Displaying items by tag: Trade Policy

One of the major international economic developments in recent years has been the growth in regional trade agreements (RTAs). However, with the exception of a few, there are criticisms that RTAs have not yielded the expected benefits. The focus of this paper is to determine the impact of engaging in regional initiatives for two groupings comprising of developing and least developed countries from two different continents, namely MERCOSUR and SADC. 

This research report was produced under the TIPS small grant scheme.

About the author

Anaïs Dangeot holds a First Class in her undergraduate studies in Banking and Finance at the University of Mauritius. She has recently completed her Masters in Social Protection Financing at the University of Mauritius with a distinction. During her Master's tenure, Anais has participated in a joint research project between the University of Mauritius and the University of Botswana. Miss Dangeot has also been working with the Economic Policy Research Institute (EPRI), in Cape Town. Finally, her research interests centres on areas which include public policy, poverty, deprivation analysis and broader social development issues. 

Intra-Industry trade (henceforth IIT) has generally been perceived to be a feature of the industrialized countries. As the past few years have seen a rapid increase in Zambia's trade with its trading partners in the SADC, trade statistics reveal that a substantial part of such intra-SADC trade is in fact of the IIT form. This study seeks to establish the extent of IIT between Zambia and its trading partners in the SADC region and to identify the determinants of IIT at this level.

Using a modified gravity model in a panel data framework for the 1998-2006 period, the estimation results from the Feasible Generalized Least Squares in the random effects model evaluates the existence of IIT between Zambia and its trading partners in the SADC. The empirical results reveal that gross domestic product, dissimilarities in per capita income, transportation costs (distance and common border) and colonial ties (common language) are significant factors explaining IIT between Zambia and its trading partners in the SADC. The results also reveal that IIT between Zambia and its trading partners in the SADC is positively determined by GDP, distance, and dummies for common border and common language while dissimilarities in per capita income (DPCI) depresses it.

This paper investigates the potential to harness trade finance to foster the development of a green economy in developing countries.

The world is facing multiple crises of sustainability: global financial crisis, climate change, and the overuse of natural resources. Many developing countries are additionally destabilized by poverty, disease, corruption, and failures in democratic governance and education.

The transition to a green economy is recognised by a variety of organizations and experts as a ground-breaking way forward, combining economic development, social welfare and environmental protection. In order to shift to a green economy, changes in production and consumption practices, and therefore also in trade patterns, are crucial. This makes the leverage power of leading export credit agencies, which totalled an exposure of USD 1.7 trillion in 2011, colossal.

Geographical Indications are goods that derive the uniqueness of their quality from the region where they originate. Provision for protection of such goods is provided for in the TRIPS Agreement among WTO member countries. This policy brief looks at some international examples where goods have been protected based on a Geographical Indication status in attempting to draw out some lessons on the costs and benefits of protecting goods with this status, and whether such a regime should be introduced in South Africa.

We look at how trade liberalisation, working through product prices, has affected the skill premium in South Africa over the period 1990-2009. Our main finding is that trade liberalisation led to a reduction in prices over this period, and, through prices, mandated a rise in the skill premium of 3.3%. The structure of the skill premium did not stay constant over the period. In the sub-period 1990-1999, trade liberalisation mandated a fall in the skill premium of 10.6% and in the sub-period 2000-2009, trade liberalisation mandated a rise in the skill premium of 11.6%. Our main results are consistent with the sector bias of tariff cuts over these periods, however they do not pass some of the robustness checks that we perform.

About the Authors:

Jeffrey Mashiane

In progress

Supervisor, Larence Edwards: Lawrence Edwards is an Associate Professor in the School of Economics, University of Cape Town. Lawrence graduated with a MSc in Economics from the London School of Economics in 1998. He completed his PhD in Economics at the University of Cape Town in 2003.

Lawrence's research falls within the field of international trade with a specific focus on international trade and labour, the determinants of trade flows and economic adjustments to trade liberalisation. He has published in a number of international and local journals including World Development, Journal of International Development, South African Journal of Economics and Journal of Studies in Economics and Econometrics. He has also consulted widely with the World Bank, the National Treasury, the Department of Trade and Industry and is currently a member of the South African Growth Project managed by the Centre of International Development at Harvard University.

Southern African Development Community (SADC) members signed the Trade Protocol in 1996, however progress in the region to reap the benefits purported to accompany regional economic integration appears limited. Although SADC has adopted a growth and development through trade strategy, indications are that more needs to be done to implement this in a way that yields more positive results.

