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.
