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Thursday, 19 July, 2001, 17:01 GMT 18:01 UK
India/South Africa trade zone talks
Johannesburg skyline
Africa's richest economy wants stronger ties
By BBC News Online's Mary Hennock

India and South Africa have agreed to explore the possibility of establishing a free trade zone.

The breakthrough came at a meeting of the two countries' trade ministers on Wednesday, according to Tshediso Matona, chief director of trade negotiations at South Africa's Ministry of Trade and Industry.

India "has tabled a draft" of an agreement, he told BBC News Online, though he emphasised the talks were at any early stage. "These things take years".

South Africa's trade minister Alec Erwin and his Indian counterpart Omar Abdullah held talks in South Africa alongside a trade fair to promote Indian goods.

Building allies in WTO

The pair also focused on building a common position ahead of the World Trade Organisation's ministerial meeting in Qatar in November, said Mr Matona.

They were trying to "build a leadership core of significant developing countries", he said.

Miners leaving a gold mine
South Africa's gold sales to India are down
He said South Africa and India had been trying to deepen their relationship since the WTO's Seattle meeting in 1999.

That ministerial gathering collapsed without agreement when developing nations stood firm against what they said were attempts by the major industrialised nations to impose their agenda for new global trade talks.

The planned free trade area is part of South Africa's post-apartheid attempt to stimulate "south-south trade", said Mr Matona.

"An analysis of two-way trade over the last few years shows stagnation creeping into quite a few sectors," said Mr Abdullah.

Trade needs a boost

Two-way trade looks set to total $1.3bn in the current year, down from $2bn in the year to March 2001, according to a spokesman for the Indian High Commission in Johannesburg.

The decline is due mainly to a fall in gold bullion purchases by India, he said.

Last year, South Africa's exports to India were about $1.7bn - with bullion worth more than one third. This year's total is estimated at $1.2bn.

In principle we would want everything to be on the table

Tshediso Matona, chief trade negotiator, South Africa
Fabric and yarn were the biggest component of India's $300m trade with South Africa last year, followed by manufactured metals, non-ferrous metals and pharmaceuticals, the spokesman said.

India also processes South African diamonds, polishing 90% of the world's diamonds by quantity, but only 52% by value, since most are lower grade industrial gems.

IT, drugs and gems

Mr Omar is attending the Made In India show in South Africa to promote trade in IT, drugs and mining.

India also hopes its expertise in small and medium sized enterprises will generate significant consultancy work and equipment sales.

Commenting on a possible free trade zone, Mr Matona pointed to the importance of the IT sector in India.

"In principle we would want everything to be on the table," he said. "The format can be worked out."

Talks on a free trade agreement were first proposed by South Africa 18 months ago, he said. India has now responded.

"The important thing at this stage is that the Indian government is prepared to consider it", he said.

India does not have a history of negotiating free trade agreements as it has concentrated on bilateral preferential agreements in the past, he said.

See also:

10 Jul 01 | South Asia
Brain drain costs Asia billions
11 Jul 01 | South Asia
Energy giant appeals to India
17 Jul 01 | Business
African exchanges plan alliances
03 Jul 01 | Business
Russia WTO talks 'at dead end'
26 Jun 01 | Business
WTO promises trade talk progress
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