Impact Assessment of the SADC FTA on SACU Member States: A CGE Analysis

Abstract

This paper provides a quantitative assessment of the implications for Southern African Customs Union (SACU) members of a Southern African Development Community (SADC) Free Trade Area (FTA). Specifically it addresses the following policy questions that are of concern to SACU policy makers:

• What are the costs and benefits of regional trade liberalisation and economic integration for individual Member States of SADC?
• What are the potential economic, developmental and welfare impacts of the attainment of the SADC FTA on each Member State of SACU?

Simulations concerning the SADC FTA indicate that the impacts on SACU members are in general positive although small. The major winner is South Africa and many of the gains that accrue to SADC members can be attributed solely to the reduction of their trade barriers with SADC members, and hence these gains could largely be realised by unilateral actions on behalf of the individual members. This indicates that South Africa is the key component of any SADC wide agreement.

Keywords: Southern African Customs Union (SACU), Southern African Development Community (SADC), Free Trade Area (FTA), Social Accounting Matrix (SAM), Computable General Equilibrium Model (CGE), International Trade