Analysis of Trade Costs and FTA Effects on Bilateral Trade Flows in the Southern African Development Community

Abstract

The study measured the relative effect of the SADC FTA, logistical and governance induced trade costs on trade flows, using a gravity model based on the Pseudo-Maximum Likelihood (PPML) estimations, covering the period 2005 to 2014. The study did not find evidence of trade creation by the SADC FTA, but found robust evidence regarding the trade diverting effects of the SADC FTA. Additionally, the study suggests that improvements in governance and reductions in logistics related costs raise trade flows. Further, trade indicators show that the SADC FTA resulted in increased intra-SADC trade intensity, implying a growing consumer market and potential enhancer of growth in the region.

Key words: Economic Integration, SADCFTA, Nontarriff Barriers

DOI: 10.7176/IAGS/73-02

Publication date:June 30^th 2019