Topics publications: Data analysis and statistics
Trade Reports
Intra-African trade in southern and eastern Africa and the role of South Africa
tralac has been collaborating with the National Agricultural Marketing Council (NAMC) in South Africa during the past year on a project which focuses on the proposed Tripartite Free Trade Area (FTA). The Tripartite FTA is envisaged to consist of the 26 member states of the East African Community (EAC), the Common Market for East and Southern Africa (COMESA) and the Southern African Development Community (SADC), establishing a free trade area stretching from Cape to Cairo. The research papers focus on different aspects of the trade in goods agenda; including a review of intra-African trade and agri-business development in this region. These papers are included in a book, entitled Cape to Cairo – an Assessment of the Tripartite Free Trade Area.
The purpose of this paper is to analyse the implications for South Africa of the proposed COMESA-EAC-SADC tripartite free trade agreement, with a focus on agricultural trade. Any analysis of this nature needs to take into account the problem of regional data quality. African countries are notorious for the lack of openness, timeliness and reliability of trade data. For this reason, a wide range of data sources has been investigated and, where possible, the best data for the specific components has been used.
First, the recently-built Global Trade Analysis Project (GTAP) African database is used to present what is possibly the most accurate report on intra-Africa trade data, including agricultural trade. As this analysis is built upon 2001 data, however, the COMTRADE data base is then used to update the analysis to the 2006 to 2008 period. This is followed by an examination of the ‘mirror’ data for most of the major countries exporting agricultural products to Africa using World Trade Atlas (WTA) data for the December years through to and including December 2009, and then by an analysis using the United Nations Food and Agricultural Organisation (FAO) data to look at a consistent but slightly dated analysis of African imports by product. Finally, given the focus on the implications for South Africa, South African agricultural trade with the tripartite region is analysed, again using WTA data.
Compounding the problems of timeliness and completeness of the data are the inconsistencies in the sector definitions used. In general, this analysis is based on the definitions used by the World Trade Organisation (WTO), but this has not always been practical, and the approaches used to facilitate consistency are discussed at the appropriate points in the analysis. The chapter starts by introducing the trade data and its components, namely agriculture (processed and unprocessed), resources, and manufacturing as used in the GTAP database.
Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.
Books
South Africa’s way ahead: Shall we Samba?
The timing of the third book in tralac’s ‘South Africa’s way ahead’ series exploring trade policy options fits perfectly with the recent interest in examining both South Africa’s Industrial Policy and Trade Policy. The book details the implications of taking the current SACU-Mercosur partial trading agreement (PTA) further to a full free trade agreement (FTA), and we consider that it makes a valuable contribution both trade and industrial policy insights with the Mercosur countries of Brazil and Argentina in particular. We conclude that such an FTA is worthy of serious consideration.
The book starts by detailing the political, economic and trading regimes and settings for both Mercosur and SACU before examining the agricultural production and policy profiles and trade regimes and performances of Brazil, Argentina and South Africa in particular. These three countries have much in common in that they are all, with Brazil and to a lesser extent South Africa, becoming significant actors upon the global agricultural trade reform stage resulting from their common positions as champions of a more liberal agricultural trading world. Specifically for South Africa we find that there are many similarities in the production patterns of the three countries, and while they are to a large degree competitors on in global markets for many products there are also many complementarities.
While recognising that models are never exactly right but arguing that they provide valuable insights, we use the internationally accepted benchmark GTAP global computer model as the analytical tool to examine an FTA between SACU and Mercosur that eliminates custom’ tariff barriers and a representative but conservative estimate of both non-tariff and service constraints between the parties. The results show that there are comfortable welfare gains to South Africa from; a better use of land, labour and capital (enhanced allocative efficiency); increased net investment increasing the amount of capital employed in the economy; and a small contribution from increased labour employment.
This FTA is not good for the South African agriculture sector, however. Imports of agricultural products increase leading to marginal reductions in the prices of all agricultural products. While this is bad news for farmers, it translates into good news for consumers as the reduced agricultural prices across the board help to lower the consumer price index which in turn contributes to the overall welfare gains for South Africa.
The gainers are the vast majority South Africans who are consumers and losers are mainly the small number of commercial farmers. The results for the manufacturing sectors are better news for South Africa, as despite a reduction in the value of production in the motor vehicle and parts sector there was an increase in overall value of manufacturing output. The big gainers were the chemicals, rubber and plastics sector and non-ferrous metals. Importantly, we run an extra scenario whereby changes to the vehicle sector were constrained, and while our modeling has several limitations the results suggested that protecting the motor vehicle sector against Brazilian imports is not in the best interests of South Africa or South African agriculture.
