Reform and opportunity : the changing role and patterns of trade in South Africa and SADC

Abstract

In this paper, we examine the changing role of trade in South Africa and SADC from different vantage points. We first review progress in liberalizing South Africa's trade regime, and conclude that, while signs of progress are clear, the levels and complexity of protection continue to pose barriers to the evolution of efficient trading patterns and a constraint to growth. We also find that trade liberalization has not led to de-industrialization of the South African economy: while import penetration has risen, exports have grown as well, so that the net impact from expanding trade is positive. But the net numbers remain small, and the limited employment creation is biased towards skilled workers, suggesting that the full potential from expanding trade has not been realized. We turn our focus next to the SADC region, and examine the fiscal implications of the proposed SADC FTA, highlighting both the administrative complexity of harmonizing tariff regimes among the diverse SADC economies, and the differential fiscal costs of the proposed arrangements for the participating economies. Finally, we look at the economic impact of alternative free trade areas (FTAs) for the region, using a multi-region simulation model. We find that these FTA initiatives are beneficial for the region, not only for participants, but even (in the case of the EU-South Africa FTA) for non-participants, since the rest of southern Africa benefits as well from the EU-South Africa agreement. But it is also clear that South Africa alone is not large enough to serve as the growth pole for the entire sub-region. Authors' Affiliation and Sponsorship Jeffrey D. Lewis, Lead Economist, AFTMI, The World Bank e-mail: jlewis4@worldbank.org THE WORKING PAPER SERIES The Africa Region Working Paper Series expedites dissemination of applied research and policy studies with potential for improving economic performance and social conditions in Sub-Saharan Africa. The Series publishes papers at preliminary stages to stimulate timely discussion within the Region and among client countries, donors, and the policy research community. The editorial board for the Series consists of representatives from professional Families appointed by the Region's Sector Directors. Editor in charge of the series: Antoine Waldburger, AFTM3, Email: awaldburger@worldbank.org, who may be contacted for hard copies. For additional information visit the Web site http://www.worldbank.org/afr/wps/index.htm, where copies are available in pdf format. The findings, interpretations, and conclusions expressed in this paper are entirely those of the author(s). They do not necessarily represent the views of the World Bank Group, its Executive Directors, or the countries that they represent and should not be attributed to them. Reform and Opportunity: The Changing Role and Patterns of Trade in South Africa and SADC Jeffrey D. Lewis Lead Economist, AFTM1, The World Bank e-mail: jlewis4gworldbank.org

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