After trade talks on Tuesday, the European Union and South Africa are said to be close to finalizing a deal that would cut tariffs on cars exported to each other's markets. Reuters is reporting that if all goes well, the first changes are set to occur by the end of the year. South Africa will cut the duty it applies on European car imports to 18% by 2012 from 25% it now charges. The EU will go further, with plans to cut down import duty it applies on cars coming from South Africa to nil in 2008.

Though it appears that the EU is actually losing out by the deal, this is because the EU is much larger and more powerful than SA and can afford to make these sacrifices. South Africa has recently become a significant manufacturer of cars, with both major German and US carmakers producing vehicles there. Currently, automotive goods represent more than 20% of EU exports to South Africa with the EU representing the African nation’s largest trading partner.

The EU and South Africa said on Tuesday they would start negotiations to review their trade and development agreement.