India, Southern African Customs Union sign terms for preferential trade pact talks

India and the Southern African Customs Union (SACU) have signed the Terms of Reference for negotiations on a Preferential Trade Agreement (PTA), marking a significant step towards strengthening trade and economic engagement between the two sides. Union Commerce and Industry Minister Piyush Goyal described the development as an important move towards elevating India's economic relationship with the Southern African region. The Southern African Customs Union comprises South Africa, Botswana, Lesotho, Namibia and Eswatini. The agreement on the negotiating framework is expected to provide a structured path for discussions aimed at offering preferential market access and expanding bilateral trade.

Framework for negotiations

The Terms of Reference will establish the scope and broad framework under which India and SACU will negotiate the proposed trade agreement. A PTA generally involves participating countries reducing or eliminating tariffs on an agreed list of goods rather than covering substantially all trade, as is typically the case with a free trade agreement.

Goyal said the signing reflected the shared commitment of India and SACU members to deepen economic cooperation and unlock new opportunities for businesses.

Negotiations on an India-SACU preferential trade arrangement have been discussed for several years. The latest development provides fresh momentum to efforts to formalise a trade framework between India and the five-member customs union.

South Africa is already India's largest trading partner in Africa and an important economic partner in sectors ranging from minerals and automobiles to pharmaceuticals and engineering products. A preferential agreement with SACU could provide Indian businesses with improved access to a wider Southern African market while creating additional opportunities for exporters from SACU countries in India.

Focus on expanding trade

The proposed agreement is expected to focus on identifying products on which the two sides can offer tariff concessions, while addressing market-access concerns and other issues affecting trade.

India has been seeking to broaden its network of trade agreements as part of efforts to diversify export markets and strengthen commercial relations with key regions.

Africa has emerged as an increasingly important component of this strategy because of its growing consumer markets, natural resources and demand for infrastructure, pharmaceuticals, automobiles, digital services and other products in which Indian companies have a significant presence.

The SACU arrangement is particularly important because its members operate under a common external tariff and share customs revenues. Established in 1910, it is regarded as the world's oldest functioning customs union.

For SACU members, greater access to the Indian market could create opportunities in commodities, minerals, agricultural products and other areas where Southern African economies have export strengths.

The signing of the Terms of Reference does not itself constitute a trade agreement. Negotiators from the two sides will now have to work through issues including the products to be covered, the extent of tariff concessions, rules of origin and other provisions before a final pact can be concluded.

If negotiations succeed, the PTA could become another pillar of India's expanding commercial engagement with Africa and provide businesses on both sides with a more predictable framework for increasing trade and investment.