Abstract
M.Comm.
The objective of the study is to assess the impact of the European Union (EU) and
South African (SA) Free Trade Agreement (FTA) in the manufacturing sector with
reference to specific sectors using the results of the trade based economic model.
Chapter two shows the gains that a country might benefit as a result of reducing its
tariffs. However, it recommends that it is important to consider the extent to which tariffs
are removed and industries liberalised. The nature of the South African manufacturing
sector is analysed in the third chapter in order to identify the direction of South African
trade and major products that are imported and exported by South Africa with its major
trading partners. The European Union is found to have been and still is one of South
Africa's major trading partner. Though there hasn't been much trade between non
SACU members of SADC and South Africa, the study has found that it is important that
regional trade or rather integration should be strengthened.
The results of the SMART model (a partial equilibrium model) and the GTAP model (a
computable general equilibrium model) are analysed and from the simulation almost the
same category of products turn out to be the most important for the South African
economy in terms of exports and productivity. The performance of these sectors with
regard to exports and productivity is looked at and it was found that the capital intensive
sectors might not be the sectors which will generate employment over the coming years,
however the loss of employment will be compensated by employment creation in the
labour intensive sectors which promise to have large growth potential. The South African
manufacturing sector traditionally has had a domestic market focus, despite this, export
opportunities have begun manifesting themselves recently. The African market,
especially SADC countries, is opening up to South African products while potential
markets in the northern hemisphere have also become more accessible due to
agreements regarding the easing of trade barriers. The study has also found that there
is trade potential between non SACU members of SADC and South Africa and there are
trade opportunities from SADC to South Africa. The recommendation is that SADC
should strengthen regional integration which is politically and economically important for
industrial purposes and that when involved in negotiations South Africa should look for
concessions that will enhance its interest to investors.