The effects of trade policy on intra-industry trade within the context of trade liberalization in South Africa.

Abstract

Intra-industry trade is a new phenomenon in international trade theory and has attracted interest from economists, in the form of both empirical and theoretical work. The first attempt to measure the extent of intra-industry trade in South Africa was under taken by Simson (1987). In his study Simson (1987) found that the amount of intra-industry trade accounted for only one-third of total trade. This is low compared to many industrialized countries. This thesis aims to analyze the extent of intra-industry trade within the context of trade liberalization. Chapter two provides the evolution, background and an overview of the literature of the concept of intra-industry trade. This chapter is followed by a presentation of the different measurement of intra-industry trade. But, however the Grubel Lloyd (1975) index remains the most commonly used index in the literature. A fourth chapter estimated the level of intra-industry trade in South Africa for the period 1972 to 1993. This chapter concludes that intra-industry trade in South Africa is a real phenomenon and not just a statistical novelty as argued by Finger (1975). It was is concluded that intra-industry trade is low when compared to most of its trading partners and there remains much scope for the growth of intra-industry trade. The fifth chapter discusses the role of regional integration and intra-industry trade. It is concluded that the levels of intra-industry trade between South Africa and with the countries in the Southern African region is relatively low when compared to the intra-industry trade between South Africa and its major trading partners, nevertheless there remains scope for the growth of intra-industry trade within the region as the countries become more similar. Chapter six discusses the commercial and welfare effects of intra-industry trade, concluding that there are advantages to be gained from intra-industry trade. Chapter seven analyses the effect of tariff levels on intra-industry trade in South Africa. Weak support was found for the height of tariffs and intra-industry trade in South Africa. Given the reduction of tariff lines in terms of the GATT requirement, it is anticipated that levels of intra-industry trade in South Africa will increase and there is much to gain in terms of welfare than inter industry trade.