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INTERNATIONAL TRADE ANALYTICAL REPORT

Trade Patterns And Multi-Trade Agreement Membership In SADC
Jean B. Nkume 9/28/2010

Malawi has several main exports tobacco. The main export partner of Botswana is the United Kingdom with a share of more than 60 % of total export followed by South Africa. Its main import partners are those countries in the Southern African Customs Union (SACU) with South Africa being one of the highest countries it imports from about 80% of total import followed by Asia especially China and the European Union (EU) (CSO. social and cultural affinities between people(SADC. regional integration. theories and as well as quantitative methods to compare and contrast the international trade flows of Botswana and Malawi. copper and nickel.security and productive employment. There are at least . The key reason for joining such an organization is the benefits gained from economic cooperation and regional integration among members.INTRODUCTION The Southern African Development Community (SADC) was previously known as the Southern African Development Coordination Conference (SADCC) which was created in 1980 to reduce the economic independence on South Africa. 2010). protection of environment and sustainable use of natural resources and finally through strong historical. 2010). The purpose of this assignment is to use economic concepts. sugar and tea while its main imports are petroleum based products such as fertilizers and transport equipment (Intracen. Zimbabwe and Norway. and food. The main objectives of SADC is the socio-economic development of the Southern Africa region through the reduction of poverty. Between 2001 and 2008 the major exports of Botswana were mainly mining products contributing to more than 70 % of total export this includes diamonds. promotion of peace . Whilst its major imports are machinery and electrical equipment. the improvement of standard of living. The transformation to SADC was established on the 17 August 1992 giving it a legal character (SADC. 2010). 2010). fuel. beverage and tobacco contributing to more than 40 % of total import (CSO. 2010 ).

However. UK. .three major import and export partnerships in consumables and raw materials respectively that Malawi has with several countries such as South Africa followed by the China. • The gravity model which states that flow of trade increases for two countries as their economic size increases. In addition to explaining the trade patterns the concept of intra industry trade (IIT) with some of the commodities is explored. USA and Mozambique in terms of imports only (NSO. 2010). Botswana is at risk of experiencing immiserizing growth because it relies mainly on mineral products for its export and a decline in the price of these products will negatively affect Botswana terms of trade. Intra industry trade involves trade of similar products between countries (Pugel. Pattern of trade in Botswana and Malawi Commodity pattern of export average 2000-2008 Botswana Botswana has an abundance of natural resources such as diamonds and nickel and its export trade pattern is consistent with the H-O theory. There are various theories that can be used to explain the pattern of trade in both Botswana and Malawi however the main theories used here will be: • Ricardo’s theory which states that a country will produce goods in which it has a relative advantage in and that will export goods that it can produce at a low opportunity cost and import those with high opportunity cost. • The H-O theory states that a country. 2009). geographic distance lower. The Ricardo theory is also consistent because Botswana can produce these natural resources at low opportunity cost. Natural resources represent more than 80% of total export. will export products in which it has an abundant source of factors of production which are used intensively and import products that they have scarce factors of production in. and other negative trade factors get are eradicated. in our case Botswana and Malawi.

Malawi would import products that are capital intensive and this is shown in the graph below.C 2001-2008 Commodity pattern of import average 2004-2008 Botswana Although Botswana is endowed with diamonds and other natural resources it is an agricultural country and must import manufactures products as shown in the graph above which is consistent with Ricardo theory and H-O theory.nsa. Moreover according to the H-O theory. However.net Commodity pattern of import 2001-2008 Malawi Source: www.cso.malawi.Source: Makochekanwa.malawi. and Jordaan. it is consistent with trade between South Africa and Malawi. A. or Malawi and USA. the gravity model is unable to explain the trade between Malawi and UK. The import products include vehicles and machinery.gov. The gravity model is also consistent with Botswana trade as it mainly trades with SACU (low geographical distance) and within SACU.net . Malawi is also at risk of experiencing immiserizing growth because it relies mainly on tobacco and sugar. Source: http://www. As the gravity model mainly explains bilateral trade. A. South Africa (high GDP). Source: www.bw/ Commodity pattern of export average 2001-2008 Malawi Malawi is a labor abundant country and export products which use labor intensively such as tobacco and sugar which is constant with the H-O theory and Ricardo theory.nso.

Net export of Botswana 2001 to 2008 in millions of dollars As it is shown in the column chart below.26 0.org The following formula 1.097 0 0. Botswana net export has been positive from 2001 to 2008 except for 2002 and 2003.156 Malawi ITT share 0.032 0. Botswana’s term of trade have been improving over the past years Source: www.008 0.trademap. Products Tobacco Sugar Diamonds Nickel Fuel and Oil Machinery Botswana ITT share 0.org Net export of Malawi 2001 to 2008 in millions of dollars Malawi has experienced negative net export from 2001 to 2008 which show that it has imported more than exported which is a characteristic of developing countries that rely on the primary products such as agricultural products for export.42 0. Malawi terms of trade has worsened over the years.The positive values are principally due to the high price of mineral products such as diamonds and nickel.09 .0044 0.041 0.036 0.|X-M|/X+M has been used to contrast and compare the IIT share of Malawi and Botswana.trademap. Source: www.31 0.

causing a delay of the flow of goods from one nation to another. A 2009). The research conducted by Krueger (1997) shows that applying rules of origin from a single RTA is manageable.trademap. if a member nation of SADC has multiple memberships in various trade agreements it will weaken its commitment to trade. But this again depends upon who is at the receiving end of it all.org In the table above. resulting in low levels of trade within the SADC bloc. This mean that it has two markets in which it can buy and sell its good and services to. . In some cases multiple memberships may be advantageous to a country. This delay will not only limits trade ties. which depends if one decides to pursue self interest instead of those goals of the trade blocks those who have a high GDP like South Africa have the capacity to do so. Yet again it could a big economic boost for a member. QUESTION OF MULTIPLE MEMBERSHIPS According to Chacha (2008).Source: www. multiple memberships in various regional trade agreements could limit the attainment of the goals set out by SADC members in the future and intra-regional trade within the SADC bloc with disastrous consequences. but. South Africa is both a member of SACU and SADC. it is shown that most of the intra industry trade shares of Malawi and Botswana are low and low trade share is common characteristic of developing countries. Therefore. with multiple memberships. this is a form of trade diversion (Pugel T. but will also have the effect of limiting any advances towards further elimination or undercut of tariffs and will weakens cooperation among SADC members (ibid). various rules of origin are applied which becomes cumbersome and problematic for the nations involved. thus.

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