Comparative Advantage In The Southern Africa Customs Union (Sacu)

Abstract

The authors sought to find out whether the Southern African Customs Union (SACU) possesses comparative advantage. They found that South Africa has comparative advantage in the production of 727 product lines, Botswana in 268 product lines, Swaziland 243 product lines, Namibia 213 product lines and Lesotho 85 product lines. They also found that the highest degree of specialization in a particular product was observed in Lesotho in the production of cartridges for rivet with an average RCA index of 19215. The authors concluded that SACU has comparative advantage although such comparative advantage has a narrow base for a customs union (CU). Further it was concluded that due to imposition of the common external tariff (CET) in SACU and a narrow base of the products in which it has comparative advantage, it may be experiencing trade diversion rather than trade creation by replacing low cost producers outside SACU in favour of intra-SACU high cost producers. That South Africa, although not the least producer, is unfairly benefiting due to the imposition of CET which prevents other countries from exporting their products to Botswana, Swaziland, Namibia and Lesotho under the same conditions.  These countries are, therefore, disadvantaged. For this reason, the authors advocate communication at policy level, to facilitate expansion of SACU as means of narrowing trade diversion.