Macroeconomic policy convergence and a SADC Free Trade Area

Charles Harvey
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Charles Harvey: Botswana Institute for Development Policy Analysis

No 21, Working Papers from Botswana Institute for Development Policy Analysis

Abstract: Regional free trade areas fail because one member-country is perceived as getting more than its share of the benefits. Most non-SACU SADC economies would not be able to export to a newly opened South African market, so their uncompetitive manufacturing sectors need new investment. Such investment will not occur in situations of extreme macroeconomic stability, and where there is lack of credibility that macroeconomic stability (if achieved) would be sustained. Unfortunately, the macroeconomic track record of some SADC member countries makes their credibility very low. What is needed is an "external agency of restraint", to provide that credibility, quickly. The IMF and the World Bank are not suitable, because their programmes are often abandoned or fail. SADC governments must therefore create a regional agency of restraint, by voluntary negotiated agreement, with credible sanctions against breaking its rules. Without this, there will not be the investment in non-SACU members, which is necessary for all members to gain from a SADC free trade area. An attempt to establish a SADC free trade area, without making sure that all the member countries stand to gain in the short term, would condemn SADC to failure.

Keywords: Free trade areas; Customs unions; Trade Agreements; Southern Africa (search for similar items in EconPapers)
Pages: 24 pages
Date: 1999-10
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