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.

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