Trade Policy Issues in Southern Africa and

the SACU-India PTA

by

Boipelo Sekhu

Class of 2011

Copyright © tralac, 2011.

Readers are encouraged to quote and reproduce this material for educational, non-profit

purposes, provided the source is acknowledged. All views and opinions expressed remain solely

those of the authors and do not purport to reflect the views of tralac.

This publication should be cited as: Sekhu, B. 2011. Trade policy issues in Southern Africa and

the SACU-India PTA. Stellenbosch: tralac.

Table of Contents

1. Introduction 3

2. Trade in Goods and Services Liberalization 3

2.1. Costs and Benefits of Trade in Goods and Services Liberalization 4

3. Design and Scope of Regional Trade Agreements 4

3.1. WTO Regulations 5

3.1.1. Enabling Clause 5

3.1.2. GATT Article XXIV 6

4. Regional Integration in Eastern and Southern Africa 6

4.1. Rationale for Regional Trade Arrangements 7

5. SACU‟s Agenda on Regional Trade Agreements 8

5.1. SACU‟s Intra-Regional Trade 9

5.2. Reasons for Limited Intra-Regional Trade 9

5.3. Necessity of Regional Integration 9

5.4. Challenges Facing SACU 10

6. SACU-India PTA 13

7. Conclusion 15

REFERENCES 16

3

1. Introduction

This paper is aimed at looking at the benefits of trade in goods and services liberalization and

advising Government on trade policy matters, specifically, the SACU agenda on Regional Trade

Agreements (RTAs). It will also look into SACU members‟ preference towards South-South

partnerships, specifically, the current negotiations to conclude a Preferential Trade Agreement

with India. South-South cooperation amongst developing countries is considered to be a vehicle

towards achieving sustainable economic growth. It is also believed that it will help the developing

countries to have a single voice in international fora like the United Nations, and to increase

Africa‟s economic muscle in the world.

This paper therefore seeks to advise Government on the design and scope of Regional Trade

Agreements, discuss relevant World Trade Organization (WTO) disciplines, and highlight the

implications of these for the design, scope, and implementation of a Regional Trade Agreement.

2. Trade in Goods and Services Liberalization

The importance of trade liberalization is to reduce poverty in the developing world. Developing

countries are likely to bear the brunt of the recent economic recession and the instabilities in the

Middle East and several oil producing countries in Africa, which is affecting the price of oil and

increasing trading prices (McColloch, Winters, & Cerera, 2001).

According McCulloch et al. (2001), international trade is almost always good for growth and

growth is good for the poor, although the effects vary from case to case. Policy and research

should focus on understanding the reliability of these links and how to make them stronger. Gains

from trade liberalization have been estimated at US$171 billion or 0.7% of world GDP. However,

more gains will be accrued from obtaining previously unavailable products.

Agricultural liberalization, in particular, is critical for poverty reduction, as it constitutes 28% of

GDP in low-income countries and only 2% in industrialized countries. Nevertheless, both

developed and developing countries must liberalize this sector.

The liberalization of services presents another major opportunity for growth and can help spur

poverty reduction if care is taken to ensure access to key services for the poor.

Improved international labour mobility has huge potential for poverty reduction, especially if it

focuses on the less skilled. This form of liberalization could lead to gains as large as $300 billion a

year. Therefore, resolving the practical and political difficulties of achieving this should be a

4

priority. Improved labour standards could also help the poor, through international action,

although labour standards should not be linked to trade (McColloch et al., 2001).

The environmental threats faced by the poor are overwhelmingly local. As such, they should be

tackled by appropriate domestic environmental policy. International environmental problems

should be tackled by international environmental agreements, not just trade sanctions (McColloch

et al., 2001).

