WP 01/057 - The role of intra-industry trade and cross-border supply chains in facilitating regional integration in the SADC markets
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Previous studies have indicated that there may be untapped potential for exports from non-SACU SADC countries to the SACU market. The share of non-SACU markets in exports to the rest of the world has been increasing while the SACU share has remained the same. Concerns have been raised that the size of the South African economy and the net trade surplus of the Customs Union relative to that of the other SADC members may lead to polarization within the region. The nature of existing trade flows between SADC and SACU is investigated here, with specific reference to the role of intra-industry trade and vertical integration of cross-border supply chains in the region in facilitating regional integration. The sectors where the various SADC countries show a Revealed Comparative Advantage (RCA) and high intra-industry trade (IIT) have been at the centre of the debate around sensitive products during the SADC Trade Protocol negotiations. IIT indices are calculated for those sectors that show potential for addressing the imbalance in net trade between SACU and the region. We argue that increased IIT and supply chain development, specifically in these categories, provide a feasible distributive mechanism for lower cost relocation of investment from SACU to the rest of SADC.
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