that a host of non-tariff barriers such as regional state levies and customs regulations in India would make access to the Indian market very difficult and could offset the benefit of any preferential access granted to South African exporters.

On the other hand, India wanted preferential access to sensitive sectors such as clothing, a vulnerable industry in South Africa that has already suffered from a flood of cheap Chinese imports.

At a ministerial meeting last month, it was decided to limit the Sacu-India talks, which started in 2007, to tariff exchanges on a limited number of products.

This limited preferential trade agreement would be used incrementally as a building block for enhanced trade in future.

Further talks would take place before June, Mr Carim told Parliament’s trade and industry committee during an update on South Africa’s trade talks.

Trade between South Africa and India has shown strong growth, with South Africa rising to be India’s sixth-largest trading partner in 2011 from 20th in 2000. South Africa mainly exports gold, diamonds and platinum to India and imports pharmaceuticals, steel and other manufactured products from India.

Technical difficulties in reaching agreement on common trade and tariff data, and more recently in preparing offers, were responsible for the long delay in reaching an agreement between the parties, Mr Carim said.

Market access requests for 1,000 products for each party were exchanged in December 2011 and an assessment was under way by the department on a market access offer. South Africa was developing its market access offers and requests in Nedlac as a basis for Sacu’s position.