An Analysis of the U.S.-SACU FTA Negotiations

Drusilla Brown (), Kozo Kiyota and Robert Stern
Additional contact information
Robert Stern: University of Michigan

No 545, Working Papers from Research Seminar in International Economics, University of Michigan

Abstract: This paper analyzes the potential economic effects of bilateral negotiations for an FTA between the United States and the Southern African Customs Union (SACU). The U.S.-SACU FTA bilateral negotiations were initiated in June 2003. But following a number of official meetings, the negotiations were deadlocked over a series of issues of concern to the SACU. The bilateral FTA negotiations have now been replaced by an effort to negotiate a framework agreement covering trade and investment issues and possibly a bilateral FTA at some future time. To determine whether a bilateral FTA might be in the SACU members’ interests, we use the Michigan Model of World Production and Trade to assess the welfare and other economic effects of a bilateral FTA. For modeling purposes, the focus is on the effects of the bilateral removal of trade barriers, which lend themselves most readily to quantification. The conclusion is that the welfare benefits of a bilateral FTA are rather small in both absolute and relative terms, and that the non-trade and dynamic benefits of the SACU FTA are unlikely to alter these results significantly. To provide a broader perspective on the potential economic effects of a U.S.-SACU FTA, the model is also used to calculate the effects of unilateral tariff removal and global free trade. It is shown that unilateral free trade would result in much larger increases in economic welfare for the United States and SACU as compared to the FTA bilateral trade liberalization. The effects of global (multilateral) free trade are shown to be greater for the United States and SACU as compared to both the bilateral FTA liberalization and unilateral tariff removal. The results suggest accordingly that the interests of the global trading community, including the United States and SACU, could be better served by unilateral and especially multilateral liberalization rather than a bilateral FTA.

Pages: 35 pages
Date: 2006
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://fordschool.umich.edu/rsie/workingpapers/Papers526-550/r545.pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mie:wpaper:545

Access Statistics for this paper

More papers in Working Papers from Research Seminar in International Economics, University of Michigan Contact information at EDIRC.
Bibliographic data for series maintained by FSPP Webmaster ().