SACU and Mercosur: The implication of a free trade agreement for Botswana, Lesotho, Namibia and Swaziland

The Southern African Customs Union (SACU) and Mercado Comun del Sur (Mercosur) have a partial trade arrangement that contains a provision for considering expending this into a free trade agreement (FTA). Sandrey et al. (2010) have used the Global Trade Analysis Project (GTAP) database to assess the welfare and trade gains from such an FTA, but concentrating upon the major economies of South Africa, Brazil and Argentina. In this paper we extend that analysis to examine the implications for the BLNS (Botswana, Lesotho, Namibia and Swaziland). We note that the analysis is mostly determined by merchandise goods access only, although we allow for some gains from services trade by proxying a 2% tariff-equivalent relaxation of barriers between the partners. We also build upon the tralac analysis by Sandrey and Jensen (2009) on the implications for the BLNS of an FTA between SACU and China to compare and contrast the current SACU/Mercosur FTA with a SACU/China FTA, and in particular possible revenue implications for the BLNS from the SACU revenue pool from these FTAs.