Estimation of the potential economic welfare to be gained by the South African Customs Union from trade facilitation

Abstract

Background: Trade facilitation is important for the South African Customs Union (SACU) countries because the expansion of international trade is a priority to enhance their economic growth. Unfortunately, the high trade compliance costs facing importers and exporters operating in SACU are in conflict with this objective. Aim: This article aims to quantify the annual economic welfare gains that the member countries of SACU could realise from reforms that would reduce the documentary and border compliance time and costs. Methods: We use a partial equilibrium welfare economics framework of up-to-date sets of general equilibrium estimates of the import demand and the export supply elasticity in a country. The impact on the volume of trade flow and economic welfare is quantified to reduce documentary and border compliance time and trade compliance costs. Results: The economic welfare changes from reducing the documentary and border compliance time and costs for imports and exports would be between US$2.2 billion and US$3.7 billion (2018 prices), or between 0.54% and 0.90% of GDP of the SACU countries. The economic welfare gains from reducing the excess administrative costs in imports and exports of SACU members would be between US$2.2 billion and US$3.7 billion (2018 prices), or between 0.54% and 0.90% of the GDP of the SACU. Conclusion: The most important reforms needed to realise these cost savings include a single window administrative structure. In this case, both customs, health, welfare, and controls, as well as the payment of all duties, taxes, and licenses are handled by a single administrative office. Failure to move fast regarding such changes would have a negative impact on the well-being of SACU members.

Keywords

• trade facilitation
• southern africa customs union (sacu)
• south africa
• trade compliance costs
• trade reform
• economic welfare gains