The politics of trade in the Southern African Customs Union (SACU) : prospect of a SACU-China free trade agreement

Abstract

Considering the obstacles to the conclusion of the Doha Round of international trade negotiations, bilateral free trade agreements (FTAs) are the new trend emerging in international relations. Hence, the Southern African Customs Union (SACU) and China intend to negotiate such an agreement in order to promote trade and investment between their markets. However, SACU is an organisation with a colonial legacy that continues to debilitate the economies of its weaker member states. Discrepancies in its administration and operation threaten the integrity of the customs union, especially when third parties are involved. This study assesses the politics of trade in the Southern African Customs Union, and the prospect of a FTA with the People’s Republic of China. It explores the quantity and quality of trade between the parties, as well as the role of the state in encouraging economic diplomacy. The dissertation draws on the experiences of other developing countries that have signed FTAs with stronger economies, in order to provide policy recommendations that will steer sustainable trade relations between SACU and China that will be aligned to SACU’s development agenda. The study concludes that a FTA will stimulate a restructuring of SACU’s trade partners, without creating a significant increase in production or employment. Furthermore, the cost competitiveness of Chinese imports will cripple the respective SACU industries, cause unemployment and negate prospects of new industrialisation in certain sectors of the economy. SACU’s strategy for trade liberalisation should be incremental and sector specific. Copyright