Trade liberalisation in BRICS countries and its implication on the South African economy

- Kolisi, Nwabisa

Title
Trade liberalisation in BRICS countries and its implication on the South African economy
Creator
Kolisi, Nwabisa
Subject
BRICS
Subject
Economic development -- Developing countries
Subject
Saving and investment -- Developing countries -- Econometric models
Date Issued
2024-12
Date
2024-12
Type
Doctoral theses
Type
text
Identifier
http://hdl.handle.net/10948/70209
Identifier
vital:78311
Description
South Africa has been grappling with sluggish economic growth over the last two decades. To this extent, it is believed that international trade can be used as an instrument to foster growth in the economy of South Africa. This is why South Africa became a member of BRICSS in 2010. Literature postulates that trade liberalisation is an essential element of international trade that promotes economic growth. Trade has been at the forefront of enhancing the economic growth prospects of the BRICS. In 2010, BRICS experienced a significant increase in the share of global trade from 3% in 1990 to 19.3% of global exports of goods and services. Like many other countries involved in trade, BRICS are members of the WTO. Furthermore, the BRICS countries have signed several bilateral and multilateral trade agreements. Brazil is a member of MERCOSUR and signed a preferential trade agreement with India in 2004, and South Africa has been a member of SACU since 2008. Given this, five regional trade agreements are led by the BRICS. These five regional trade agreements include MERCOSUR, SACU, ASEAN-China, EAEU, and SAFTA. The study examined the impact of trade liberalisation in BRICS countries on South Africa’s economic growth. The method of data analysis used in this study is the pooled mean group (PMG) estimator as proposed by Pesaran et al. (1999) and autoregressive distributive lags (ARDL) on a country-by-country basis on data covering a period from 1995 to 2018. Based on the PMG simulation, the results show that trade liberalisation in BRICS countries positively impacts South Africa’s economic growth during the period under review. Notwithstanding, import tariffs in BRICS countries hinder economic growth in South Africa. The PMG results are also confirmed by country-by-country ARDL models used in this study in that trade liberalization in BRICS positively impacts South African economic growth during the period under review. Once again, import tariffs in BRICS negatively impacted South Africa’s economic growth. Regarding the country-by-country ARDL models, the results reveal that trade openness has a positive and statistically significant impact on economic growth in South Africa, mainly from Brazil, India, and China in the long run but not in the short run. Further control variables used in this study were gross fixed capital formation, human development index, government expenditure, inflation rate, real effective exchange rate and import tariffs. The control variables' analysis suggests that the BRICS trade liberalisation's impact on South Africa’s growth can be enhanced by intensifying human development, gross fixed capital formation, government expenditure, controlling inflation, and maintaining a stable exchange rate. It is also equally important to ensure that the import tariffs are managed such that they do not compromise the good intentions of trade liberalisation. Based on the study results, trade liberalisation policies in BRICS are recommended to be coordinated so that all obstacles combating the effectiveness of trade liberalisation are removed. Trade liberalisation should be accompanied by adequate infrastructure. This can be achieved through government expenditure that is biased towards economic infrastructure. Furthermore, the BRICS must focus on human capital investment to ensure that they continue to adopt innovative ways of trade, for example, trade digitalisation. Whilst this thesis does not suggest using a single currency amongst BRICS, it is important to ensure that exchange rate volatility is minimised to a large extent. It cannot go without saying that high inflation erodes trade relations amongst and within BRICS in that goods and services produced in BRICS economies become less competitive. This in itself compromises whatever gains may be obtained through trade liberalisation. Given these dynamics regarding BRICS trade liberalisation, it is recommended that the processes towards policy formulation to declare BRICS integration as a free trade area should be fast-tracked.
Description
Thesis (PhD) -- Faculty of Business and Economic Sciences, School of Economics, Development and Tourism, 2024
Format
computer
Format
online resource
Format
application/pdf
Format
1 online resource (268 pages)
Format
pdf
Publisher
Nelson Mandela University
Publisher
Faculty of Business and Economic Sciences
Language
English
Rights
Nelson Mandela University
Rights
All Rights Reserved
Rights
Open Access
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