2.1. Costs and Benefits of Trade in Goods and Services Liberalization

The liberalization of trade in goods and services would contribute to ensuring that various sectors

(financial, infrastructure (roads), transport, institutions, health, and energy) are efficient and would

improve economic performance in Southern Africa. Good road infrastructure contributes positively

to transport services and cuts the cost of transporting and distributing goods. It also enables a

country to participate in global trade. Efficient telecommunications is vital in improving trade, as

the internet and all it has to offer (such as social networking, websites etc.) has bridged the gap

between countries in the world, and instant access has become an important element to trade.

Collier and Gunning (1999) indicate that high transaction costs have been identified as

impediments to economic growth in Africa and therefore, it is imperative to have a competent and

well-regulated financial sector as it will lead to an efficient transformation of savings into

investment. Other services, such as legal and accounting services, are important in lowering the

transaction costs of doing business.

3. Design and Scope of Regional Trade Agreements

Regional Trade Agreements (RTAs) are agreements concluded between countries not

necessarily belonging to the same geographical region because, according to WTO provisions,

there are variations of preferential treatment from one RTA to another. In recent RTAs, emphasis

has been placed not only on tariff-cutting but also on standards, safeguard provisions, customs

administration, and a framework for mutual services trade, and includes regional rules on labour,

environment, competition, and investment.

RTAs are perceived to be an important complement to the multilateral trading system, because

they assist in building and strengthening the trade system. RTAs are inequitable by their nature

as they are a departure from the most favoured nation (MFN) principle, a cornerstone of the

multilateral trading system. Their effects on global trade liberalization and economic growth are

5

not clear, given that the regional economic impact of RTAs is ex ante inherently ambiguous.1

Though RTAs are designed to the advantage of signatory countries, expected benefits may be

undercut if distortions in resource allocation, as well as trade and investment diversion potentially

present in any RTA process, are not minimized, if not eliminated altogether. An RTA‟s net

economic impact will certainly depend on its own architecture and the choice of its major internal

parameters (in particular, the depth of trade liberalization and sectoral coverage). Concurrent

MFN trade liberalization by RTA parties, either unilaterally or in the context of multilateral trade

negotiations, can play an important role in defusing potential distortions, both at the regional and

at the global level.2

The increase in RTAs, coupled with the preference shown for concluding bilateral free-trade

agreements, has produced the phenomenon of overlapping memberships. Because each RTA

will tend to develop its own mini-trade regime, the coexistence in a single country of differing

trade rules applying to different RTA partners has become a frequent feature. This can hamper

trade flows merely by the costs involved for traders in meeting multiple sets of trade rules.3

The proliferation of RTAs, especially as their scope broadens to include policy areas not

regulated multilaterally, increases the risks of inconsistencies in the rules and procedures among

RTAs themselves, and between RTAs and the multilateral framework. This is likely to give rise to

regulatory confusion, distortion of regional markets, and severe implementation problems,

especially where there are overlapping RTAs.4

3.1. WTO Regulations

The WTO, under the General Agreement on Tariffs and Trade (GATT, 1994), provides three

frameworks for the establishment of RTAs covering trade in goods, which take the form of

Preferential Trade Arrangements (PTAs) under the Enabling Clause, and Free Trade Areas and

Customs Unions under GATT Article XXIV.

3.1.1. Enabling Clause

The Enabling Clause makes special provisions for developing countries to conclude PTAs with

each other. The Enabling Clause allows developing countries the following:

• Only duties need to be liberalized;

1 „Scope of RTAs‟. Retrieved from http://www.wto.org/english/tratop_e/region_e/scope_rta_e.htm

2 „Scope of RTAs‟.

3 „Scope of RTAs‟.

4 „Scope of RTAs‟.