There are several other aspects of a possible FTA covered in this book, as a modern FTA is about more than just merchandise trade. A literature review of the relevant non-tariff barriers (NTBs) is presented which finds that technical barriers to trade seem to be the most common NTB facing exports to Brazil, Argentina and South Africa. Also, in the GTAP model we proxy a reduction of NTB resulting from an FTA and this provides a valuable perspective on the importance of these barriers.
Trade remedies traditionally consist of anti-dumping measures, countervailing duties and safeguards. We provide an analysis of how these are embodied within the trade policies of the main parties and show that they may become important should SACU and Mercosur move towards a comprehensive FTA.
For services, the SACU-Mercosur agreement is limited in scope and currently excludes any reference to trade in services. A key problem here is that SACU is embroiled in a number of regional and bilateral arrangements without having a common negotiating structure and no common position on how to treat the liberalisation of trade in services. In contrast the South American countries are more prepared and organised to liberalise trade in services.
While outside of the SACU-Mercosur mandate, Chile is a closely related South American country that shares many characteristics with South Africa. As an adjunct to the main research we similarly examine these implications for a South Africa/Chile FTA. While not providing major gains, this relationship has some intuitive appeal as there appear no obvious sensitive sectors such as clothing with China or autos and sugar with Brazil that are likely to lead to a cautious approach from South Africa.
Importantly, the implications for the Botswana, Lesotho, Namibia and Swaziland (BLNS) are examined in detail. Again most of the interest is in the agricultural sectors, and given that Mercosur is the global benchmark producer of cattle meat and sugar, both of which are important exports from the BLNS under EU preferences, this is to be expected. There are perhaps smaller reductions than feared in both of these sectors and limited changes in other agricultural products. However, the SACU tariff revenue pool implications for the BLNS countries are substantial and sobering following an FTA with Mercosur. Thus, it is not the direct trade effects from these FTAs that are the main interest to the BLNS but rather tariff revenue pool implications and this research puts some numerical values around that conflict.
© 2010 Trade Law Centre for Southern Africa and the National Agricultural Marketing Council
Publication of this book was made possible by the support of the Trade Law Centre for Southern Africa (tralac) and the National Agricultural Marketing Council (NAMC). The views expressed by the authors are not necessarily the view of any of these institutions.
Readers are encouraged to quote and reproduce the material contained in these books for educational, non-profit purposes, provided the source is acknowledged. Please contact us to obtain authorisation for reproducing this material.
Trade Reports
China-Africa merchandise trade for the December 2008 year
The objective of this paper is to examine the merchandise trading profile between Africa and China. This trade has seen dramatic growth in recent years, with this growth rate almost always higher than the increasingly documented Chinese export penetration into global markets. Chinese imports from Africa are heavily dominated by resources, and in particular mineral fuels (84 % of the aggregated African total) and precious metals (another 3.2 %). Chinese exports to Africa are much more diverse and cover most of the general manufacturing sectors. Looking at the often mirror data of African imports from the global economy, the notable feature again is the dramatic rise of China in all of the markets that consistent data is available for. In addition, an update on the direct China-Africa trade for the six months ending June 2009 is given in the Annex (where Chinese imports declined by 51% on the comparable period during 2008, with the average unit price of most of the main imports falling by a similar figure indicating that this decline was largely price-driven).
We suggest that given the nature of African exports into China and the consequentially low average tariff assessed on these imports, China may wish to consider extending its currently limited preferences for Africa into a much more ambitious scheme. This trade scheme could almost resemble a Chinese variant of the African Growth and Opportunities Act (AGOA) US-initiated trade liberalization program intended to promote African exports to the US market or the Economic Partnership Agreements (EPAs) that are being negotiated for African access into Europe. The direct costs to China of such a trade arrangement would be minimal and the political gains from giving Africa an opportunity to promote its resource and manufacturing base, a base that is increasingly being underpinned either directly or indirectly through infrastructural building from China itself, is very large.
Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.
Books
Monitoring Regional Integration in Southern Africa Yearbook 2008
2008 has been an eventful year for the Southern Africa region. The Southern African Development Community (SADC) launched its Free Trade Area in August. In October at a Tripartite Summit, SADC, the East African Customs Union (EAC), the Common Market for East and Southern Africa (COMESA) announced their intention to create a Free Trade Area encompassing the member states of all three regional economic communities.
