MPIA-11677 Textiles Protection and Poverty in South Africa

Abstract

There is an important debate going on in South Africa on whether to apply safeguard trade barriers to protect textiles. This presents an interesting case of how a country might use safeguard trade barriers in order to better achieve a domestic policy objective. Much of the current debate has been restricted to static arguments and seldom focused on dynamics and poverty. To assess these effects of protection, a sequential dynamic computable general equilibrium model linked to a nationally representative household survey of 2000 is used. The simulation involves a doubling of the import tariffs on textiles. The textile sector is, obviously, the biggest winner, followed by the service sector, which sells more than half of its production as inputs for the textile sector. All other sectors experience falling output with the worst affected being the export oriented sectors. Because the protected sectors are relatively more labour intensive, wages increase in both the short and long terms. Capital returns are sector specific in the short run and go up markedly for textiles and services but decline for all the other sectors. Overall, welfare falls both in the short and long term as the rise in factor prices is completely offset by the increase in consumer prices. The proportion of people living below US$2 per day increases marginally in the short run following increased textiles protection because of the observed increase in CPI that is higher than the increase in consumption for most households. Unskilled Indians are the only group to experience a reduction in poverty and welfare increases in the short run. The average poverty gap and the squared poverty gap also follow the same pattern as poverty headcount because most households are being pushed into poverty.


Members

Project leader: Ramos Mabugu

Project researchers: Margaret Chitiga


Journal publication

No journal publications.


Working Papers

Title Modified Size Comments Recommendations
Textiles Protection and Poverty in South Africa 2007-01-15 278.43KB 0 0
La protection du secteur des textiles et la pauvreté en Afrique du Sud : une analyse en équilibre général calculable dynamique micro-simulé 2007-01-15 282.77KB 0 0

Policy Briefs

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Final report

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Proposal

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