The Economist (2013), in its usual succinct manner, sums up the African trading position as follows: “Africa is a continent rich in minerals and oil. China has an economy that requires them in abundance. Since the mid-1990s the economy of sub-Saharan Africa has grown by an average of 5% a year. At the start of this period Africa’s trade with China was negligible. It is now worth around $200 billion a year. Most of Africa’s exports are raw materials. China sends manufactured goods back in return”.

The objective of this paper is to examine the South African-Chinese trading relationship against this background statement. In particular, the authors assess (a) how consistent the trade data reporting is between the two partners and (b) how well South Africa has been performing in the Chinese market.

The answer to question (a) above is that there are significant differences in the reporting, and especially between South African exports on the one side of the equation and Chinese imports on the other. This difference is not only at the aggregate level but at the detailed level as well where the bilateral data can seldom be reconciled. Contributing to the aggregate level differences on the Chinese side is its reporting of a massive value defined as ‘Special Products’ that does not have an easily available explanation. Notably this data is not universally reported by international trade sources.

The answer to question (b) is equally worrying: South Africa is not competing well in the Chinese market against its major competitors at the detailed level despite appearing to do so by just looking at the increased export trade flows. Similarly, while the reverse flow of Chinese exports/South African imports does reconcile very well at the aggregate level the ‘devil is in the detail’ where the large differences become apparent. Worryingly, these differences are also a feature of the closely monitored South African clothing imports from China. And yes, South Africa is exporting raw materials and importing manufactured goods.

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.

The accession of South Africa into the ‘BRICS’ formation has attracted wide attention internationally. Some welcomed the step while others questioned it. A closer look at BRICS reveals that these countries share some fundamental features while they differ in other respects.

The BRIC acronym was coined by Jim O’Neill of Goldman Sachs in 2001. The founding members of this political formation are Brazil, Russia, India and China. The formation of the BRIC was motivated by global economic developments and changes in geopolitical configurations. South Africa joined the group in 2011, thus opening the possibility of putting Africa on the BRICS’ agenda. South Africa’s admission to the group was motivated by China and supported by Russia. Its accession to the BRICS generated much discussion about the country’s suitability to be part of the formation.

One of the real issues raised is that South Africa does not measure up to the other BRIC economies in terms of population, trade levels and performance, and growth rates. A formation such as the BRICS is of value to South Africa only if the country’s strategic development interests (relating, for example, to agriculture) are to be on the agenda. South Africa faces particular challenges related to market access into the BRIC countries.

Agricultural issues amongst the BRICS are discussed under the Standing Expert Working Group on Agriculture and Agrarian Development. The issues that are prioritised include:

• The development of a general strategy for access to food (this is where market access needs to be tabled), which is tasked to Brazil;

• Impact of climate change on food security, which is allocated to South Africa;

• The enhancement of agricultural technology, cooperation and innovation that is allocated to India; and

• Creation of an information base of BRICS countries that is allocated to China.

In 2012, at the annual conference of the Agricultural Economics Association of South Africa, the National Agricultural Marketing Council (NAMC) co-hosted a workshop aimed at establishing a dialogue on how agriculture can benefit from South Africa’s membership of the BRICS. It emerged clearly from the workshop that agriculture needs to be better positioned to benefit from the BRICS formation. One important issue that was noted was that market access for South African agricultural produce into the BRICS countries could be improved.

In this regard, an honest question was raised whether, as the country’s agriculture stakeholders, we fold our arms and do nothing since this is a political formation (while market access is an economic issue), or whether we use this political formation to address our socioeconomic issues as they relate to these countries. Market access is one of the issues of interest to South Africa’s agriculture industry within the BRICS formation, together with issues such as the diffusion of technologies and collaborations.

The research that is presented in this book addresses a range of important issues related to the trade and investment relations among the BRICS countries, in particular the performance of their agricultural sectors. There is also a focus on the relationship between BRICS and Africa, and what this means for South Africa’s trade relations with other African countries.

© 2013 Trade Law Centre, National Agricultural Marketing Council, Royal Danish Embassy, and Swedish Embassy, Nairobi

Publication of this book was made possible by the support of the Trade Law Centre (tralac), National Agricultural Marketing Council (NAMC), the Royal Danish Embassy, and the Swedish Embassy, Nairobi. 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.

This study discusses the issue of Africa’s export performance and, more specifically, focuses on export competition for South Africa and Kenya in the envisaged COMESA-EAC-SADC Tripartite Free Trade Area (TFTA) which was launched on 12 June 2011 at a summit in Johannesburg, South Africa.

