Identifying priority products and sectors for bilateral trade negotiations: the case of AGOA beyond 2025
Since the inception of the World Trade Organization (WTO) in 1995, multilateralism has been the dominant approach to trade liberalisation. However, the trade negotiation and trade agreement landscape is evolving, shifting from multilateral focus to bilateralism and/or regionalism. Even though the inclination towards bilateralism is growing, in the preparation phase of the bilateral trade negotiation process, the evidence on product-level prioritisation methods, specifically designed to inform trade negotiations by considering both countries’ core export competences and the size, growth and consistency of the import demand, is silent. Most of the trade policy analysis methods applied in the preparation phase of bilateral trade negotiations measure the macro-level impact of trade policy. Hence, negotiating parties tend to focus on as many products and sectors as possible in the negotiations, and may lose sight of their core export competencies and the size, growth and consistency of the import demand. Moreover, some developing countries may face capacity constraints in terms of trade policy analysis and negotiation as a consequence of inadequate resources, insufficient analytical capacity and lack of expertise. This may adversely affect their capability to better prepare for trade negotiations and eventually the fairness, survival and sustainability of trade relations resulting from such negotiations. Product-level prioritisation is therefore crucial, not only in addressing capacity constraints that some developing countries may face, but also in contributing to inclusive trade agreements with greater implementation support. From a trade policy standpoint, there is lingering uncertainty surrounding the renewal of the African Growth and Opportunity Act (AGOA) after its expiry in 2025. However, Southern Africa Customs Union (SACU) members and many other Sub-Saharan Africa (SSA) AGOA beneficiary countries primarily access the United States of America (USA) market through AGOA. The uncertainty surrounding the renewal of AGOA means that the post-AGOA trade relationship between SACU and the USA is undefined. This study proposes that, to be pro-active, SACU has to re-engage the USA in negotiations of a Bilateral Trade Agreement (BTA) that builds on AGOA by strengthening trade and investment relations, while addressing AGOA drawbacks and taking reciprocity into account. The main objective of this thesis is to contribute to the trade negotiation literature by developing a product-level prioritisation method, which specifically considers both countriesâ€™ core export competencies and the size, growth and consistency of the import demand, to inform bilateral trade negotiations. The method is suggested for implementation into the preparation phase of the bilateral trade negotiation process in order to enhance the fairness, survival and sustainability of trade relations resulting from such negotiations. To achieve the main objective of this study, elements of three research methodologies, namely the Global Trade Analysis Project (GTAP) model, the Decision Support Model (DSM), and the International Trade Centre’s Market Attractiveness Index (MAI) were combined to develop the product-level prioritisation method. The method was applied in the case of SACU and the USA to identify products and sectors that both parties should prioritise in the potential SACU-USA bilateral trade negotiations. The results of the product-level prioritisation method identify 407 products for SACU to prioritise when entering into the potential SACU-USA trade negotiations. Likewise, the prioritisation method identifies 161 products that the USA should prioritise in the negotiations of the same potential trade deal. The majority of the priority products for SACU fall within the textiles and clothing, machinery and electrical, chemicals and allied industries, metals, and food products sector. Similarly, the majority of products that the USA should prioritise fall within the machinery and electrical, textiles and clothing, chemicals and allied industries, and metals sector. In the USA market, the product-level prioritisation method also identifies 99 products for SACU to additionally prioritise for negotiation, in terms of Non-Tariff Measures (NTMs), in the potential SACU-USA reciprocal trade agreement. The majority of the additional priority products for SACU fall under the chemicals and allied industries, food products, vegetables and vegetable products, animal and animal products, textiles and clothing, and metals sector.