SHOULD REGIONAL TRADE LIBERALIZATION OF AGRICULTURE BE A POLICY PRIORITY IN SOUTHERN AFRICA?

We develop a detailed trade analysis to assess the potential impacts of a free trade agreement (FTA) on the agricultural sector of Southern African countries. We do this by combining the use of a partial equilibrium analysis with bilateral trade data at the four-digit Standard International Trade Classification (SITC) level for 193 agricultural industries in 14 Southern African countries. Results show that the overall welfare effects of a FTA would be positive but small in most countries. Largest benefits would go to countries with a regional comparative advantage for agriculture, while still being inefficient producers of regionally traded commodities. No direct gains for importing countries are expected because a FTA would increase imports from inefficient regional producers, with trade diversion dominating trade creation. These results suggest that the region should be looking at regional policies and interventions beyond trade arrangements, such as those targeting investment, agricultural productivity and diversification to enhance benefits of regional trade liberalization.