South Africa's tariff liberalisation policy : an appraisal of developments during the 1990s

Abstract

Trade liberalization in South Africa has been a characteristic of trade policy since the early 1970s, with the reduction of quantitative restrictions being the main policy instrument as far as imports were concerned. By the early 1990s there was strong support for South Africa’s industrial strategy being spearheaded by comprehensive tariff reductions agreed to under the General Agreement on Tariffs and Trade (GATT) in 1994, and implemented from 1995 onwards under the auspices of the World Trade Organisation (WTO). South Africa’s trade policy reform was premised on the assumption that tariff liberalization would increase the competitiveness of domestic manufacturing industries. This paper attempts to ascertain if this did in fact materialise by critically appraises the impact of trade policy reform on the production of the South African manufacturing sector. The results obtained in this paper indicate that tariff liberalisation has not been successful in securing improved competitiveness. The article argues that improved competitiveness goes beyond trade policy reform – government policies should also be directed at issues relating to efficiency in production, distortions in factor markets and institutional development. The desired or appropriate level of openness does not necessarily entail completely free markets for trade and investment. In view of market and institutional failures the role of government in securing the appropriate industrial outcomes should not be underestimated.