Assessing the impacts of SADC Free Trade Agreements (SADC FTA) on South African agricultural trade

[摘要] English: In today's economically integrated world, trade matters more than ever before. Nations are signing various bilateral trade agreements and are engaged in various form of economic integration. Developing countries are also involved in economic integration for vital developments. Free trade areas (FTA), which is a form of economic integration, is formed by removing tariffs on trade among member nations leaving the autonomy in setting their tariffs on trade with non-members. The Southern Africa Development Community (SADC) became a Free Trade Area in 2008 for the economic integration of members. Literature reviews revealed that econometric models (gravity model in particular) have not been extensively used to estimate the impact of free trade agreements on South African agricultural trade at commodity level using disaggregated data. This study, therefore, evaluates the impact of Southern Africa Development Community Free Trade Agreements (SADCFTA) on South African agricultural trade using gravity model. The study focuses on South African data for agricultural exports and imports with SADC member countries and EU-15 countries for meat of bovine, maize and wheat commodities from 2000 to 2011. These products were selected based on their sensitivity, relative importance in terms of their contributions to the gross value of agricultural production, consumption and their tradability. The study used the gravity modeling technique to analyse the impact of SADC free trade agreement. The applied regression method used is the Poisson Pseudo Maximum Likelihood (PPML) estimator to determine the significance of variables within the model. The PPML was preferred to the ordinary least square (OLS) method of estimation. In the presence of heteroskedasticity the standard OLS methods can severely bias the estimated coefficients, casting doubt on the empirical findings. The PPML is robust to different patterns of heteroskedasticity and provides a natural way to deal with zero values in data. The result shows that there has been a significant increase in trade for meat of bovine and maize among SADC members. There has been a net trade creation and an increasing intra-SADC bloc bias for meat of bovine. The intra-regional trade in maize has also been stimulated by the implementation of the free trade agreements. The study cannot identify any strong bloc effect in wheat trade. Therefore a trade diversion effect was established. The empirical findings of this study can be considered as an intermediate step to address the relative trade creation and trade diversion effects. The study also signifies the importance of analyzing the effects of SADCFTA for major agricultural commodities. In order to assess the progress of the SADCFTA scheduled of full liberalization up till the end of 2012, it is imperative that the study recommends carrying out further studies to assess the full liberalization of trade in the agricultural sector.

[发布机构] University of the Free State