The motivation behind this analysis is based on the premise that the apparent objective behind the trade strategies being adopted by African countries is to achieve a number of goals such as to create a competitive environment and achieve sustainable economic growth and development, with emphasis being placed on increasing exports. In this process, the TFTA will be the continent's biggest FTA comprising 26 countries spanning from Cape Town to Cairo with an estimated market potential of US$ 1 trillion.

This study investigates the degree of South Africa and Kenya’s export similarity with those of various exporters to the TFTA market. Calculating export similarity is useful in determining the similarity or dissimilarity of countries in terms of their export compositions. To achieve this, the Export Similarity Index (ESI) proposed by Finger and Kreinin (1979) is used. The various countries considered in this analysis include both developing and developed countries. This comparison serves two purposes: (i) analysing the similarity of South Africa and Kenya’s exports with those of other major developing countries provides a measure of how directly these countries compete with RSA and Kenya in the TFTA market; and (ii) the comparison with developed countries offers an indication of the level of sophistication of their exports.

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.

Earlier tralac research (Sandrey et al., 2011) explored the economic background to the so-called Tripartite Free Trade Agreement (FTA) between the Common Market for Eastern and Southern Africa (Comesa), the East African Community (EAC) and the Southern African Development Community (SADC). This showed that while there were solid economic gains to such an FTA there were also many problems, both from an economic perspective and from the political-economy perspective, and furthermore these problems were interrelated.

Highlighted were the problems of (a) overlapping memberships in the region and (b) the substantial economic losses for some countries resulting from comprehensive trade liberalisation. In addition, and while perhaps not highlighted but certainly in the background, is the regional problem of several failed or semi-failed states that are patently not candidates for regional integration.

This paper takes what can be described as the European Union (EU) approach of starting regional integration slowly from a base of those few countries that appear to be ready for comprehensive liberalisation. This EU approach has been one of starting modestly in 1960 with the original six members and slowly enlarging (and deepening) over the years to the current 27 members and counting.

We believe that such an approach has potential for east Africa and consequently we assess the five countries in the Southern African Customs Union (SACU), the five in the EAC and Egypt as being our foundation members of what we call ‘an FTA of the willing’ with tariff reductions only. The objective of this paper is to use the Global Trade Analysis Project (GTAP) computer model to assess the economic implications of this approach to regional integration.

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.

Two-way merchandise trade between New Zealand and China has increased since the Free Trade Agreement (FTA) was implemented, but this is a weak test of the FTA per se as virtually all countries have been increasing their trade with China. However, examining Chinese merchandise trade through to the end of 2012 applies a stronger test and confirms that New Zealand’s imports into China were increasing at a rate significantly above the average. This is especially true for agriculture where dairy in particular is booming. These agricultural imports certainly seem to be aided by tariff preferences, and in some instances these gains are likely to be accentuated as the tariffs fade to zero for New Zealand.

Only a very few import lines are not subject to tariff reductions, and these focus upon the special case of wool where other access concessions apply, upon some agricultural lines where New Zealand is not active anyway, and upon some forestry products. Virtually all Chinese imports into New Zealand were duty free or rapidly heading that way, but there is little evidence that this has led to a surge in imports that some predicted.

Examining South Africa’s bilateral trade with China we find that (a) a large percentage of the imports into China are already duty-free mineral-related and natural resource-products, and (b) that while there appears to be some potential gains from agricultural concessions into China these gains may be restricted through the limited abilities of South Africa to supply the Chinese; this is so because no concessions were granted to New Zealand in the two most important agricultural sectors (sugar and maize) and therefore South Africa may have trouble in negotiating in these lines. The great concern for South Africa is that preferential access for Chinese imports of textiles and clothing would decimate South Africa’s domestic sectors that are currently hiding behind a 45% tariff wall.

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.

Over the last decade China has become South Africa’s single biggest trading partner. In this period foreign direct investment from China in South Africa grew as well. Although South Africa benefited from this increased trade and investment, concerns about the sustainability of trade relations with China came to the surface. Exports to China mainly consist of raw materials, while finished consumer goods make up for the majority of imports.

Different solutions are being discussed to address the issue of unsustainability. South Africa at first has to become more competitive and should focus on productivity. In handling the trade relations with China, it has been suggested to impose duties on the export of raw materials and import of manufactured goods.

China’s slowing economic growth and transition to a more mature economy offers South Africa both threats and opportunities. When South African policymakers do the right thing, South Africa can be the gateway to Africa and benefit from its current trade and political relations with China even more.

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.

The author was a tralac intern at the time of writing. tralac’s Internship Programme provides an opportunity for recent graduates to work on trade-related matters, specifically relevant to countries in eastern and southern Africa.

