Assessing the trade policy space to implement industrial policy in South Africa
Date
2013-07-16
Authors
Letsoalo, Malose Anthony
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Abstract
This paper undertook qualitative research to determine the trade policy space for South
Africa to implement its industrial policy action plan (Ipap). The South African economy was
transformed from import substitution in the 1970s to export-orientation in the 1980s. The
apartheid regime failed to develop coherent policies for industrialisation. In the 1990s, there
was a deliberate government decision as articulated in the GEAR policy to liberalise the
economy and with regard to trade this is associated with accession to the World Trade
Organisation and commitments made thereof. In 2007, the country adopted the national
industrial policy framework to guide its reindustrialisation efforts and subsequently various
iterations of the Ipap. Therefore, given that a lot of policy space was lost when the country
joined as the WTO as a developed country, the question is “does South Africa have enough
policy space to use some of the instruments that were used by successful Asian countries to
industrialise”. The WTO made some of these instruments illegal.
To analyse policy space, the paper looked at the effect of WTO Agreements on Subsidies and
Countervailing Measures (SCM), on Trade-Related Investment Measures (TRIMS), on
Government Procurement (GPA), as well as the tariff commitments. The study found that
although SCM has made certain subsidies illegal, other kinds of subsidies are allowed such as
those for economic development in disadvantaged regions and for rural development.
Therefore, strategy and packaging of these subsidies for development is important. TRIMS
was found to have significantly reduced policy space by making a number of instruments on
foreign direct investment illegal such as enforcing local content as well as export
requirements. Since South Africa is not party to the GPA, it retains policy space to use
government procurement to promote industrialisation in the country. In terms of tariffs
commitment, the study found that there is no “water” between applied and bound rate for a
number of critical sectors such as textile, clothing, footwear, and furniture. However, other
important sectors such as automotive and automotive components and white goods still have
“water” to increase tariff in future as necessary. Therefore, the study concluded that there is
policy space to implement industrial policy in South Africa but this requires strategy and
closer look at the WTO rules for flexibility.
Description
Submitted in partial fulfilment of the requirements for the degree M.Com. Development Theory and Policy in the faculty of Commerce, Law and Management at the University of the Witwayersrand, 2013
Keywords
Industrial policy, Trade agreements, WTO, World Trade Organization, South Africa