6

• Parties can decide to what extent they would like to liberalize their economies and then to

mutually agree on the number of goods they would like to liberalize;

• Parties can agree on their own timeframes in which duties will be phased down without

necessarily adhering to the requirements Article XXIV of the GATT;

• Parties are provided with flexibility from adhering to the provision of Article I, relating to the

Most Favoured Nation requirements (i.e., the parties are allowed to afford members of the

PTA preferential treatment without extending the same treatment to third parties);

• Parties are required to adhere to the provisions of all GATT Articles except for Article I,

including the principles of Transparency, National Treatment, Elimination of Non-Tariff

Barriers, Anti-Dumping and Countervailing Measures, and other relevant provisions as

stipulated in the GATT 1994; and

• Members have the option to include the liberalization of other trade restrictive measures in

their agreements, although they are not obligated to do so.

3.1.2. GATT Article XXIV

Article XXIV of the GATT provides for the formation and operations of Customs Unions and Free

Trade Areas covering trade in goods. According to Article XXIV, participating countries need to:

• Adhere to 10 year timeframes in which their trade liberalization objectives are achieved;

• Liberalize substantially all trade (although the concept of „substantially all trade‟ has not

yet been finalized within the WTO, it is accepted by members to mean that at least 85% of

a country‟s trade needs to be liberalized);

• Eliminate other restrictive regulations of commerce (ORRC); and

• Notify the WTO of their intention to establish an FTA or customs union, accompanied by a

detailed schedule of implementation within the stipulated timeframe of 10 years.

4. Regional Integration in Eastern and Southern Africa

In addition to the multilateral system, countries cooperate in the areas of trade regionally. In the

African context, the African Union has adopted a rules-based treaty outlining the framework for

the achievement of the trade objectives of the African Economic Community (AEC). The

objectives of the AEC are, among others, to promote economic, social, and cultural development,

and the integration of African economies in order to increase economic self-reliance and promote

sustained development through fostering closer ties in trade relations. In order to achieve the

objectives of the AEC, the AU has highlighted areas on which countries should focus attention in

order to attain integration, including the following:

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a) The liberalisation of trade through the abolition, among Member States, of customs duties

levied on imports and exports, and the abolition, among Member States, of non-tariff

barriers (NTBs) in order to establish a Free Trade Area at the level of each regional

economic community; and

b) The harmonisation of national policies in order to promote Community activities,

particularly in the fields of agriculture, industry, transport and communications, energy,

natural resources, trade, money and finance, human resources, education, culture, and

science and technology.

The African continent is organised sub-regionally into several Regional Economic Communities

(RECs). The AEC has emphasised the role which RECs have to play in ensuring that the

objectives of the AEC are fulfilled. The three RECs in Eastern and Southern Africa are the

Common Market for Eastern and Southern Africa (COMESA), East African Community (EAC),

and Southern African Development Community (SADC).

These RECs implement their individual regional integration programmes in trade and economic

development, covering the establishment of Free Trade Areas, Customs Unions, Common

Markets and Monetary Unions, as well as regional infrastructure development programmes in

transport, information communications technology, energy, and civil aviation as a first step

towards the realisation of continental integration. The overarching objective of the three regional

organizations is to expand trade, alleviate poverty, and improve the quality of life for the people of

the Eastern and Southern African region.5

4.1. Rationale for Regional Trade Arrangements

Each of the SADC, COMESA, and EAC RECs contain an „economic powerhouse‟, such as Egypt,

South Africa, Kenya, and/or Mauritius, which have a GDP which is comparable to international

levels. These large economies pose both opportunities, in terms of better-priced production

inputs, services etc. which SACU countries would be able to source from these economies, and

threats, in terms of directly competing industries, the impact that it would have on South Africa‟s

hegemony in the SADC region, and the downstream effect which this would have on the smaller

SACU member states.

South Africa is the largest economy in Africa, with a GDP that amounted to $467.6 billion in 2007.

It is a middle-income, emerging market economy with an abundant supply of natural resources;

5 COMESA-EAC-SADC Tripartite Framework: State Of Play. Report by the Chair of the Tripartite Task

Force. July, 2010.