Evidence based policy making is critical for developing sound and relevant government policies. The process of evidence based policy making by definition allows one to monitor specific variables to determine the efficacy of a government intervention. Accurate data and sound data analysis are needed to achieve particular objectives.

• The TIPS SADC data base was constructed by TIPS through making use of its regional network of in-country government sources attached to various statistical authorities;
• The ITC Trade Map data is based on UN Comtrade with quarterly and monthly data originating from national as well as from regional sources. Data access on the ITC Trade Map is limited to a few years (currently the available trade data series begins in 2001 and progresses to the most recent data available)
• The UN Comtrade database is an internet subscription service that supplies international trade data, as reported by the countries and is maintained by United Nations Commodity Trade Statistics Division. UN COMTRADE does provide free data; although there is a strict limitation to 1 000 records' per day. In both ITC Trade Maps and UN Comtrade, data that is not available from the reporting country is reconstructed on the basis of data reported by partner countries, giving rise to mirror statistics.
• Special attention will also be paid to an additional dataset for South Africa, the Quantec database, because of its popularity amongst South African policy researchers. The Quantec database is an internet subscription service that makes available economic data collections that cover macroeconomic, regional socio-economic, industry and international trade data. It is a database that focuses only on South Africa, and collects data on South African statistics. The trade data is sourced from the South African Revenue Service.

1. The first section gives a brief description of the characteristics of the trade data available for SACU and will focus on the three aforementioned sources.
2. The second section will focus on discrepancies in total trade values reported by two databases, between a reporting SACU member and the corresponding SACU partners..
3. The third section looks at the statistical significance of the data differences making use of the Wilcoxon Matched-Pairs Signed-Ranks test (Wilcoxon-MPSR test).
4. The fourth and final section looks at the results from the statistical analysis

This note highlights the pattern of South Africa, European Union and Asia trade over the period 1990-2009. The note pays particular attention to trade flow changes between South Africa and the EU and compares these to the changes in the trade flows between South Africa and Asia. The note also looks at the changes that have occurred within the Asian region, taking a closer look at sub-regions in Asia, namely, Eastern Asia, South Central Asia, South Eastern Asia, and Western Asia.
The trade trends reveal that South Africa's imports have been slowly increasing dominated by Asia. Similarly Asia, in particular East Asia, has emerged as South Africa's major trade partner, dethroning the European Union as an export destination.

With regards to imports, China has, over the years, rose to become a significant exporter to South Africa. The same can be said for Saudi Arabia and the United Arab Emirates. On the other hand, Japan, India, Pakistan and Singapore have lost ground in terms of preference as import sources. Germany and the United Kingdom remained South Africa most important export markets, although the two countries' share of South Africa exports declined.

On closer inspection, there is evidence to suggest that a number of traditional European Union imports commodities that were ranked as in the top ten exports to South Africa that have been replaced by Asian imports and these include; HS27: Mineral fuels, Oil, distillation products, etc.; HS29: Organic chemicals; HS39: Plastics and articles thereof; HS71: Natural or cultured pearls, precious or semi-precious stones, precious metals, metals clad with precious metal & articles thereof; imitation jewellery; coin; HS73: Articles of iron or steel and HS85: Electrical, electronic equipment.

This research note shows that the EU is a significant trading partner to South Africa. Over the years the EU has been South Africa's largest trading block. Post 2005, Asia became a crucial trading partner to South Africa, and based on the previous trends, expectations are for Asia to surpass the EU in terms of value of trade within the next decade.
 

For many African states, negotiations to liberalise trade in services is a relatively new experience. Southern African Development Community (SADC), Common Market for Eastern and Southern Africa (COMESA) and East African Community (EAC) member states are set to negotiate services at several levels – regional, bilateral, multilateral and even at the supra-regional level in the context of the Tripartite agreements.

