Trade and Industry

Tuesday, 01 December 1998

Free Trade with Europe - the Winners and Losers: The Results of the SMART Simulation

  • Year: 1998
  • Organisation: UNCTAD; TIPS
  • Author(s): Ethel Teljeur
  • Countries and Regions: European Union (EU), South Africa

This study projects the impact of the proposed free trade area (FTA) between South Africa and the European Union on the bilateral trade flows between the two. The South African and European respective proposals, as formulated in 1996, served as a basis. The results are evaluated both at an aggregate level, to gauge its impact on the balance of payments and on Government revenue, and at a sectoral level to assess its implications for specific industries. Additionally, a simulation of the impact of the agreement on South Africa's trade with other commercial partners is discussed. The simulation was conducted utilising a static, partial equilibrium methodology, 'SMART', jointly developed by UNCTAD and the World Bank and widely utilised by negotiators of both bilateral and multilateral trade agreements.

Our results show that the impact of the proposed free trade area agreement on bilateral trade flows is likely to be uneven, with a relatively large effect on SA's imports from the EU and a comparatively smaller effect on its exports towards this market. The size of this projected imbalance will depend on the exact terms of the agreement, which are currently under negotiation. Depending on the scenario used, our projections show an increase in South African imports from the EU between 2.3% and 12.3% of 1996 SA imports from EU. By contrast, the estimated increase in SA exports to the EU will approximate between 1.3% and 1.4% of 1996 SA exports to the EU (see Table "Summary Results " below).