8

well-developed financial, legal, communications, energy, and transport services sectors; and

modern infrastructure supporting the efficient distribution of goods to major urban centres

throughout the region.

Egypt is the second largest economy in Africa, with GDP amounting to $431.9 billion. Its

economic activities have been affected by recent political developments. The government

reduced personal and corporate tax rates, reduced energy subsidies, and privatized several

enterprises to encourage foreign direct investment (FDI) into the country. It further reformed its

trade regime in 2004, cutting tariffs and reducing its number of tariff bands from 25 to 6, as well

as its number of tariff lines from 13 000 to 6 000. All the above provide an opportunity for least

developed countries.

5. SACU’s Agenda on Regional Trade Agreements

SACU is the oldest customs union in the world, consisting of South Africa, Botswana, Lesotho,

Namibia, and Swaziland. It extends a common external tariff to non-members. In a meeting held

on 22 April, 2010 in Namibia, SACU adopted a new vision to be “an economic community with

equitable and sustainable development, dedicated to the welfare of its people for a common

future”.6

In a meeting held in South Africa on March 25, 2011, the Summit endorsed five priority areas in

SACU‟s work programme:7

• Regional industrial development policy

• Review of the Revenue Sharing Arrangement

• Trade facilitation

• Development of SACU institutions

• Unified engagement in trade negotiations

SACU supports RTAs and perceives them to be an important driving force towards the objective

of South-South cooperation and integration. South-South RTAs, such as the SACU-MERCOSUR

preferential trade agreement (PTA), creates a basis for further integration and cooperation,

including through possible further exchanges of tariff preferences, and cooperation on any other

area.8

6 „About SACU: Vision and Mission‟. Retrieved from http://www.sacu.int/

7 COMMUNIQUÉ: Summit of the Heads of State and Government of the Member States of the Southern

African Customs Union (SACU). Friday, 25 March, 2011. Pretoria, South Africa. 8 „Trade Negotiations: Bi-lateral Trade‟. Retrieved from http://www.sacu.int/

9

5.1. SACU’s Intra-Regional Trade

Trade within the SACU region is concentrated on the agriculture, machinery, minerals, and

automobile sectors. Most of the goods are imported from developed countries and then sold

within the region. Various products, such as agricultural goods, precious stones, and vehicles,

have presented a challenge with regards to the level of diversity of products and the high

dependence on South Africa. However, countries like Lesotho, Botswana, and Swaziland are still

heavily dependent on trading in agricultural goods. The small economic space forces SACU to

start focusing a bit further than its borders.

5.2. Reasons for Limited Intra-Regional Trade

There are various challenges for intra-regional trade in Africa due to poor infrastructure like roads,

financial services, telecommunications, labour, and health, which makes intra-regional trade

expensive and hinders progress on the delivery of goods on time and in good condition. However,

in Southern Africa, challenges may be attributed by the following:

(i) High costs of doing business between countries in the region

These can be attributed to several factors, including high logistical costs, especially in the

transport sector, caused to a great extent by a lack of infrastructure.

(ii) Border and „behind the border‟ challenges

There are challenges at borders, including red tape (bureaucracy) which means it takes a

long time to clear goods. A complicated trade handbook and problems of bureaucracy are

posed by the lack of harmonisation between countries‟ customs and immigrations

procedures and policies, as well as a shortage of some critical services such as financial

and communication services in some of the member states. This has a detrimental impact

on the ease at which business can be conducted as well as the costs of doing business.

(iii) Varying levels of economic development

The different levels of development of countries in the region can be attributed to several

factors, such as their small populations, small GDPs, as well as their landlocked

geographic locations, all of which limit their access to competitive logistical services.

5.3. Necessity of Regional Integration

Regional integration is a critical step towards fostering economic development in the SACU

member states and could bring about the following positive outcomes:

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• The expansion of economic space and the liberalisation of trade by making production

inputs available at more competitive prices and thus making the cost of production more

efficient;

• The creation of opportunities for diversification of economies, which is critical for the long-

term viability of an economy in the global arena as it makes it more robust to international

economic fluctuations; and

• The expansion of market access as a result of the reduction or elimination of tariffs.

