Trade agreements play a big part in international trade and have existed for as long as countries have been trading internationally. Countries often agree to sign a trade agreement with their trading partners because trade agreements can stimulate international trade by removing barriers. Trade agreements can also have a negative impact on a country, such as social injustice and economic inequality. South Africa has numerous trade agreements with various countries, one important agreement that South Africa is part of is the regional trade agreement between the European Union (EU) and the African, Caribbean and Pacific (ACP) countries which originated in 1976.
The Economic Partnership Agreement (EPA) is a preferential trade agreement which evolved from the Cotonou Agreement which came into force in 2000 and envisioned the creation of mutual trade agreements. When this agreement expired in 2007, the (EPA) was created. The main objective of the EPA’s is to integrate the ACP countries into the world economy. The EU aims to combine trade, politics and development and enhance the political dimension of ACP countries by addressing issues such as corruption, poverty and inadequate development policies. The EU is in favour of the EPA because it will reduce the number of negotiations with various countries, which it currently holds simultaneously.
South Africa had some reservations regarding the EPA. South Africa is currently governed by the Trade, Development and Co-operation Agreement (TDCA), which was created with specific goals and also acts as a strategic partnership between the EU and South Africa. If the EPA is implemented in South Africa, it will replace certain elements of the TDCA agreement. South Africa has characteristics of both a developed and developing economy and will be excluded from several of the general trade arrangements of the EPA. The EU is offering duty-free and quota-free access for all the countries except for South Africa. This will result in two different SACU tariffs for imports from the EU. South Africa also argues that various discrepancies will arise between the EPA and TDCA which will cause various challenges regarding political, legal and technical aspects between Southern African countries and this will hinder regional integration amongst these countries.
There are various opinions as to which agreement will be more beneficial for South Africa. Where the EPA aims to create a single agreement for all ACP countries, the TDCA is an exclusive agreement between South Africa and the EU, and addresses issues specific to South Africa. The underlying problem is that South Africa has qualities of both a developed and a developing nation and is being excluded from some of the benefits that the EU is offering the other members. This rings some alarm bells, as South Africa and its neighbouring countries are working towards better regional integration. The EPA might have a negative influence on this regional integration because various African countries will benefit differently under the EPA.
This Study analyses the possible effects the EPA could have on South Africa’s trade with the EU and South Africa’s neighbouring countries by means of a literature study and an empirical analysis. The first part of literature study gives an overview on trade theories and trade agreements, advantages of free trade, trade barriers and the likeliness of countries to trade with each other. The second part provides an in depth overview of regional and preferential trade agreements and economic integration. The Third section of the literature study gives a complete overview of South Africa and the EU’s economic and trade situation. The Fourth and final section of the literature study provides an overview of the TDCA and the EPA and compares the two agreements.
The literature study is followed by an empirical analysis and an overview of the gravity model. The empirical analysis studied the impact of trade barriers on the historic trade between South Africa and the EU using a gravity model as a basis. The gravity model was used as a base for the regression models, because it has proven to give accurate estimations in previous studies done with similar trade data. This study used data for each variable for the time period 2000 to 2010 and was sourced from the World Bank and the International Trade Centre but there are data limitations. Separate models were estimated for exports from South Africa to the EU and imports to SA from the EU. From the import regression results, it was clear that the coefficients were very small and should all tariffs be eliminated, there will not be a significant increase in imports to South Africa from the EU.
The export regression results were similar to the results of imports and indicated that if all tariffs should be eliminated with the implementation of the EPA, there will not be a significant increase in exports from South Africa to the EU. However the EPA stretches beyond only trade benefits and because the EU remains one of South Africa’s biggest trade and development partners, it is vital to consider the effects of the EPA. It does appear that the EPA’s main motivator is not international trade, but that it is rather political and development orientated. / Thesis (MCom (International Trade))--North-West University, Potchefstroom Campus, 2013.
| Identifer | oai:union.ndltd.org:NWUBOLOKA1/oai:dspace.nwu.ac.za:10394/9867 |
| Date | January 2012 |
| Creators | Wroblewski, Joanna Makgorzata |
| Publisher | North-West University |
| Source Sets | North-West University |
| Language | English |
| Detected Language | English |
| Type | Thesis |
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