As far as trade agreements are concerned, 2016 was an unprecedented year, with significant activity occurring that had never been witnessed in the past decade.
The Economic Partnership Agreement with the European Union and South Africa’s first trade agreement with South America, the Common Market of the South, or Mercosur, were implemented in the second half of 2016.
On the African front, the Tripartite Free Trade Area (TFTA) negotiations soldiered on, bringing the vision of creating a free trade area (FTA) stretching from Cape to Cairo within reach.
Significant developments to be expected this year include the revival of the India-Southern African Customs Union (Sacu) preferential trade agreement (PTA) negotiations. Although these negotiations started more than a decade ago, they collapsed mainly because of failure to reach agreement on tariff offers, which are, essentially, products for which Sacu and India will provide preferential market access. Sacu also raised concerns about nontariff barriers (NTBs).
Trade between South Africa and India is by no means insignificant. In 2016, South African exports valued at R47.4-billion were destined for India, while imports were valued at R45.6-billion. The largest export products from the Sacu region were minerals, which accounted for 70% of the total figure, while the top three import product categories were mineral products (23%), chemicals (21%) and vehicles, aircraft and vessel products (19%).
Among Asian countries, India is ranked is ranked third in terms of trade with South Africa, accounting for 14% of the country’s trade with Asia, with China and Japan being South Africa’s top Asian trading partners.
The PTA may potentially create better market access opportunities for South African exporters, further enhancing trade between the two countries. While PTAs, by their nature, cover a limited range of products, it is important that industry plays an important role in lobbying for access for specific products.
The TFTA negotiations are ongoing, but whether or not they will be completed this year remains to be seen. However, the region to look out for is the East African Community (EAC), made up of Kenya, Burundi, Uganda, Rwanda, Tanzania and South Sudan. Significant economic growth, particularly in Kenya, makes this an attractive trade bloc for exports. Market access negotiations are at an advanced stage, with tariff offers having already been exchanged and several rounds of negotiations having been undertaken in 2016.
In its latest offer, the EAC offered to provide duty-free access for 60% (comprising 5 411 tariff lines) of the products on its tariff book. About 1.2% of its products are regarded as sensitive and, therefore, cannot be liberalised, while 38.8% of the products included in the offer are subject to negotiation, as duties ranging from 10% to 25% are currently levied. The negotiations will likely be centred on these products.
The TFTA is part of the grand plan to create a single African FTA called the Continental Free Trade Area (CFTA), which will provide businesses with access to 54 African countries with a combined market of about one-billion people. The CFTA negotiations were expected to start in 2015; however, not much has progress has been made. Once the TFTA negotiations have been completed, this may give traction to the CFTA agenda.
Trade agreements are, by their nature, a result of complex negotiations. Countries typically want to have good market access to other countries while protecting their own markets. The single biggest risk of not knowing what is happening in trade negotiations is that duties on your products may be eliminated or reduced. If that were to happen, you might find yourself facing competition from many countries when the agreements are eventually implemented. Once a duty is eliminated or reduced in a trade agreement, it is not easy to reverse it.
If your company is already exporting to countries covered in these negotiations and if your products are subjected to import duties, the current negotiations are a perfect opportunity to lobby for the removal of such duties.