The abovementioned positive outcomes of regional integration could have the cumulative effect of

strengthening the economies of small nations by affording them the possibility of maximising

trade as a result of the creation of economies of scale, which would make them more competitive

internationally.

5.4. Challenges Facing SACU

SACU has its own unique challenges that have at times strained integration within the customs

union, one of the major contributing factors being the different levels of economic scale, structure

and, development between the member states. However, a recent study highlighted a number of

challenges regarding the institutional reforms of SACU (WTO, 2009), including the following:

(i) Lack of harmonization of policies

Lack of formal harmonization of fiscal, industrial development, agriculture, competition,

and unfair trade practices policies between SACU members, among others, poses great

challenges to SACU members in clearly identifying their objectives and developing their

internal negotiating process.

(ii) Multiple memberships

All SACU countries participate in the Southern African Development Community (SADC).

Some of them are signatories to other trade arrangements. While it is technically possible

for free trade areas to co-exist, it is not possible for a member state to belong to more than

one customs union (unless each custom union adopts identical trade regulations and the

same common external tariff). Given the aspirations of SADC and COMESA to evolve into

customs unions, this poses significant challenges for all four RTAs. Other problems

related to multiple memberships are said to include the following (Gibb, 2006).

• National negotiating capacities are overstretched.

• Multiple membership fees are costly.

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• Conflicting membership loyalties hamper progress with implementing agreements and

promoting deeper integration.

• Different rules of origin impose costs on business and governments.

• Regional trade is hampered by a lack of commitment to one RTA at the expense of

another, resulting in the proliferation of non-tariff barriers.

• Importantly for businesses, because the system lacks credibility and is so

unsustainable, it serves to highlight issues of market unpredictability.

(iii) Revenue Sharing Formula

Discussions are still on-going between member states with regards to the revenue sharing

formula. The BLNS (Botswana, Lesotho, Namibia and Swaziland) countries are still reliant

on SACU revenue, which makes up a significant part of their annual GDP. However, this is

not sustainable, which has become especially clear after the global economic crisis which

has significantly reduced SACU‟s revenue outlook, and which is having a disproportionate

impact on its smaller member countries, thus calling for an appropriate policy response

(Mongardini et al., 2011).

(iv) Trade restrictions

The 2002 SACU Agreement makes provision for protectionist measures to be

implemented by the BLNS member states in terms of infant industry protection. This in

itself is in contravention to the objective of a Customs Union, which requires free trade and

a common customs territory.

(v) Institutions

The 2002 SACU Agreement introduces significant changes in the modus operandi of the

common customs area by creating, inter alia, a new institutional structure and a dispute

settlement mechanism (WTO, 2003). This institutional structure includes the following:

• Council of Ministers: the supreme decision-making authority on SACU matters

• Customs Union Commission: responsible for the implementation of the Agreement,

overseeing the management of the common revenue pool in accordance with the policy

guidelines decided by the Council, and supervising the work of the Secretariat

• Secretariat: responsible for the day-to-day administration of the Agreement, and

coordinating and monitoring the implementation of the decisions of the Council and the

Commission

• Tariff Board: responsible for making recommendations to the Council on the level of,

and changes to, customs, anti-dumping, countervailing measures, etc. The Tariff Board

will be an independent institution, consisting of experts drawn from member states. The

12

Tariff Board has, however, not yet been established, and the revenue is still being

managed by ITAC in South Africa

• Four Technical Liaison Committees on matters related to agriculture, customs, trade

and industry, and transport: to advise and assist the Commission in its work

• Tribunal: to adjudicate on any issue concerning the application or interpretation of the

Agreement, or any dispute arising there at the request of the Council. One of the main

objectives of the Tribunal would be to enforce the rules-based system which SACU has

adopted, which will contribute towards the transparency of the organisation. However,

this institution has not yet been established

(vi) Negotiating mechanism

The 2002 SACU Agreement does not make provision for a negotiation mechanism within

the structures of the Secretariat. This hampers the ability of members to speak with one

voice in regional and international negotiations, and provides an avenue for the other

negotiating parties to find and exploit weaknesses in the SACU negotiation position.

