The impact of trade liberalisation on the South African automobile and textile industries

Abstract

It is widely accepted that a country's foreign trade sector has a fundamental role to play in creating economic growth and development. It is therefore argued that one of the key objectives of any country's macro economic policy should be to create and maintain an internationally competitive manufacturing sector. From a macroeconomic perspective it is of fundamental importance to South Africa to keep improving its export position if the country wants to achieve an economic growth rate of six percent per annum as set out in the GEAR strategy. South Africa's competitiveness and share in world trade can only increase if there is an increase in the levels op exports. In order to achieve an increase in exports, the country had to travel a path of trade liberalisation. Due to different applicable tariffs and different reforms according to the GATT, it is difficult to examine the impact of trade liberalisation on all sectors of the economy. The aim of this study is to evaluate the impact that trade liberalisation in South Africa had on the South African automotive and textile industries. These two sectors were chosen due to the fact that they were formerly the most protected sectors and the assumption was made that the impact of liberalisation would be more evident in these two sectors than in those that were not so much protected. The automotive industry has in recent years of trade liberalization experienced an increase in production and exports, but there was a reduction in employment levels. However, this can be ascribed to more effective production methods. Although the automotive indusby experienced a rough and sometimes difficult time to adapt to the liberalization process, it has completed the process of adaptation and is focused on being an international role player. On the other hand, the textile industry is experiencing difficulties in adapting to the process of liberalization and a more open economy. This is evident from the fact that the sector experienced a decline in production and employment levels. The conclusion can be made that trade liberalization had some success in the automotive industry, but that the textile industry is struggling without protection. However, there is still a long road to travel before a definite conclusion can be drawn on the effect that trade liberalization had on the South African economy, especially with regards to exports as a means to boosting growth.