Welfare, macroeconomic and trade effects of the hypothetical Southern African Customs Union-United States free trade agreement
| Title: | Welfare, macroeconomic and trade effects of the hypothetical Southern African Customs Union-United States free trade agreement |
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| Authors: | Gabriel Mhonyera, Daniel F. Meyer |
| Source: | South African Journal of Economic and Management Sciences, Vol 27, Iss 1, Pp e1-e13 (2024) |
| Publisher Information: | AOSIS, 2024. |
| Publication Year: | 2024 |
| Collection: | LCC:Management. Industrial management LCC:Business LCC:Economics as a science |
| Subject Terms: | agoa, cge model, fta, gtap model, sacu, trade creation, trade diversion, trade negotiations, trade policy, us, welfare, Management. Industrial management, HD28-70, Business, HF5001-6182, Economics as a science, HB71-74 |
| More Details: | Background: There is lingering uncertainty surrounding the renewal of the African Growth and Opportunity Act (AGOA), a United States (US) Trade Act enacted in 2000 and set to expire in 2025. However, the US is a traditional trading partner of the Southern African Customs Union (SACU), and all SACU members predominantly access the US market through AGOA. Aim: This article assesses the welfare, macroeconomic and trade effects of the potential Southern African Customs Union-United States Free Trade Agreement (SACU-US FTA). Setting: The expiry of AGOA and the uncertainty surrounding its renewal present trade policy challenges for AGOA beneficiary countries, particularly the SACU nations. Method: The article employs the Global Trade Analysis Project (GTAP)-Computable General Equilibrium (CGE) model to simulate a scenario where SACU and the US eliminate all import taxes and export subsidies in their bilateral trade. Results: The GTAP-CGE model simulation results reveal welfare gains of US$316.47 million for SACU and US$678.01 million for the US with favourable macroeconomic and trade effects for both parties. Net trade creation is estimated at US$3.06 billion. Conclusion: The US interest in the potential SACU-US FTA rests in enhanced access to a smaller, but highly protected market where the European Union (EU) has already concluded preferential trade arrangements. Correspondingly, SACU aims for enriched access to a much larger, though less protected, market. Contribution: While most studies on FTAs focus on distributional effects using CGE and partial equilibrium models, there is limited research on the welfare, macroeconomic, and trade impacts of the potential SACU-US FTA. This article, therefore, stimulates debate and navigate domestic policies on the welfare, macroeconomic and trade implications of the prospective trade agreement. |
| Document Type: | article |
| File Description: | electronic resource |
| Language: | English |
| ISSN: | 1015-8812 2222-3436 |
| Relation: | https://sajems.org/index.php/sajems/article/view/5814; https://doaj.org/toc/1015-8812; https://doaj.org/toc/2222-3436 |
| DOI: | 10.4102/sajems.v27i1.5814 |
| Access URL: | https://doaj.org/article/1217553cccf749ee832f847c64e00c3b |
| Accession Number: | edsdoj.1217553cccf749ee832f847c64e00c3b |
| Database: | Directory of Open Access Journals |
| ISSN: | 10158812 22223436 |
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| DOI: | 10.4102/sajems.v27i1.5814 |
| Published in: | South African Journal of Economic and Management Sciences |
| Language: | English |