(vii) Lack of diversification of economies

The SACU economies are not diversified. A few areas such as agriculture, mining, and

labour-intensive manufacturing activities (particularly textiles and clothing), have expanded

strongly in recent years throughout SACU. The general development of the manufacturing

sector has, however, largely been hampered by supply-side constraints, such as high

production costs, limited access to financing, low capacity utilization, and low quality of

products.

(viii) Lack of customs cooperation

The countries agreed to cooperate in customs areas by simplifying and harmonizing trade

documentation. However, little progress has been made in this area, and the countries

retain internal borders, which is, in essence, not in line with the objectives of a Customs

Union.

(ix) Unexploited export opportunities in services sector

Export opportunities in the services sector remain largely unexploited, other than in South

Africa and to some extent in Botswana and Namibia. In tourism, for example, where

SACU‟s attractions are among the best in Africa, inadequacies in infrastructure and

marketing/promotion, financial constraints, and lack of skilled labour have constrained the

development of the subsector.

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SACU members should develop a common position on the future expansion of SACU, taking into

account the abovementioned challenges. Although the expansion of SACU would have an impact

on the revenue-sharing formula, it may offer SACU the opportunity to have a stronger voice in the

region. This should be taken into consideration as discussions regarding the restructuring of the

SACU formula are on-going. If SACU is in a position to grow organically into a SADC Customs

Union, they would be in a stronger position to retain their organisational history and personality,

which may otherwise be completely lost in the transition to a SADC Customs Union.

6. SACU-India PTA

During the sixth session of the India-South Africa Joint Ministerial Commission Meeting held in

New Delhi on 5-6 December, 2005, both sides agreed that a comprehensive Free Trade

Agreement within a reasonable time, and in the interim, a limited scope agreement providing for

the exchange of tariff concessions on a select list of products between India and SACU, would

give further impetus to bilateral trade, and urged for its early conclusion.

India and SACU are thus currently negotiating a Preferential Trade Agreement (PTA). The first

round of technical discussions took place in Pretoria on 5-6 October, 2007; the second round of

PTA negotiations took place in Walvis Bay, Namibia on 21-22 February, 2008; the third round in

New Delhi on 25-27 November, 2008; and the fourth round in Pretoria on 7-8 October, 2009.

During the third round of negotiations, a Memorandum of Understanding (MOU), providing a

framework mechanism to facilitate negotiations, was signed on 26 November, 2008 by the

representatives of India and SACU, while during the fourth round, India submitted its initial tariff

preference request list and draft sanitary and phytosanitary (SPS) and technical barriers to trade

(TBT) texts to SACU for consideration. The two sides also discussed the text of the Agreement,

including annexes relating to safeguard measures and dispute settlement. The fifth round of

negotiations was held in New Delhi on 7-8 October, 2010.

In January 2011, Indian Minister of Commerce and Industry Anand Sharma announced that the

long-discussed PTA between India and SACU was expected to be concluded towards the middle

of 2011. This agreement is proposed to cut tariffs on a limited number of products between the

two regions, and is thereafter expected to eventually expand into a fully-fledged free trade

agreement.

India has maintained a close relationship with Africa since its independence, and in 2008, the

Indian Government created a new design for this involvement in the form of the India-Africa

Summit, guided by principles of equality, mutual respect and benefit, and respect for the

14

sovereignty of the state, with the intention of enhancing cooperation between Africa and India.

