Leveraging Services for Growth, Employment and Equity: Services Trade Reform in the South African Economy: What Does it Mean for Growth and Welfare?

by CASSIM, R. , 2009
Research Report, Employment Growth & Development Initiative, Human Sciences Research Council

Cassim reviews the theoretical literature on the impact of services trade liberalisation on efficiency, welfare and growth. The objective is to assess its implications for services trade reform in the South African context. In view of data limitations, this paper draws insights from the theoretical and international literature and assesses its relevance to South Africa. The focus of this paper is to explore the role of services trade reform in the growth and welfare of an economy, hence the similarities and differences between welfare in trade in goods relative to that of services are explored in some detail. Cassim provides a critical review of the typical analytical approaches normally associated with goods trade reform, such as comparative advantage theory, the static and dynamic effects of reform, and the cost of protection. An assessment is made of the utility of transplanting these frameworks to the case of services trade reform. It then assesses theoretical approaches to the measurement of the welfare losses associated with inefficiencies in services sectors, as well as the methodologies of empirical studies. He also assesses the issues facing the services economy in South Africa through case studies on telecommunications, energy and finance, and finally examines the relevance of the conceptual framework for the challenges facing policymakers in South Africa