ABSTRACT
4.1. INTRODUCTION
CHAPTER FOUR: GLOBAL ECONOMIC INTEGRATION AND THE EFFECTS IN THE LOCAL ECONOMY
Trade regimes or international trade agreements are some of the mam policy interventions that have stimulated worldwide industrial mobility. In this thesis, the analyses of international trade agreements was aimed at examining their purpose and providing a picture of themainaspects of each agreement in so far as they are pertinent to KwaZulu-Natal as well as their contribution to the movement of industries in pursuit of opportunities emanating from such trade agreements.
Most of these agreements are detailed and lengthy, and much of their content was not of any particular relevance for the purpose of this thesis. These agreements were categorised according to whether they were multilateral, bilateral or unilateral.
As was shown in this thesis, the increased role of multilateralism had both positive and negative spin-offs for small towns. For those in Africa, multilateralism has been more negative. Whereas the phenomenon was expected to generate more opportunities for the under-developed world through the global economic integration that was envisaged, multilateralism did not come with the expected global economic integration Instead, it has led to economic decline.
The implication for South African, including KwaZulu-Natal industries, was that the government was expected to promote exports and international trade in order to increase the amount of labour and capital within the economy. The World Trade Organisation (WTO) essentially stresses export promotion, and this has been accepted by the South African government6. It was hoped that exports would increase competition in the local market and this would in turn increase employment opportunities. However, multilateralism, just like globalization has disabled small localities, as they were unable to promote international trade, given poor logistical infrastructure that is required to facilitate international trade.
Embracing the 'export-led growth hypothesis' has been one characteristic of South Africa's industrial strategy. The main objection to the export-led growth hypothesis has come from UNCTAD 2001 report, where it was argued that:
the theoretical benchmark for the export-led growth hypothesis is considered generally weak and is based on the bivariate and ad hoc production of functions, whilst the empirical results derived from traditional econometrics have been highly criticized forbeingspurious.
6A substantial amount of research has beencarriedout on the export-led growth hypothesis, which postulates that export expansion is the one of the main determinants of growth.
If one follows such an argument, it means that over-reliance on the export growth-led hypothesis can be misleading given the fact that the WTO has been promoting eXJ.lort promotion in an indiscriminate way, though evidence on the role of exports in an economy is still inconclusive. Although the theoretical links between trade and economic growth was not the focus of this thesis, the analysis of literature on this subject suggests that the debate is far from over.
The most important issue that this thesis hoped to examine was the impact of multi1ateralism on the local industrial base. This thesis therefore argues that inland KZN was geographically well positioned to serve the markets of Lesotho and Swaziland in particular. Therefore, industries located in small towns were attracted to these markets where local government conditions, including industrial incentives, were similar to those that existed under the apartheid's industrial decentralisation scheme. More and more industries have relocated their operations to these areas.
4.2. THE AFRICA GROWm AND OPPORTUNITIES ACT
The Africa Growth and Opportunity Act (AGOA) was one of the most significant unilateral trade agreements thathad far reaching implications for local capital and its ability to penetrate the US market. The US president signed AGOA in 20007, and it originally designated 35 sub- Saharan Africa countries as beneficiaries. Zimbabwe was later excluded. South Africa was included in the list. Essentially, AGOA offered duty-free and quota free access for textile and apparel commodities over a period of eight years.
Addressing the 2ndUS-Africa Trade Cooperation Forum conference held in Mauritius in 2003, George Bush, the US president told the delegates of that conference that the US Congress was investigating the possibility of a wider Generalised System of Preferences (GSP) provisions for AGOA beneficiaries.
There appeared to be at least two implications for South African firms. The first was that they would not be as attractive for labour intensive industries as would be the Less Developed
7On 2 October 2002, President Clinton signed a proclamation designating 34 (with an exception of Zimbabwe) sub-Saharan African countries as beneficiary countries under AGOA. The Presidential proclamation designates these sub-Saharan countries as beneficiaries for purposes of trade preferences made available under AGOA
Countries such as Lesotho and Malawi that enjoyed more favourable access to the US market under AGOA. This arrangement was, however, expected to end by 30 September 2004. Secondly, South African firms couldaimfor niche markets in the US.
The proclamation modifies the Harmonized Tariff Schedule of the US to reflect the apparel and textile trade preferences made available under Section 112 of the Act. It also delegates to the Office of the US Trade Representative the authority to publish through a Federal Register notice deterrninations regarding whether a country has established an effective visa system and meets the other custom-related requirements under Section 112 of the Act.