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The aim of this study is to examine South Africa ' s trading position in the Southern African region with a view to establishing whether South Africa should participate in any of the existing regional groups and establish preferential trading arrangements within the various groups. South Africa's trade with the region and the world is documented drawing on data previously unavailable during the years of sanctions. The study establishes that South Africa trades mainly with countries in Europe, North America and Asia. Aside from Zimbabwe, trade with countries in Africa counts for a small proportion of total trade in South Africa. Africa predominantly exports natural resource products to South Africa in exchange for manufactures. An analysis of the determinants of South Africa's trade direction establishes that from 1989 to 1993 trade direction has not been influenced by the various regional groupings. Controlling for economic and geographic factors, the regional groups have not biased South Africa's trade with Africa even during the sanctions. Furthermore, preferential trading arrangements with Zimbabwe, Malawi and Mozambique failed to affect the volume of South African exports. The study concludes that preferential trading arrangements are no substitute for multilateral trade liberalization when the preferences are given to a more dominant economy. Trade diversion is more likely to occur and the costs of redistribution of the tariff revenue significant. The costs to the smaller economies are large and the benefits to the larger economy minimal. The proliferation of trading arrangements in the region in a climate of uncertainty surrounding their membership and roles should be carefully examined by all participants in light of whether they are good substitutes for multilateral trade liberalization.

Publisher: World Bank

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