Trade Diversion and Trade Creation: An Augmented Gravity Model Study for South Africa

This study involved the determination and analysis of trade potential for the South African pulp and paper industry using a gravity model approach. The pulp and paper sector was identified by the Department of Trade and Industry amongst four other lead sectors to enhance economic growth through the Accelerated and Shared Growth Initiative for South Africa (AsgiSA). The econometric gravity model was designed to forecast the potential international bi-lateral trade flows by looking at specific conditions. It is also used to establish which priority markets in the economy are underperforming when taking their trade potential into consideration. These results then help determine how resources could efficiently be allocated to utilize export growth and promote job creation.