International Trade policies assignment

International Trade policies assignment

Introduction

International Trade policies assignment  help  is one of the most important economic activities of a country and it highly facilitates globalization and integration of the countries across the globe. International trade helps a country to gain more revenues from external countries and also leads to the promotion of innovation in the economy. International trade is one of the biggest facilitators of development in a country. Hence, countries with higher exports tend to demonstrate higher levels of growth (Wong and Gringos, 1995).

Developing Trends in World Import Growth

The report by the United Nation states that the international trade that had gone down in 2009 due to financial recession has again picked up momentum since 2011 (United Nations, 2012). It is found that the global economic growth fell down by almost 12.6 percent in 2010 but the imports started rising from 2011 and has been growing till now (figure 1). Developing countries are found to be the maximum contributors towards the observed increase in international trade all over the world (United Nations, 2012). The changes in the policy observed across the world are found to be one of the major factors that have led to an enhancement in the world trade. Hence, while sending an employee of Endless Wave, a surfboard and surfing apparel retailer to South Africa for assessing the attractiveness of the market, it is important to first analysis the international trade policies that exist in the country along with an overview of the competitors that already exist in the market.

Surfboard and Apparel wear Industry

Surfboards and apparel wear industry is slowly becoming a high-tech industry in South Africa and rest of the world. Some of the main cities in South Africa that are known for the manufacture of surfboards and apparel weal are Durban, Jeffrey's Bay, Cape Town and Port Elizabeth (Buckley, 2002). The surfing industry in South Africa has been found to have a turnover of almost 1.4 billion rand and also provides employment to over 7000 people all across the world (Martin and Assenov 2013). Among all the regions known for surfboards and related apparel, Dubran contributes towards 60% of the total industry. Dubran itself leads to 1 billion (Martin and Assenov, 2013). There are large number of companies that are in the business of manufacture of surfboards and related apparels and other products in South Africa but still there is a huge scope of development and entry of new market players. Booth (2001) says that the entry of international players in the surfboard market can lead to further expansion of the industry. However, it is crucial to analysis the online international trade policies that exist in the country.

International trade in South Africa

South Africa, the biggest economy in Africa is regularly growing in its size and scope. South African economy was estimated to have a market value of around $810bn as per the 2014 January records and was found to constitute of around 0.5% of the total GDP of the world (Wikipedia, 2014). The online international trade taking place in the country has undergone significant changes and modifications as observed in the past few years or decades. As continuous efforts are being made to improve the overall economy of South Africa, it is important to alter the trade policies and practices also being adopted in the country because online international trade is one of the most important aspects and parts of the economy (Bond, 2003).

Figure 2: Change in Exports and Imports of South Africa

As the economy of South Africa is growing at a rate of around 6% every year, it is expected that the demand for goods and services would also increase, which would further require facilitation and ease of exports and imports. Some of the common sectors involved in international trade in South Africa include agriculture, mining, tourism and also manufacturing. There are several benefits of improving international trade in South Africa, which include the creation of employment and additional jobs, increasing the living standards of people, facilitating growth and better innovation. All of these factors are facilitators of macro economic development and hence trade is important (Clark and Worger, 2003).

The goods that are maximum exported from South Africa include iron and steel, motor vehicles, basic chemicals, refined petroleum products and also precious metals. Being the top producers of large number of products like chrome, vanadium and platinum and being the second in the list of gold producers, the currently has closely knit international ties with several countries. It exports these products to various countries such as United States, Japan, China, UK and Spain (Narlikar, 2013). It also imports plethora of products from these countries, which include televisions, motor vehicle parts and computer and office equipment. Some of the main trade agreements that the company has gotten into are the Southern African Development Community Trade Agreement, Trade Agreement between Zimbabwe and South Africa and the African Growth and Opportunity Act. Giving an overview of the international trade market and its growth, it is important to understand the changes that have taken place in the trade policies to lead to these changes (Narlikar, 2013).

Change in Net trade in SA

Changing International Trade Policies in South Africa

Overview of the Trade Policies and Framework

South Africa has defined the South African Trade Policy and business strategy Framework, which defines the policies that need to be followed by the country to meet its international objectives and also diversifying the economic base of the system. The policy has been designed by keeping the previous economic conditions, international competition and past experiences in mind in order to facilitate and improve the future conditions. There have significant changes in the tariffs related to online international  trade (Aksoy and Ng, 2013).

The cuts in international tariffs started way back in 1994, since when the exports in the country have been growing at a continuous rate. The tariff rate which was around 23% in the 1990s has reduced all the way to 8.2%. The total numbers of tariff lines in the 1990s were recorded to be around 13600, out of which almost 28% are subjected to the import control. As recorded in 2006, total numbers of lines were reduced to around 6400, demonstrating a total decline of almost 53% (Jordan and Kanda, 2011). The first tariff reduction came with the introduction of General Export Incentive Scheme (GEIS), which led to the application of general export subsidies in the country.

Change in international trade with change in tariff policies (WEF, 2013)

One of the biggest changes observed in the South African policies related to international trade was observed after the globalization  economic crisis of 2008. The crisis not only affected the United States but led to overall decline in the international trade and export-import all over the world. South Africa also witnessed humongous losses, especially in the manufacturing and mining sectors. Framework for South Africa’s Response to the Global Economic Crisis was hence adopted in the year 2009 then to manage the adverse impacts of the crisis in different ways. Some of the major changes that were incorporated after the economic crisis included structural changes (Kee et al. 2013).

