A Review of Methodological Approaches used to Analyse the Impact of Trade Liberalisation on Growth and Poverty in South Africa

The paper examines the theoretical and empirical debate surrounding trade liberalisation in South Africa, specifically its effects on growth, employment, and poverty. It critiques common methodological tools, including partial equilibrium approaches, effective rates of protection (ERP), and computable general equilibrium (CGE) models, noting that they often rely on restrictive assumptions and fail to account for dynamic effects or institutional complexities. The author argues that the 'free trade' ideal is an unrealistic benchmark and suggests that South Africa should instead pursue a 'sensible management of trade' that creates dynamic comparative advantages and protects industrial policy space to achieve structural change and job creation.

• The debate over South Africa's trade policy is highly polarised, particularly regarding whether trade liberalisation effectively promotes economic growth, employment, and poverty reduction.
• Traditional trade theory's focus on static comparative advantage is insufficient for developing countries, as it ignores dynamic gains such as technological diffusion and the potential for creating new comparative advantages through industrial policy.
• Empirical evidence on the link between trade openness and growth is ambiguous, with critics noting that cross-country studies often suffer from causality problems and poor measurement of 'openness'.
• Trade liberalisation in developing countries may lead to a deterioration of the trade-off between growth and the balance of trade, as import growth often exceeds export growth.
• The use of Effective Rates of Protection (ERP) in South African research is criticised for attempting to draw general equilibrium inferences from a partial equilibrium measure, which limits its predictive value.
• Partial equilibrium simulations suggest that while tariff reductions might lower consumer prices, they can cause significant job losses, and the net effect on the working class is likely negative.
• Computable General Equilibrium (CGE) models are useful for estimating multi-sector interactions but are heavily dependent on the modeller's assumptions and 'closure rules', which can significantly alter results regarding wages and employment.
• Dynamic CGE modelling in South Africa suggests that while trade-induced technological change may accelerate growth, it has only marginally reduced poverty and has worsened inequality.
• South Africa's pursuit of preferential trade agreements (such as with the EU and SADC) may be a response to the failure of the Doha Round and a way to secure market access, though it may also limit industrial policy space.
• The author concludes that trade policy should not be a binary choice between 'free trade' and 'protectionism', but rather a 'sensible management of trade' that allows for structural change and job creation.

APA

Cattaneo, N. (2011). A Review of Methodological Approaches used to Analyse the Impact of Trade Liberalisation on Growth and Poverty in South Africa. South African Institute of International Affairs. https://saiia.org.za/wp-content/uploads/2013/06/Occasional-Paper-79.pdf

Chicago

Cattaneo, Nicolette. A Review of Methodological Approaches used to Analyse the Impact of Trade Liberalisation on Growth and Poverty in South Africa. South African Institute of International Affairs, 2011. https://saiia.org.za/wp-content/uploads/2013/06/Occasional-Paper-79.pdf.

Wikipedia

{{cite report |last1=Cattaneo |first1=Nicolette |title=A Review of Methodological Approaches used to Analyse the Impact of Trade Liberalisation on Growth and Poverty in South Africa |publisher=South African Institute of International Affairs |date=March 2011 |url=https://saiia.org.za/wp-content/uploads/2013/06/Occasional-Paper-79.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{cattaneo2011review, author = {Cattaneo, Nicolette}, title = {{A Review of Methodological Approaches used to Analyse the Impact of Trade Liberalisation on Growth and Poverty in South Africa}}, institution = {South African Institute of International Affairs}, year = {2011}, month = mar, url = {https://saiia.org.za/wp-content/uploads/2013/06/Occasional-Paper-79.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }