International Trade II (International Trade Relations)

Governments adopt policies which are implemented through intervention in economic activity in a way that impacts on the allocation of resources. The question is: to what extent should governments intervene, how should they do it, and to what effect?

The course does not address the broader spectrum of macro and micro economic policies but focuses on an applied branch of micro-economic policy, namely industrial policy, which in general terms can be defined as intervention by government to influence the allocation of resources in production from what is perceived to be less to more productive use. This general definition reveals a close association between trade and industrial policy, with trade policy referring to the impact on relative prices when traded goods and services cross the national frontier and consequently influence the allocation of resources between the consumption and production of import-competing and export products. Industrial policy in turn refers to all other interventions that have an impact on relative product and factor prices within the borders of a country, thus influencing the allocation of resources.

This close association between trade and industrial policy explains the convention of treating the two micro-economic policies as an entity, which in practice cannot and should not be regarded as separate interventions.

The course owes its existence to a need to interpret and critically analyse industrial policy against the background of the clear shift in attention given to industrial policy in South Africa and in the region. Regularly references to an industrial policy for the Southern African Development Community (SADC) appear in the speeches of policy practitioners, including politicians, while the 2002 Agreement of the Southern African Customs Union (SACU) explicitly includes an undertaking by the member states to develop common industrial policies. But most importantly, the dominant economy of the region, South Africa, has recently adopted a National Industrial Policy Framework which is bound to have a profound impact on development policy in the country and the region.

The objective of the course is to develop analytical skills in designing and assessing industrial policies. The course addresses industrial and trade policy in general but the South African strategies will serve as case study. Consequently, the outcome will not only be enhanced analytical skills but also a critical group assessment of the South African policy. The latter will include the impact of the policy in the region and in so doing will inform positions that could be adopted in regional negotiations on industrial development.

Course instructor: Colin McCarthy and Rachel Jafta