Trade in services is not a feature of the 2002 Southern African Customs Union (SACU) agreement, and although the Heads of State and Government hinted at the possibility when they undertook to develop “SACU positions on new generation issues”, it is unlikely that services will be negotiated in the context of SACU any time soon. SACU member states already have to contend with bilateral services negotiations with the European Union (EU) (Botswana, Lesotho, Swaziland), regional negotiations as part of SADC (all five SACU member states), regional negotiations as part of COMESA (Swaziland) and even at the supra-regional level as part of the Tripartite negotiations. This is already ambitious, particularly for a country with limited capacity such as Swaziland. These negotiations are mostly focused on services liberalisation, which addresses regulatory barriers relating to the access and treatment of foreign services suppliers. If SACU member states feel the need to directly address the issue of services within the configuration, the basis of the discussion should be deeper integration. With deeper integration, the focus should be shifted from liberalising the barriers that exist at the borders, towards addressing the behind-the-border issues, which exist within the jurisdiction of the member states.
 

The purpose of this paper is two-fold. First it is to review Botswana's competitiveness policy in the 10th National Development Plan, (NDP10 -2009-2016), National Export Strategy (2010-2016) and what are its conceptual foundations in the works of Michael Porter (1990). This will help explain the direction of trade and development policy in a small landlocked country like Botswana. The second purpose of the study is to review the actual experience of several non-traditional manufacturing exporters (i.e. outside the textile and motor vehicle industry) and to see what their experience has been and whether the current export strategy will facilitate their competitiveness and survival in Botswana's challenging commercial context. The five firms reviewed in this paper, represent numerically approximately one third of the firms in the non-traditional export sector. The sector is very small and is likely only to become smaller as the existence of this sector is in many ways the product of an earlier period when there was more government intervention in the development of exports. The analysis of the firms is qualitative in nature as firms were understandably unwilling to provide cost and revenue data and there were an insufficient number of firms for any serious quantitative analysis. The research focuses on the main concerns of the firms in sustaining their position in the export sector. In some cases this stems from the costs of transport, smallness and in others from decisions of government in terms of development policy and its application.

The paper will consider whether there is anything in the current competitiveness strategy that will assist firms in meeting the challenges of production in a small landlocked country like Botswana. It will be argued that the strategy and the actual commercial needs of most of the firms surveyed are disconnected as the export strategy is focused on a view of export development which is in appropriate given the actual level of private sector development in Botswana. Moreover, the policy is internally contradictory. Like most resource rich countries Botswana's principle policy direction for diversification is beneficiation which lies at the very heart of national and regional trade policy. It fails to focus on the question of how beneficiation of raw materials is to proceed in light of the current electricity and energy policy which lies at the core as to why firms in Botswana beneficiate minerals abroad. Thus the approach taken in this paper is essentially commercial, considering the actual cost and availability constraints that firms face.
 

Climate and trade issues lie at the intersection of two of the world's most contested, delayed and important multilateral negotiations. Climate change under the auspices of the United Nations Framework Convention on Climate Change (UNFCCC) and international trade as regulated by the World Trade Organization (WTO). This paper is a scoping assessment of the inter-relationship between international trade and climate change negotiations as it affects policy development in South Africa. The paper highlights two key variants of measures which pose a challenge to both these negotiations, specifically border carbon adjustments and the liberalization of trade in environmental goods and services.

The paper finds that while free trade in green industry products may be encouraged under a global climate agreement, it should not be reasonably required. In addition, for Border Carbon Adjustments (BCAs) under the UNFCCC, the authors recommend that BCAs be considered an issue best left to the WTO to judge as fair or not. At the same time, the authors propose a multilateral climate agreement under the UNFCCC which considers one (or all) of the following three agreements/provisions to mitigate the negative impact of response measures on non-Annex 1 countries:

• Exemption of Least-Developed Countries from BCAs;
• Inclusion of non-Annex 1 countries in a global carbon trading scheme on the basis of no-lose targets (which economic modelling suggests almost totally offsets any negative trade impact of carbon pricing on exports); or
• Provision made for an “effectively comparable” or “minimum effort” carbon price, whose implementation in a country that is a signatory of the Convention would be acknowledged and treated as a Nationally Appropriate Mitigation Action (NAMA). A global deal on climate change should then allow for Non-Annex 1 countries to be exempted from the imposition of any unilateral BCAs by other signatories of the Convention, provided they meet the “minimum effort” requirement for carbon pricing.

In 1997 the EU introduced a requirement that beef imports be traceable through a computerised system. To ensure continued access to the EU market, Botswana introduced the livestock identification and traceback system (LITS). The objectives  of this study are to estimate the costs associated with implementing the system and determine the effects on Botswana's beef exports to the EU market, government's export revenue from the beef sub-sector, and cattle producers' incomes and rural employment in the cattle industry.

