ENDOGENOUS PROTECTION IN A TRADE LIBERALIZING ECONOMY: THE CASE OF SOUTH AFRICA

Authors

  • Merle Holden,

    1. Holden: Professor of Economics, School of Economics and Management, University of Natal, Durban 4041, South Africa. E-mail holden@nu.ac.za
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  • Daniela Casale

    1. Casale: Doctoral student, School of Economics and Management, University of Natal, Durban 4041, South Africa. E-mail casaled@nu.ac.za
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      This paper was presented at the Western Economics Association International's 75th annual conference, Van-couver, June 29-July 3,2000, in the session on trade the-ory chaired by Daniel Swaine. The authors acknowledge the useful comments and discussion in the session and comments by the referees that contribued to the revi-sion of the paper.


Abstract

This article aims to establish the changes that occurred in the institutional structures governing trade policy in South Africa during the period 1990–1998. It also examines the forces that influenced the application of tariff policy by the major tariff-setting bodies by applying various theories of endogenous protection to their decisions. Using firm-level data on applications made to the Board on Tariffs and Trade, the study finds that when estimating a probit model, employment considerations rather than capital invested influenced the board's decisions to grant protection. In addition, the board is found to have granted protection even in the face of tariff lines having been bound under the Uruguay Round. The article argues that this should not be interpreted as a reversal of the trade liberalization but rather as an attempt by the board to cushion firms from the acceleration in the tariff rationalization process that occurred after the GATT offer. Finally, it is suggested that the board's response to changes in import penetration ratios between industries that were considered organized provides prima facie evidence of the superior lobbying ability of such industries.

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