Meanwhile the Southern African Customs Union (SACU) has experienced growing internal dissent, largely as a result of two factors. The first is South Africa’s concerns about the revenue-sharing arrangement in terms of which South Africa is making transfers to the smaller member states. Second are the negotiations with the European Union (EU) to conclude an Economic Partnership Agreement (EPA). All SACU member states are included in the SADC EPA group that is negotiating with the EU. South Africa has not yet signed the Interim EPA and has intimated that if the other member states implement the interim agreement, it may withdraw from SACU. This is a credible threat particularly for countries like Lesotho which rely for more than 50 percent of government revenue on the SACU revenue pool, and have very few alternative sources of revenue to tap into.
At a political economy level the Zimbabwe situation is causing growing concern, and the political parties, even at the end of 2008, nowhere near an agreement on a way forward to govern the country. Very important regional issues came to the fore from the Zimbabwe catastrophe. Sustainable regional development is difficult to negotiate when even one member state is in crisis.
The global financial crisis has also impacted on the region in 2008 and more serious impact is still expected. The depth and extent of this crisis and the general economic slowdown (some are already speaking of recession) reflects not only on economic performance as employment, income and other indicators slide, but also in policy stance. Undeniably, countries in the region are becoming more protectionist and this can be expected to impact on the regional integration agenda and specifically on the implementation of the liberalisation agenda. There is also evidence of more reactive policy decisions, as contingency protection increases and policy generally becomes more inward looking. This is not necessarily in the interest of longer-term development.
The 2008 collection of papers reviews the developments in the Southern African region, hoping to stimulate debate about regional integration matters at a time when important decisions for the region’s longer-term future are being taken.
This book was launched on 30 March 2009 at The Aquarium, V&A Waterfront, Cape Town.
Download the pdf Foreword, Contents, Introduction and Authors’ Profiles (323 KB) .
© 2008 Trade Law Centre for Southern Africa, Konrad-Adenauer-Stiftung and Namibian Economic Policy Research Unit
Publication of this book was made possible by the support of the Trade Law Centre for Southern Africa (tralac), the Konrad Adenauer Foundation and the Namibian Economic Policy Research Unit (NEPRU).
Readers are encouraged to quote and reproduce the material contained in these books for educational, non-profit purposes, provided the source is acknowledged. Please contact us to obtain authorisation for reproducing this material.
Books
South Africa’s way ahead: looking East
South Africa is interested in strengthening trade relations with developing country partners and is articulating a strong ‘Look East’ policy. Trade links with China and India seem to be high on the agenda. This is important in the context of the Southern Africa Customs Union (SACU) too. South Africa is the largest and most developed country in this customs union, and its preferences are likely to influence SACU’s trade agenda. This book assesses the potential impact of a free trade agreement (FTA) between South Africa (SACU) and China, and an FTA with India. These are two very fast growing developing countries which are also important sources of foreign direct investment in Africa. The two FTAs are likely to deliver very different impacts, and to raise important policy questions for South Africa and SACU.
The focus of this book is on South Africa’s trade relationship with China and India. We note at the outset that, as a member of the Southern African Customs Union (SACU), South Africa does not articulate an independent trade policy, but determines a common external tariff together with its SACU partners. Nonetheless, South Africa’s trade policy stance can be expected to play an important role in SACU’s trade policy, given that the South African economy dwarfs the collective economic power of its SACU partners.
This book provides much needed input to trade policy analysis for South Africa and, by implication, for SACU too. The trade modelling work builds on that developed in an earlier tralac monograph, ‘South Africa’s Way Ahead: Trade Policy Options’. South Africa’s gold exports to India add an important dimension to the impact of an FTA between these partners, while, of course, China’s manufacturing exports to South Africa and concerns about sensitive sectors such as clothing and textiles raise industrial development questions for South Africa.
© 2008 Trade Law Centre for Southern Africa, Tru-Cape Fruit Marketing (Pty) Ltd and the National Agricultural Marketing Council (NAMC)
Publication of this book was made possible by the support of the Trade Law Centre for Southern Africa (tralac), Tru-Cape Fruit Marketing (Pty) Ltd and the National Agricultural Marketing Council (NAMC). The views expressed by the authors are not necessarily the view of any of these institutions.
Readers are encouraged to quote and reproduce the material contained in these books for educational, non-profit purposes, provided the source is acknowledged. Please contact us to obtain authorisation for reproducing this material.