There is increasing evidence that export diversification is linked to growth. However, possibly less than 10 African countries show signs of export diversification, with manufacturing making up at least 25% of total exports. Botswana and Zambia are both heavily reliant on primary commodity exports. In Zambia, the dominance of copper was such that only 6% of Gross Domestic Product (GDP) was manufacturing at independence in 1964 – 90% of export revenues were with copper. Zambia has had two main eras of economic policy since independence, with a central planning approach in the first period. In 1991 Zambia evolved to a market economy model. Policies and the role of government differed – from that of investor to facilitator – but the outcome was similar: mineral exports have remained high and dominate the portfolio of goods exported.

In their quest to achieve higher economic growth and development African governments have experimented with different growth and industrialisation models. Prominent among these is the import substitution industrialisation (ISI) model adopted after gaining independence in the 1960s and 1770s. It is widely believed that the ISI model failed, and after this came the idea of supporting growth through regional economic integration, specifically through the institutions of regional economic communities.

Sugar cane remains a major contributor to the Mauritian economy. In 2003 it was cultivated on 85% of the arable land by 28 000 planters, with most planters being smallholders. One in three rural families is directly or indirectly involved in the sugar industry. Annual sugar production averages 575 000 tonnes of which 507 000 tonnes are exported to the EU under the African Caribbean and Pacific (ACP) - European Union (EU) Sugar Protocol, the Special Preferential Sugar Agreement, which provides a guaranteed price well above the world market price. The share of the sugar industry in the Mauritian economy has dwindled from 25% of Gross Domestic Product (GDP) in the 1970s to about 3.5% in 2003, but still represents about 19% of foreign exchange earnings.

South Africa's trade policy has undergone much change as the country approaches its second decade of democracy. In particular, of more recent interest on the global sphere, and hence on the domestic front, have been the trade issues du jour, including trade in services and behind-the-border issues such as non-tariff measures and competition.

Trade remains an important facet of the country's economy, and although growth has improved since the 1990s when economic growth of 1% was being experienced, it is generally agreed that South Africa needs to grow its economy by more than the 5% it is averaging currently per annum. Increasing growth in the country's exports is seen as one key objective in the country's path to achieving more robust growth, but of course a crucial question is how this can be done.

Numerous challenges have arisen which have affected South Africa's ability to realise this objective. Amongst these are issues such as volatility of the exchange rate and a widening trade deficit, together with political crises plaguing African trading partners such as Kenya and Zimbabwe. Expanding infrastructure bottlenecks, for example related to maritime transport, and increasing uncertainty regarding energy supply are further limiting factors that are not part of the trade policy arena per se, but do impact on the country's ability to expand its exports. This is also linked to an important area of policy concern, which relates to how trade policy complements, and is complemented by, other economic policies, such as the industrial policy, in a pragmatic way. On the bilateral and multilateral front further difficulties have arisen, for example, within the context of the Doha negotiations related to liberalisation in agriculture, as well as the Economic Partnership Agreement (EPA) negotiations with the European Union (EU).
 

This paper examines the pattern of trade between IBSA countries for the period 2001-2008. We find that trade between the countries has been on the increase. After the IBSA initiative was established in 2003, each country recorded a significant growth in its trade with other IBSA countries in 2004, leading to a large intra-IBSA trade increase of 43.45%. Intra-IBSA trade continued to rise thereafter peaking at US$26 497.7million in 2008, a 40.97% growth from the previous year.

With regards to South Africa's exports with Brazil, we find that the mining sector dominates. In the manufacturing sector, high-technology followed by medium-technology manufactures dominates. South Africa's chief imports from Brazil are largely with manufactures, particularly of high-technology goods followed by medium-technology imports. The agricultural sector is the second most significant sector after manufacturing.
 

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.

Trade patterns change as a result of the international specialisation of production and the increased integration of world markets. This is especially evident in small open economies such as the countries that make up the SADC region. In 2000, the share of SADC industrial production that was exported stood at 12%; by 2005, this share stood at 17%. A similar yet more pronounced trend applies to the share of domestic final demand for industrial goods imported. For 2000, the share of domestic final demand imported was 13%; this increased to 20% in 2005. The change in trade patterns reflected in these numbers has important implications for the use of resources in the economies of the region. This study focuses on the implications of changes in SADC industry trade patterns on the energy use patterns of the countries within the region.