Namibia opens up trade with Mercosur countries as the SACU
The Namibia Trade Forum recently announced that Namibia can now trade with Mercosur countries (Argentina, Brazil, Uruguay, Paraguay) on a preferential basis under the SACU – Mercosur Preferential Trade Agreement (PTA) which entered into force on 1 April 2016.
This agreement will serve as the second concluded international trade agreement by SACU countries, the first one being the SACU-EFTA Free Trade Agreement (FTA) which was implemented in 2008.
Speaking to the Economist, Senior Trade & Investment Analyst, Maria Lisa Immanuel explained that the SACU – Mercosur PTA was concluded 11 years ago but was never implemented until recently due to ratification processes which are purely depended on the national laws of individual countries.
Immanuel said that trade agreements such as this one should be embraced from a point of government effort to create alternative market access for the private sector to trade and also to participate in global value chains, especially for a small market like Namibia. “On the other hand, what really matters is how the private sector will embrace this agreement as they are the ones to implement it.” she noted.
She explained that this agreement aims to highlight some of the key products of interest to Namibia in terms of import and export as well as to give a private sector or industries perspective on how the agreement impacts their respective industries and ultimately how it will influence their business models. The preferential trade agreement will be based on the premise that the two markets of Southern African Customs Union and Mercosur will trade certain products on preferential terms based on reduced tariff rates. The agreement states that the countries agree to establish fixed preference margins as a first step towards the creation of a free trade area.
Immanuel listed the products of interest in this trade agreement as bone beef, horticulture and agronomy, sea salt and table salt and fish products. “The agreement grants two Mercosur countries, Paraguay and Uruguay a total of 500 tonnes of boneless beef (250 tons each) to be imported into the SACU market. This boneless beef classified under HS 0202 30 00 will be subject to a Margin of Preference (MP) tariff rate quota of 25%.
For the sake of reciprocity, Namibia is allowed to export carcasses and half carcasses at a MP tariff rate of 25%.” She explained.
The Meat Board of Namibia explained that the agreement might be viewed more as a threat than an opportunity for the beef sector at the moment as Mercosur countries are more cost effective when it comes to beef production. By implication, beef imported into Namibia is able to land cheaply and hence have a direct influence on the Namibian producer price. The beef sector cautioned that there has been regular outbreak of Foot and Mouth disease in the past especially in Paraguay which led the European Union banning Brazilian imports from 3 Brazilian states bordering Paraguay.
Namibia is a net exporter of beef having access to lucrative niche markets in the EU and Norway and therefore strict control mechanisms and verification systems are important to monitor beef imports from Mercosur under this agreement to avoid jeopardising access to existing markets.
Immanuel articulated that the agreement allows importation of anchovies, herrings, flours, meals and fish pellets fit for human consumption, frozen rock lobsters, shrimps and prawn frozen, crabs frozen into the SACU market. “All these products will attract a MP tariff rate of 100%, i.e. zero tariff. For Namibia to export fish products such as horse mackeral and hake to the Mercosur market, it will attract a MP tariff rate of 25% when exporting to Brazil and Paraguay and Sardines will attract a tariff rate of 100% when exported to Argentine, Brazil and Uruguay while to Paraguay it’s only 25% tariff rate.” she detailed.
With regard to agricultural produce, Namibia can import from Mercosur products such as cabbage lettuce, carrots, banana (fresh or dried), and avocados at a MP tariff rate of 100%.
Durum wheat, used mainly by the milling industry as inputs into ‘certain’ pasta can be imported at 50% MP tariff rate from Paraguay only. Both Paraguay and Uruguay are granted soy beans quotas to export into the SACU market. Paraguay is given 10 000 tons and Uruguay 6 000 tons annually at a MP tariff rate quota of 25%. Again, Paraguay is allowed to export 5 000 and 4 000 tons of Soy bean oils and Sunflower oil respectively at a MP tariff rate quota of 25%.
For Namibia to export salt to Mercosur, it will be subject to a MP tariff rate of 100% for sea salt and 50% for table salt Immanuel informed. “This is quite interesting because the table salt which is the value added product becomes a bit restrictive to export as opposed to the sea salt (used as raw material in many chemical industries) which can be exported at almost zero tariff.” she said.
In her final remarks Immanuel advised that Namibia should prioritise the implementation of this agreement by sensitising the private sector and creating awareness of opportunities created by this agreement. “The Mercosur countries are quite advanced in industrialisation and Namibia should adopt a clear strategy on how to promote this trade agreement especially in relations to industrialisation” she stressed.