Textiles protection and poverty in South Africa

South Africa's problem with 'Made in China' textiles

By: R Mabugu and M Chitiga
Published by: Poverty and Economic Policy Network, 2007
Via: Eldis

An important debate is underway in South Africa, on whether it should protect its deteriorating textile industry. This paper examines whether implementing trade barriers will result in better domestic policy objectives. It provides a dynamic analysis on the link between textile protection and poverty. The paper simulates the doubling of the import tariff on textile industry, foreseeable impacts include:

• - long run decreases in GDP and welfare
• - poverty increases across all groups of the population, with the exception of unskilled Indian households
• - growth in the textile industry and services associated with it
• - significant contraction of the export sector
• - reduced investment and capital accumulation
• - fall in wages and rises in prices.
  

The authors conclude that protectionist measures are detrimental to South African’s welfare, and its long term economic prospects.

(http://132.203.59.36/NEW-PEP/Group/papers/papers/MPIA-2007-01.pdf)