Trade Reports
SACU, China and India: the implication of FTAs for Botswana, Lesotho, Namibia and Swaziland (BLNS)
In assessing the future trade policy options for SACU, China and India’s dramatically increasing role as trading giants on the world scene has to be taken into account in these considerations. The focus in this paper is on how the SACU trading relationships with both China and India may be advanced by the adoption of free trade agreements between SACU (that includes South Africa and the BLNS – Botswana, Lesotho, Namibia and Swaziland) and China and SACU and India. To assist with this analysis the internationally accepted benchmark Global Trade Analysis Project (GTAP) database and the associated general equilibrium model will be used as the analytical tool.
The results for a SACU-China FTA show that both Botswana and the rest of SACU (Lesotho, Namibia and Swaziland as one ‘region’) gain modestly in terms of enhanced welfare. In trade, the direct effects are of less importance than the indirect effects as Chinese imports in particular replace those from South Africa and other sources. For the rest of SACU, the increases in production are greater but they are spread unevenly across sectors. Gains in the production value of ‘other agriculture’, ‘other meats’, textiles and non-ferrous metals (NFM) are recorded, while exports overall decline to South Africa but increase to both China and the rest of the world. Overall imports into the rest of SACU increase by more than exports, with big increases in textile imports from China leading the way.
For the Indian FTA we find that a simulation of comprehensive tariff reform in India is dominated by the massive effects on South Africa’s gold sector, and given the implausibility of this, we have opted for an alternative simulation that holds the Indian non-ferrous metal (gold) tariffs at their initial value. The welfare results are a decline in real GDP of 0.12% in Botswana but a marginal increase of 0.04% in the rest of SACU. For Botswana there are minor declines in output for many sectors but larger declines for apparel, vehicles and their parts, and especially services. Botswana’s import profile shows modest increases from India and the rest of the world that more than displace South African imports. Changes for trade in the rest of SACU are even more modest, with slightly increased exports to India and a richer South Africa just ahead of declines to the rest of the world. For imports, the Indian displacement of South African exports (around $40 million in each case) paves the way for increased imports of $6 million from the rest of the world, giving the final modest increase of $7 million overall. The direct effects of these FTA results are modest, with most of the changes coming about as the BLNS trade with South Africa changes at the margin.
Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.
Trade Reports
South Africa and China: the agricultural and fisheries trading relationship
A feature of world trade over the last ten years has been the dramatic growth of China’s trade with the world, and this paper examines the agricultural component of that trade. During the first six months of 2007 agricultural imports were 3.8 percent of total Chinese imports, a figure down from the 6.6 percent during the last six months of 1996. By value, total agricultural imports were US$ 16,459 million during this six-month period, up from US$ 5,030 million in the final six months of 1996. By product the main imports were soybeans (US and Brazil), cotton (US and India) and palm oil (Malaysia and Indonesia).
This paper examines Chinese agricultural imports and provides the profile of selected import sources. It starts with global imports, and then moves sequentially through imports from South Africa, New Zealand, Australia, Chile, Argentina, Brazil, India, US, EU and ASEAN. The reports on the aggregate position for each of these sources, followed by an analysis of the top 15 agricultural products (and then the top-ten fisheries products), and for the individual sources a common template is used whereby data is presented for the first year (ending September 1996) and the last two September year along with their MFN (i.e., non TRQ) tariff rates, market shares, variability of the imports and the main competitors and their market shares. The emphasis of the paper is upon placing the position of South Africa's agricultural trade with China in perspective.
Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.
Books
South Africa’s way ahead: trade policy options
This book presents the output of a tralac project focusing on the trade agenda of South Africa and the Southern African Customs Union (SACU) of which South Africa is a member. The proliferation of Free Trade Agreements (FTAs) is very much part of SACU and specifically South Africa’s trade agenda, since FTAs are negotiated collectively by SACU member states.
The aim of the analysis in this book is twofold. First, the implications of different FTAs that are either being negotiated or being considered, are assessed in the context of the current Doha Round of multilateral trade negotiations. Second, the book presents a sober assessment of trade modelling exercises, noting the value as well as the limitations of these exercises in the making of trade policy choices and negotiating trade agreements.
“This book raises many fascinating policy questions. The authors have systematically built a series of policy scenarios for South Africa and its Southern African Customs Union (SACU) trade partners in order to see what the welfare consequences might be of preferential trading arrangements. The simulations are not only limited to situations in which South Africa and SACU enter into variously configured free trade agreements (FTAs), but they also consider what would happen to these countries if third parties from outside the region were to establish FTAs among themselves.
