The global trading system has changed rapidly in the last few months, and so should our trade policies and strategies since the instruments we used a decade ago are woefully inadequate for addressing today’s challenges.
Some countries have been preparing for times such as these. Hence the spirited activity in the Association of Southeast Asian Nations, European Free Trade Association and Mercosur (South American Common Market) blocs to conclude bilateral trade deals in the form of new-generation free-trade agreements. These act as powerful insurance at a time when uncertainty has become the norm in global trade.
There is a need for a change in our strategies, and our resources and capabilities, to respond to the world as it is shifting. For decades countries operated in an international trade environment that was reasonably stable, with minimal fundamental disruptions to trade policy except for occasional disputes over specific products or cases of dumping.
We are now experiencing a fundamental shift, which means the investment in human capital may not have been as extensive as required, particularly in terms of senior negotiators and technical experts. This is an area that SA may need to review.
We are in an era in which pressures are being felt in various sectors of the economy and all are looking to a few departments for guidance, both in defensive strategies to address the markets that are closing, and in searching for new areas to expand into.
As SA initiates a conversation on export diversification, other countries are on the same path. That increases competition in the world market in attractive regions that countries view as a potential mitigating strategy by diverting some products they would typically export to the new, narrower US market.
In this environment, it is not only key negotiators that SA requires but also more technical experts who can scan the evolving global economy and trade environment, providing insights to help negotiators navigate to viable and growing markets. These requirements may vary across different sectors of the economy, and there is therefore a need for a larger team dedicated to such tasks.
The centrality of trade to the SA economy, and the current over-concentration in a few regions such as the US, China and the EU, means there is increased urgency for this work to be carried out now more than before.
The SA business community should not only be pushing the government to act in its interests at this time, but also be talking about whether SA has sufficient capacity for all these tasks or requires an increase in the number of people who would devote their energies to trade matters. If the latter is the case, conversations about secondment and funding more academic work that would have a rapid pace of output should enable policymakers to inform their trade decisions.
This is not a call for businesses to seek involvement in the government’s decision-making processes, but rather to enable the government to have sufficient human capital to lead these efforts successfully.
Since the start of the year the focus has been on US tariff matters. But the trading environment is changing globally in other ways too. The policy decisions the US has taken have led to a shift away from embracing globalisation and opening trade, to a more inward-looking approach. Therefore, the opening of new markets may not be as easy as it was in the past few decades, when the sentiment was broadly positive.
There is also a lot more push for reciprocity these days than in the past. We must build sufficient capacity in knowledge and human capital to navigate this new world. The starting point is to overhaul our current trade policy orientation.
• Sihlobo is chief economist at the Agricultural Business Chamber of SA and a senior fellow in Stellenbosch University’s department of agricultural economics.
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