Motor vehicle manufacture poses competitive challenge

SIMILARITIES IN the trade profiles of the SA Customs Union and Mercosur are likely to further delay the trade agreement. “Mercosur basically produces the same items as us,” said PriceWaterhouse-Cooper’s Riaan de Lange. “So it doesn’t complement ours, rather it introduces greater sectoral competition.” Because of this, a study has been initiated to test the waters of a trade deal with Mercosur and see where any advantages/disadvantages lie. “SA is busy conducting sectoral studies,” said De Lange, “basically to see what the effects of the FTA would be for each of these sectors.” One prime area in this study, for example, and one where the biggest drawbacks might be found, is in motor vehicle manufacturing - with Brazil and SA major players in this industry sector in each of the regions, with both countries likely to be competing rather than complementing each other in this area of production. An added complication is likely to be a study of the factors beyond the pure levels of duty which exist in the two regions. “What, if any, non-tariff barriers are in place,” said De Lange. “Mercosur and Sacu will obviously have to look carefully at this before any FTA can be signed up.” Another delaying factor in the Sacu/Mercosur deal is the fact that it will not be an asymmetric progression, according to De Lange. Unlike the deal with the EU - where SA got duty-free entry to the European market some years before it had to reciprocate with duty-free access to the local market - neither side will get such an advantageous kick-off in the Sacu/Mercosur FTA. This could seriously reduce the attraction of such a tie-up and also slow down the completion of the deal until each side has thoroughly investigated what’s in it for them. Also adding strain to the limited team available for dealing with FTAs are the other deals currently in the offing. According to De Lange, FTAs with Nigeria, India and China are also now on the cards.