The various year on year policies that have been formed by the South African government to promote and facilitate the economic development in the country have specially focused on changing and improving the trade policies to online international trade. The Trade Policy and Strategy Framework is the main set of guidelines or strategies that define the policies that the country adopts for international trade (Roberts, 2000). One thing that imposes a problem while devising trade policies in South Africa is the high levels of unemployment and existence of unskilled labour. However, the unskilled labour has a comparative advantage in the manufacturing of labour intensive goods and hence the country focuses on exporting those to other countries (Roberts, 2000).

One thing that has not changed in the past twenty years in South Africa is the nature of trade that takes place and country has penetrated deeper into the leather, footwear and clothing sectors. The country has focused a lot on liberalization on the restrictions that were imposed on international trade, which has contributed towards the shift in its focus from the primary sectors or industries. One protocol or trade agreement that has led to various improvements in the trade policies of the country is the SADC Trade Protocol, which governs trade policies among the African countries. South Africa-EU TDCA has led to an increase in the total exports from South Africa to EU and has also contributed towards the reduction of tariff protection (Edwards and Lawrence, 2006).

Another major change that has been observed in the trade policies of the country is its integration into global value-chains (GVCs). GVCs provide a new system for calculating the trade and tariffs and significant policy alterations have been made to include the arrangement in the economy. The inclusion of GVCs has also freed South Africa from getting into major agreements for the industrial and infrastructural development and trade facilitation inside the country. In addition to these changes, the country is also focused on the development of the market access offers and requests, which would help in strengthening its position in the global trade market(Peterson, 2005).

Foreign Investment in South Afric

Some of the major trade promotional activities undertaken by the country are:

  • New trade initiatives and investments in countries like Russia, Brazil, India and Zimbabwe.
  • National export strategy has been revised
  • Around 45 new trade missions have been initiated
  • The country had around 21 national pavilions in the international trade affairs
  • South African expos in other countries like China have been growing (Fourier, 2011)

To support these changes and to benefit from the growing economy, a large number of multinational companies are also entering the country. Unilever, Proctor & Gamble and Kimberly Clarke are some of the MNCs that have already announced their investment plans for South Africa. This shows that while the trade policies and tariffs have moved towards liberalization and removal of trade barriers, the economy of South Africa has also been growing continuously and hence it is important to adopt adequate measures to make way for future and have a clear vision for better development and investments (Naude and Kruggel, 2007).

Future Directions

One of the aspects of trade policies that must be focused on in the future is the tariff policies. The country must adopt and make use of more strategic methods and approaches for improving its tariff rates and reductions. Tariff policies must be focused on promoting the development of a diversified economy, which can provide and develop high value products as well. The use of sector by sector tariff policy can also be helpful in this particular case (Edwards and Lawrence, 2012). The trade policy must also look at the revival of different policies related to different industrial marketing development. Facilitation of bilateral and multilateral trade policies can help in increasing the international trade in the economy and can also bring in more foreign investment. The country must also look at reducing the duties that are imposed on the traded goods. There are also proposals being made for promoting unilateral trade liberalization in the economy, which would lead to an enhancement in its export performances. However, while making and incorporating these changes, the country will have to ensure that it follows all the terms and conditions of its prior bilateral and multilateral trade agreements for facilitating growth (Kruger, 2011).

Conclusion

It is observed that South Africa being a developing economy has a huge scope of further economic development. The country has grown in the last twenty years and has facilitated its industrial and economic growth by changing its policies and including reforms for better and enhanced international trade. It has become one of the most growing markets for the multinational companies and is being tapped as a new market for expansion purposes. Endless Waves hence also must try to look at these trade policies to identify the policies and reforms that can help the company in establishing its position in the market. The demand for surfboards and related products is also high, as there are larger number of surfers and surfing companies. Endless Waves can also incorporate the benefits of cheap labour in its offices and/or manufacturing units in the country. Thus, overall changes in the trade policies seem to be in favour of international trade and getting more foreign investments. Hence, Endless Wave must try to identify the best region in South Africa and best ways in which it can leverage these policies for its benefits.

References

Ataman, A.M. and Ng,F.(2013), The Evolution of Agricultural Trade Flows, Discussion Paper, Turkish Economic Association 2013/2 Bond, P.(2003), Against Global Apartheid: South Africa Meets the World Bank, IMF and International Finance, 3rd edition, CIP Press Booth, D.(2001), Australian Beach Cultures: The History of Sun, Sand, and Surf, Routledge & Co. Ltd. Buckley, R.(2002), Surf Tourism and Sustainable Development in Indo-Pacific Islands. I. The Industry and the Islands, Journal of Sustainable Tourism, vol.10, no.5, pp.405-424 Clark, N.L. and Worger, W.H.(2013), South Africa: The Rise and Fall of Apartheid, 2nd edition, Routledge Edwards, L. and Lawrence, R.Z.(2012), A strategic view of South African trade policy in relation to the future global trading environment, South African Journal of International Affairs, vol.19, no.3, pp.277-298 Edwards, L. and Lawrence, R.Z. (2006), South African Trade Policy Matters: Trade Performance and Trade Policy, the National Bureau of Economic Research, Working paper no.12760 Fourie, J.(2011), Travel service exports as comparative advantage in South Africa, South African Journal of Economic and Management Sciences, vol.14, no.2 Jordaan, A. and Kanda, P.(2011), Analysing the trade effects of the EU-SA & SADC trading agreements: a panel data approach, South African Journal of Economic and Management Sciences, vol.14, no.2 Kee, H.K., Neagu, C. and Nicita, A.(2013), Is Protectionism on the Rise? Assessing National Trade Policies during the Crisis of 2008, The Review of Economics and Statistics, vol.95, no.1, pp.342-346