The historically low levels of intra-African trade have made Africa vulnerable to external economic shocks and have fostered a dependency on the rest of the world. As a result of these low levels of trade many African countries have not been able to use trade to enhance specialisation between countries and accelerate development and integration. The high cost of doing business in the region due to infrastructural gaps, duplicate border procedures and high transportation costs are a major deterrent for opportunities to enhance both intra- and extra-regional trade.

To reduce trade barriers among African countries various trade liberalisation schemes have been launched in African regional economic communities to reduce tariffs and non-tariff barriers, harmonise customs duties, facilitate trade and abolish restrictions on cross-border investments. However, high tariffs are still in place on imports of sensitive goods, while persistent non-tariff barriers, including roadblocks and checkpoints, inadequate customs procedures and inconsistent regulations continue to present serious obstacles to intra-regional trade. Inadequate infrastructure also remains one of the key barriers to intra-Africa trade, investment and private-sector development.

This paper examines intra-African trade in goods and services of three east and southern African countries – Kenya, Zambia and Uganda – through the analysis of ten years of trade data, from 2002 to 2011. The trends seen in these countries provide a brief overview of the current position of intra-African trade, infrastructure and investment, specifically in the east and southern Africa region.

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.

The author was a tralac intern at the time of writing. tralac’s Internship Programme provides an opportunity for recent graduates to work on trade-related matters, specifically relevant to countries in eastern and southern Africa.

The world’s economic and trading environments have changed since the 2010 publication of tralac’s South Africa’s way ahead: Shall we samba? In this update to that publication, we examine how the South American Mercosur economies of Brazil in particular have fared from these changes, with again a special focus on agriculture and Brazil’s trading relationship with South Africa. Trade data is updated to December 2011 where possible, but with a literally last minute inclusion of some comments on Brazil’s 2012 trade.

As Brazil is a key agricultural trading partner in this BRIC relationship, the focus of this Samba update will place Brazil against a BRIC background and to complement this we will reference some of the papers intended for a new BRIC book to be published in cooperation with the National Agricultural Marketing Council (NAMC).

In general, we find that while the scars of the bleak year of the 2009 global downturn are apparent, Mercosur countries have recovered better than South Africa. Given the direct definitional economic relationships between trade performance and Gross Domestic Product (GDP), the emphasis in this Update is on trade as this is crucial in determining economic wellbeing.

We cannot, of course, directly predict the future, but recent past performances give valuable clues as to how countries may weather the storm clouds that have not fully dissipated since 2009 and indeed are still growing in Europe and other places.

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.

In recent years countries have increasingly focused on enhancing market access through regional integration in light of the stalled decade-long WTO Doha Round of trade of negotiations. Africa is no exception and in 2008, Heads of State and Government from the member states of the regional economic communities (RECs) of the Common Market for East and Southern Africa (COMESA), the East African Community (EAC) and the Southern African Development Community (SADC), agreed to establish a Free Trade Area (FTA).

The aim of the FTA among others is to enhance market access, harmonise policies in areas of common interest and address the issue of multiple membership. This new configuration would see an expanded market covering 26 countries with an estimated population of 500 million people and a GDP of US$624 billion.

The objective for this book is to examine the trade and specifically agricultural production, agri-business and the agricultural policy regimes in East and Southern Africa. A computer analysis of the benefits of the proposed is also presented, along with a review of sensitive products and non-tariff barriers in the region. Member states of SADC, EAC and COMESA are due to begin negotiations to establish the Tripartite FTA in 2011.

© 2011 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.

This paper examines the implications of the so-called tripartite countries of the Common Market for Eastern and Southern Africa (COMESA), the East African Community (EAC) and the Southern African Development Community (SADC) entering into a genuine Free Trade Agreement (FTA). We use the Global Trade Analysis Project (GTAP) latest pre-release Version 8 database to assess the welfare and trade gains from this FTA, as determined by duty-free merchandise goods access and with a small (2%) reduction in assumed non-tariff barriers to both merchandise goods and services barriers also factored in. Importantly, our simulation starts from the assumption that the three regional blocs of COMESA, EAC and SADC have their FTAs operating in a comprehensive manner in that all three have tariff-free trade within their blocs but not outside their blocs. Thus, our results relate to combining these three blocs into one large tripartite FTA.

The paper includes developments such as the implementation of the Trade, Development and Cooperation Agreement (TDCA), and, most significantly, the assumption that the Economic Partnership Agreements (EPAs) between all African countries except South Africa and the European Union (EU) will be implemented.

Our GTAP results are indicative only, but as we are using the pre-release Version 8 GTAP database with extensive African country disaggregation we feel that these results offer a very realistic view of the final outcome. They are, to coin a phrase, ‘the best game in town’, as the use of a model such as GTAP forces consistency and closure in the resource allocative process and GTAP is the international model of choice for trade analysis.

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.