South Africa’s Trade Relations:EU, IBSA and BRICS

Presented to

Parliamentary Portfolio Committee on

Trade and Industry By

Xavier Carim, DDG

International Trade and Economic Development Division, the dti

21 April 2011

Policy Context

• NGP aims, amongst other things, to accelerate growth and industrial development along an employment generating path.

• Trade strategy and international engagements must support industrial upgrading, employment growth and increased value-added exports.

• Key elements of the strategy include:i) expand trade and investment links in Africa and advance regional integration in Southern and Eastern Africa;ii) Consolidate links with traditional partners in the North; iii) Build industrial complementarities with dynamic growing economies of the South; andiv) work to rebalance global trade rules in favour of developing countries through the Doha Round negotiations.

Changing Global Environment

• Structural shifts in global economy power.• Emerging economies are new sources of global growth, trade

and investment.• Developing countries’ share of world trade will double over the

next 40 years, from 37% in 2007 to 69% in 2050 • Global crisis 2009-2010 accelerated the shifts. • Reflected in changes to rankings of our trade partners.• China became SA’s number one trade partner in 2010.• India has rapidly moved to SA’s 8th largest trade partner

(growing 30% per annum in the 3 years before the crisis).• Trade with Brazil rapidly growing off a small base (tripled over

last 3 years before crisis).

Changing Global Environment

• IBSA and BRICS give expression to the shift.• SA shares many policy perspectives with emerging

economies. • Seek greater voice for developing economies in institutions of

global governance • Seek reform of global rules, including in trade, to enhance

prospects for growth and development• In addition, stronger links with these economies will create

new opportunities as these are dynamic growing markets and sources of investment.

• Traditional partners nevertheless remain important

SA-EU TRADE

• SA-TDCA provide the legal frameworks for trade with the EU.• EU collectively is SA’s single most important trade and

investment partner, and provides significant development finance.

• Steady growth in trade: from R143 billion in 2000 to R327 billion in 2010 (an average growth rate of 14.9% per year over 10 years).

• The trade deficit with EU has been declining.• SA exports dominated by minerals and low value added

products except autos and components, agro-processed product, notably wine.

• Import manufactured and capital goods • Gradual decline of EU in SA’s total trade, from 36% (2005) to

28% (2010).• Shifts accelerated during global economic downturn.

• `

SA-EU FDI

• Well developed investment relations.• EU remains key source of FDI in SA.• EU FDI increased from R425 billion (2005) to R669 billion

(2009) • EU accounts for around 80% of FDI stock in SA.• With growing inflows from other sources, the EU share in total

stock has tended to decline in recent years.• FDI figures significantly influenced by single large transactions• UK is the main source of EU investment into SA.• Followed by Germany, Italy and France. • SA FDI to the EU increased from R189 billion (2005) to R208

billion (2009).

UPDATE ON SADC-EU EPA

• TDCA trade review taken up under EPA negotiations.• Protracted due to unacceptable negotiating EU proposals

with negative on development policy, regional integration and diversification objectives.

• Some progress but key issues remain unresolved:i) tariff offer to SA with reasonable requests; ii) MFN, export taxes, agri safeguards, TBTs, special customs administration iii) approach to new generation issues, notably IP/GIs.

• For SA, the EPA must not undermine development policy and regional integration nor impede trade diversification, it should improve market access for SA products.

IBSA TRADE (1)

• Total IBSA trade grew from US$3,7bn in 2004 to US$16,2 bn in 2010.

• In 2010 India contributed 44%, Brazil 31%; and SA 25% to total intra-IBSA trade.

• South Africa’s exports dominated by commodities.

• Aim to build industrial complementarities with these to support our industrial development by transforming the structure of trade.

IBSA TRADE (2)

• IBSA trade targets: US$10 billion by 2007; US$15 billion by 2010; and US$25 billion by 2015.

• Pursued by:– Reducing tariffs through PTAs: India-Mercosur, SACU-

Mercosur, SACU-India as basis for possible future trilateral trade arrangement;

– PTAs establish legal basis for conducting trade relations– Reducing NTBs;– Active trade and investment promotion activities– Encouraging cooperation on SMMEs.

SA-BRICS TRADE

• Growing share of BRIC in SA total trade, from 10% (2005) to 17.4% (2010).

• Led by China and India, Brazil and Russia follow.• China:

– R40.2 billion (2005) to R142.6 billion (2010)• India:

– R12.8 billion (2005) to R42.9 billion (2010)• Brazil:

– R10.3 billion (2005) to R15.2 billion (2010)• Russia:

– R1.1 billion (2005) to R2.9 billion (2010)

SA-BRIC FDI

• China:– R5.2 billion FDI in SA (2008), although China not in top

10 list of investors.– R4.2 billion SA FDI in China (2008).

• Russia:– Negligible FDI in SA.– R418 million (2007) SA FDI in Russia.

• India:– India #6 in FDI in SA (2003-2007), but not in top 10 in

2009.– SA FDI in India still relatively small.

• Brazil:– FDI into SA still relatively small; as with SA FDI in Brazil

Comparing IBSA and BRIC

• Some complementarity but, at this stage, important differences• IBSA formed in 2003 and first Summit in 2006 • Extensive institutional and legal mechanisms (18) for

cooperation, and fora for academics, business, women• Agenda covers political dialogue and global governance, wide-

ranging economic cooperation. • On trade, PTA agenda, NTBs, SME cooperation.

• First BRIC Summit in 2009; more informal cooperation, focused on political dialogue, international finance issues, energy security.

• Second BRIC Summit in 2010 in Brazil

From BRIC to BRICS - 3rd Summit

Agenda covered:• International situation – a general exchange on international

issues (e.g. Middle East and North Africa).• International economic and financial issues – the international

currency system, growing trade protectionism and international commodity prices (oil and food).

• Global development issues – climate change, sustainable development, MDGs and the Doha Round (provide BRICS support for SA hosting COP-17 and Brazil hosting CSD).

• Strengthening Intra-BRICS economic cooperation• BRICS evolving from coordinating positions for multilateral

fora to strengthening relations with each other

BRICS SUMMIT, APRIL 2011

• Opportunity to build a new approach to relations based on mutual benefit and economic developmental principles

• Build complementarities avoid competition• Posited possibility of payments settled in national currencies• China signalled new import/consumption policy • We need to position ourselves through exhibitions promoting

high value products • Trade Ministers of Brazil, India, China and SA met to assess

Doha Round which appears to be at a turning point• SA is at the table: intensive work programme to advance

these objectives

THANK YOU