“We have known for a long time that trade liberalisation will throw up winners and losers, both within countries and, in some circumstances, among countries. Where winners and losers are located within the same jurisdiction, it may be argued that governments have a chance to mitigate the adverse effects of trade liberalisation on disadvantaged groups through the use of various adjustment-related and social policies. But what happens when the winners and losers are different countries? These distributional outcomes may often prove more delicate and difficult to deal with. Multilateral trade liberalisation can have these effects, especially through adverse terms of trade effects associated with reductions in subsidies. One of the things that the preferential trade liberalisation scenarios simulated in this book suggest, however, is that such distributional consequences are likely to occur more frequently under discriminatory trade liberalisation. No easy answer exists to this particular policy challenge, but it is not difficult to see that this may be one reason why we observe ‘herd’ behaviour and burgeoning regionalism around the world.
“Overall, this book makes a valuable contribution to increased understanding of the consequences of various trade policy choices in southern Africa. The authors are to be commended. The real contribution of work of this kind is not so much in specifying what governments should do, but rather where to look for their options and what questions to ask before exercising them.”
Chief Economist, World Trade Organisation
© 2007 Trade Law Centre for Southern Africa and AusAid
Publication of this book was made possible by the support of the Trade Law Centre for Southern Africa (tralac) and the Australian High Commission (AusAid). The financial support of AusAid for this project is gratefully acknowledged. The views expressed by the authors are not necessarily the view of any of these institutions.
Readers are encouraged to quote and reproduce the material contained in these books for educational, non-profit purposes, provided the source is acknowledged. Please contact us to obtain authorisation for reproducing this material.
Trade Reports
Revisiting the South African-China trading relationship
A feature of South African imports in recent years has been the increasing penetration of the market by China and the dominance of this market in sectors where China actively competes. This was vividly illustrated during 2006 when quotas were placed on the importation of Chinese textiles and clothing to protect a domestic section that seems unable to compete even behind significant tariff protection. Conversely, the reported South African exports to China (of mostly ores, steel and fuels) are lower, leading to a trade deficit with China of some $4.8 billion during 2006. This must be tempered, however, by the strong suggestion that exports are massively underreported when Chinese trade data is considered. This data shows a lesser deficit of $1.7 billion – still high, but more manageable.
This paper undertakes a computer simulation (using the Global Trade Analysis Project (GTAP) model) of a possible free trade agreement (FTA) where all the tariffs between Southern African Customs Union (SACU) and China are reduced to zero. This is a standard GTAP model, using the latest database information and a standard set of closure assumptions except in the case of the unskilled labour market. For this market, a closure is used whereby adjustments are made as a function of the unemployment rate in the individual country.
In South Africa, with its extremely high unemployment rate, this is a crucial closure assumption as some alternative closure assumptions show. In contrast with earlier tralac work, this model does not incorporate any non-tariff barrier reductions in the Chinese market, and this reduces the gains to South Africa by nearly half (but increases Chinese gains).
Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.
Trade Reports
A possible SACU/China Free Trade Agreement (FTA): Implications for the SA manufacturing sector
Regional trade agreements are becoming an increasingly popular trade policy tool in many countries, and SACU/South Africa is embracing this concept with a view to furthering its bilateral trade. However, the negotiating dynamics have become more complex following the introduction of the new SACU Agreement, as South Africa can no longer negotiate in its own right, as was the case with the EU TDCA, but only with the full cooperation and consent of fellow SACU members. This means that the wider SACU perspective needs to be considered in future FTA negotiations. The current study undertakes a close look at the potential bilateral FTA with China, a nation that is itself also enthusiastically embracing the ideas of bilateral FTAs although without actually consummating any; New Zealand became the first country to begin bilateral talks with China late 2004/early 2005, and these talks are still in progress; and in recognition of the need to be in conformity with the new SACU agreement the wider SACU perspective is considered.
The objective of this paper is to analyse the possible implications of this FTA for South Africa. Version 6 of the Global Trade Analysis Programme (GTAP) model has been used to simulate the FTA. The paper outlines the details on the model used and its associated database before providing and then discussing the results of a full FTA whereby all bilateral duties and some NTBs in China are abolished. A limited analysis of alternative scenarios is also considered: the partial FTA of a 50 percent cut in the FTA duties, but with NTBs in China remaining unchanged; a 30 percent cut across the board globally in all duties from Doha round outcome; and combinations of implementing both the full and partial FTAs taking into account this Doha outcome.
Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.