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India is set to revive talks for a free trade agreement with the five-member South African Customs Union (SACU), a big market for its automobiles, refined petroleum products, unmounted diamonds, and pharmaceuticals, in a bid to get a firmer foothold in the African market and diversify trade, according to official sources.
“We had a meeting with the SACU Secretariat on the proposed FTA/PTA. They are willing to engage. We have to, however, start from scratch. Once we finalise the terms of reference, we will announce a common date for the start of negotiations,” an official tracking the matter told businessline.
Last fiscal, India exported goods worth about $9 billion to SACU countries, which include Botswana, Lesotho, Namibia, South Africa, and Swaziland, accounting for around 2 per cent of its total exports. Its imports from the region were valued at a higher $11 billion (approx) which accounted for 1.53 per cent of the country’s total imports.
“There exists a lot of complementarity between India and South Africa, which accounts for a giant’s share of trade with SACU countries. India hopes that this complementarity can be exploited to the advantage of both partners once the FTA is implemented,” the official said.
The free trade talks with the SACU, which are likely to be in the form of an FTA including all goods and services but may also be a Preferential Trade Agreement if there are some exclusions, are likely to be less complicated than the ones with India’s Western partners. as it would not incorporate non-trade topics like labour, gender, and environment, the official said.
“All member countries in the negotiations would be from the developing world who are not interested in linking trade talks with non-trade issues like labour, gender, environment, and many other new areas that developed countries have started insisting on. So, it will be relatively easy to complete negotiations,” the official said.
Gain for auto sector
India’s automobile industry could be one of the primary sectors that could gain from an FTA with SACU countries, as it accounts for about 38 per cent of the country’s exports to the region.
“There are big gains to be made in the area of automobiles, as tariffs are as high as 20–25 per cent in the SACU markets, and a tariff elimination or reduction would make a big difference,” the official pointed out.
Stressing on the complementarities, the official said that India was importing coal, diamonds, gold, and iron ore from the region that were essential inputs for various sectors. “Apart from automobiles and petroleum products, there are gains to be made by the Indian industry in sectors such as pharmaceuticals and iron and steel,” he said.
Exploring an FTA with SACU gels well with India’s plans for trade diversification by engaging more with Africa (so far, India has an FTA only with Mauritius), which could help mitigate exposure to global volatility.
India and Africa have set a target of doubling bilateral trade to $200 billion by 2030, and the proposed India-Africa SACU may help achieve that.
The first round of technical discussions for the India-SACU PTA took place in Pretoria in October 2007 and continued till 2010, but talks were stalled for a decade till 2020, when both sides started talking about a trade pact again.
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