Thursday, 23 August 2007

Trade and Industry Monitor Volume 29: Targeting Key Export Growth Markets

" In this edition of the Trade and Industry Monitor we feature two articles on South Africa's (SA's) presence in key traded product markets, and a report on some of the likely implications of the planned European Union (EU) expansion.

In the first paper on the theme of dynamic products, TIPS' chief economist Dirk van Seventer and former TIPS researcher Katherine Gibson note that SA's presence in dynamic world product markets is low, with the exception of diamonds. Moreover, Van Seventer and Gibson's research suggests that of SA's top 10 products (by market share) in the dynamic products group, more than half have experienced a slow-down in export growth over the period 1997 to 2000.
As world trade in these products has continued to grow, this should be of great concern to SA policy-makers, as it suggests that SA is losing market share in key growth markets where it already has a significant presence. Moreover, even where SA has experienced high export growth in a dynamic product, this has generally been off a low base, and in only nine of the 40 products listed has this growth been sustained in both the first and second periods, notwithstanding strong international demand. Van Seventer and Gibson make the argument that these developments suggest possible supply-side difficulties for SA exporters, and propose a more active and focused role for government in addressing these supply-side failings.

In the second article on SA's trade profile, Nimrod Zalk argues that trade and investment liberalisation, growing world income and technology change have led to fundamental changes in consumer demand. The result has been a significant increase in non-resource based manufactures' share of world trade, with developed and a few developing countries the main beneficiaries. Zalk goes on to argue that SA's share of the 40 most dynamic products in world trade is low, even by developing country standards, with SA ranked below Namibia, Mauritius and Croatia, and well below East Asian emerging markets such as Malaysia, Taiwan and Thailand.

These and similar exercises in which TIPS is currently engaged are not necessarily about 'picking winners' but rather assisting government to target those sectors where it has the highest potential to have a substantial impact and where the rewards are likely to be greatest relative to the inputs required.

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