CID Working Paper No. 135 :: South African Trade Policy Matters: Trade Performance and Trade Policy by Lawrence Edwards and Robert Lawrence :: Publications :: Center for International Development at Harvard University (CID)

CID Working Paper No. 135, October 2006

South African Trade Policy Matters: Trade Performance & Trade Policy

Lawrence Edwards and Robert Lawrence

A publication of the CID South Africa Growth Initiative

Abstract

South African trade policy has exerted a major influence on the composition and aggregate growth of trade. In the Apartheid period, trade protection seriously impeded both exports and imports, and the economy depended on favorable global commodity price trends to avoid running into an external constraint. South Africa developed a comparative advantage in capital-intensive primary and manufactured commodities partly because of its natural resource endowments but also because the pattern of protection particularly detrimental to exports of non-commodity manufactured goods. High and opaque tariffs seriously impeded export growth. When global commodity markets were weak, in combination with declining gold exports, this seriously constrained aggregate growth and dulled the response of exports to the weaker rand in the late 1980s. On the other hand, surcharges were effective in reducing imports. By contrast, trade liberalization in the 1990s not only increased imports but, by reducing both input costs and the relative profitability of domestic sales, also boosted exports. The growth in non-commodity manufactured sectoral exports as a result of liberalization was actually faster than sectoral imports. This evidence suggests that additional trade liberalization could well be part of the strategy to enhance export diversification. It points to the importance of policies that afford South African firms with access to inputs at world prices as well as a competitive real exchange rate.

Keywords: South Africa, trade policy, trade performance

JEL codes: F10, F13, F14

Download the paper in PDF format

_______________________________________________________________

Back to CID Working Papers page

Direct site comments or questions to CID's Webmaster.
Copyright �2006 by the President and Fellows of Harvard College.
Last revised 07/18/2007