Bilateral trade agreement with Asean and European Union are passe. The stage is set for the first trans-continental treaty with India, South Africa and Mercosu — comprising Brazil, Argentina, Uruguay and Paraguay –launching negotiations on a preferential trade agreement later this week.

Along with the trilateral treaty, India will also start technical negotiations on Saturday for a PTA with the Southern African Customs Union (SACU), which consists of South Africa, Botswana, Namibia, Lesotho and Swaziland.

While the trilateral as well as the SACU agreements are part of measures to increase South-South trade, the going has not been easy so far. While India had signed a PTA with Mercosur last year, its operationalisation in the form of tariff cuts had been delayed.

Similarly, India and SACU have already finalised a framework agreement, but the African group is yet to approve it. In fact, the proposal for a PTA was discussed in January 2000 but even after seven years, it has not been finalised.

Besides, commerce & industry minister Kamal Nath on Monday complained of restrictions being faced by Indian pharmaceutical companies and banks who were finding in tough to open branches in South Africa. In addition, getting work visas and intra-company transfer of work permits was proving to be a problem in South Africa, Nath is learnt to have told the South African high commissioner.

A study by the Indian Institute of Foreign Trade (IIFT) found that over 50% of India’s exports were subjected to less than 10% duty in South Africa and only 33% products had to contend with over 20% import duty. In India, however, 55% of South African goods faced duty of over 20%, with only 34% of the imports facing under 10% duty.

While the tariffs might be higher in India, the revenue loss from bilateral elimination of tariffs was greater in South Africa, the study said and that probably explains the lethargy shown by SACU authorities. The revenue loss in South Africa is projected to be 1.4 times the revenue loss in India.

Apart from the strategic location, Indian companies, particularly in the services sector, could gain significant access to the South African and Brazilian markets and groups like the Tatas and Mahindra & Mahindra could benefit if the agreement also had an investment treaty.

While there might be difficulties at the ground level, at the level of political leaders there is a great sense of bonhomie and the united face put up by India, Brazil and South Africa during the WTO talks are only going to help in clinching a deal early, official said.