Trade and Industry

Thursday, 15 June 2000

Endogenous Protection in a Trade Liberalising Economy: The Case of South Africa

  • Year: 2000
  • Organisation: TIPS
  • Author(s): Merle Holden; Daniela Casale
  • Countries and Regions: South Africa

The paper aimed to establish the changes that had occurred in the institutional structures governing trade policy in South Africa during the period 1990-1998. It also examined the forces that had influenced the application of tariff policy by the major tariff setting bodies by applying various theories of endogenous protection to their decisions. Using firm level data on applications made to the Board on Tariffs and Trade, the study found that when estimating a Probit model, employment considerations rather than capital invested had influenced the Board's decisions to grant protection. In addition, the Board was found to have granted protection even in the face of tariff lines having been bound under the Uruguay Round. The paper argues that this should not be interpreted as a reversal of the trade liberalisation, but rather as an attempt by the Board to cushion firms from the acceleration in the tariff rationalisation process that had occurred after the GATT offer. Finally, it is suggested that the Board's response to changes in import penetration ratios between industries that were considered organised provided prima facie evidence of the superior lobbying ability of such industries.