Are prices sticky downwards? The effect of trade liberalisation on South Africa’s wine industry

Abstract

One country's exports are another country's imports. However, an emphasis on the outward-oriented policy ignores its import aspect, and possibly exaggerates the benefits from free trade. This paper therefore investigates whether import prices are lowered when tariffs are reduced. The issue of income redistribution is also pursued. The reliability of the policy in achieving its goal, as well as the policy integration at micro-macro level, is also touched upon. South Africa was selected for this study because in the first place it represents a typical developing economy (DC). There has been, thus far, scanty empirical evidence on the open trade paradigm in such economies.