This cooperation, however, is seen most prominently in the relationship between India and

Southern Africa, with a focus on South Africa in particular (Erasmus, 2011).

Both India and South Africa are considered states of influence with regards to South-South

cooperation, and thus a trade agreement between the two states seems only inevitable. South

Africa is responsible for almost 95% of SACU‟s annual GDP, and from an Indian perspective, a

PTA with SACU would not only grant greater access to the South African market at a lesser

expense, but would also open up the rest of southern Africa, including its natural resources, in a

much more accessible way. Similarly, India‟s rapidly expanding economy and population has

highlighted a gap in the consumer market. This, combined with steadily falling trade barriers,

presents an opportunity for South African multinationals to expand into a virtually untapped

market, while at the same time developing sound economic relations with other developing states

and rearranging South Africa‟s position on the global stage by decreasing its reliance on the

developed North.

The reason for these decreases is explained by the concept of trade diversion, which occurs if,

through the introduction of a trade agreement, a state is automatically forced to import certain

goods from its new trading partner, regardless of whether the new goods are more expensive

than the original exporter. According to this study, South Africa would most likely choose to import

its apparel from India, who would most likely offer a superior product to Botswana, but given that

any previous tariffs would no longer apply, South Africa is likely to prefer the Indian product. This

leaves a huge gap in the Botswana market, which would no longer be able to sell apparel, thus

causing a significant loss in revenue and GDP.

Currently, SACU-India trade is growing rapidly. It is expected to reach US$15 billion by 2014,

50% above the level targeted for the expansion of trade in the early stages of the PTA

negotiations. At present, the value of trade is heavily in SACU‟s favour, given the “large-scale

Indian imports of South African gold, diamonds and coal”.9

However, press reports indicate that the final lists of products subject to tariff reductions have yet

to be exchanged.

As a preferential, rather than a free-trade, agreement, the trade deal with India is far less

ambitious than the trade deal still being negotiated with the European Union (EU). Sensitive

agricultural products are largely excluded from any tariff reduction commitments. As a result, the

9 „Trade between South Africa and India accelerating towards $15bn target‟. By Keith Campbell,

Engineering News, 21 January, 2011.

15

deal is unlikely to have a direct impact on SACU‟s agricultural imports. However, for cereals such

as rice and pearl millet, there is a possibility of increased imports. Overall, the agricultural sector

in SACU is unlikely to gain significantly from the proposed agreement. The BLNS countries are,

however, hoping to be able to source inputs for various production processes from India for their

manufacturing industries.

It was envisaged that negotiations with India would proceed more rapidly than they have, with

only one engagement having taken place in 2010. The meeting in October 2010 did, however,

enable agreement to be reached on the range of products to be excluded from any tariff reduction

commitments. Progress was also made on the highly technical issue of the treatment of the

respective tariff books for the purposes of exchanging tariff reduction offers. Currently, only one

negotiating round is scheduled for July 2011, and it is unlikely that this will prove to be the final

round of negotiations. Considerable work remains to be done with regard to the draft texts on

SPS issues, administrative measures, infant industry protection and agricultural safeguards, to

name but a few of the critical areas still to be negotiated. SACU has, however, indicated that it is

ready to exchange specific tariff offers at the next meeting, if India is ready to reciprocate (Press

Trust of India, 2011).

7. Conclusion

Regional economic and trade cooperation, including bilateral and regional trade agreements

(RTAs), is a central mechanism employed by an increasing number of developing countries to

expand mutual trade and investment. Regional arrangements offer momentous possibilities to

enlarge economic space, attract foreign direct investment (FDI) to the region on better terms, and

pool economic, human, institutional, technological, and infrastructural resources and networks of

participating countries. SACU has taken a particular interest in South-South partnerships, as

evidenced in the current negotiations to conclude a PTA with India. South-South cooperation is

considered to be a vehicle towards achieving sustainable economic growth, and is therefore of

strategic importance for the members of SACU.

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