A computable general equilibrium (CGE) model based on 37 sectors in 12 countries of the Southern African Development Community (SADC) is used to explore the welfare effects and the changes in employment structure of the agreed SADC Free Trade Area (FTA).
To highlight the deindustrialisation effects, these results are compared with Free Trade (FT). The preliminary findings are that the FTA leads to some net trade creation. The manufacturing sector suffers a marked decline under FT, particularly textiles and clothing, whilst mining employment is stimulated. It is argued that the formulation of a SADC industrialisation strategy needs both the results of the kind of CGE model discussed here, combined with sector studies and a political economy analysis.
- a simple mark-up cost function determining the cost of production of domestically produced goods,
- a market clearing exchange rate and tax wedge between income,
- expenditure that simulates fiscal policy aimed at maintaining full employment at the initial wage.
The CGE model is used to explore the welfare effects and the changes in employment structure of the agreed SADC Free Trade Area (FTA). To highlight the deindustrialisation effects, these results are compared with Free Trade (FT). The preliminary findings are that the FTA leads to some net trade creation. The manufacturing sector suffers a marked decline under FT, particularly Textiles and Clothing whilst Mining employment is stimulated. It is argued that the formulation of a SADC industrialisation strategy needs both the results of the kind of CGE model discussed here, combined with sector studies and a political economy analysis.
