The Impact of Economic Sanctions on South African Exports
| DOI | http://doi.org/10.1111/1467-9485.00248 |
| Published date | 01 November 2002 |
| Author | Simon J. Evenett |
| Date | 01 November 2002 |
THEIMPACTOFECONOMICSANCTIONSON
SOUTH AFRICAN EXPORTS
Simon J. Evenett*
ABSTRACT
In the mid-1980s many nations imposed sanctions on South African exports, most
of which were subsequently removed during 1991– 3. I estimate the effect of eight
industrialized economies’ sanctions on their imports from South Africa. Outliers
are found to strongly influence the parameter estimates. Failure to take account of
them leads to the conclusion that sanctions by the (then) European Communities
most adversely affected South African exports. In fact, robustness checks reveal
that the United States’ Comprehensive Anti-Apartheid Act played the largest role,
reducing bilateral imports by a third. The broader implications of these findings for
estimating gravity equations are discussed.
II
NTRODUCTION
Despite the long history of using trade policies to further foreign policy goals,
opinion is still divided as to the wisdom of doing so (Hufbauer, Schott and
Elliott, 1990; Haass and O’Sullivan, 2000).1Proponents argue that sanctions,
including those on trade flows, create incentives for reform by ‘renegade’
countries. Critics note that many sanctions regimes are either cosmetic, poorly
enforced, or have little influence on the target’s policymakers.
In this paper, I examine the effect of one type of economic sanctions— those
against the exports of the target economy. Specifically, I estimate the effect of
eight industrialised economies’ sanctions on South African exports. The former
began to impose more severe trade sanctions in 1985 and 1986, and withdrew
them after the collapse of the apartheid regime in 1991. Using bilateral trade
data for eight years after the collapse of apartheid, I shall examine the extent to
which South African exports have recovered after the sanctions were lifted.
Furthermore, I employ trade data for eight years before the sanctions were
imposed to better identify the effect of sanctions on trade flows. Finally, to
ensure a fair degree of comparability, I formed samples of each of the eight
Scottish Journal of Political Economy, Vol.49, No. 5, November 2002
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557
*World Trade Institute, University of Berne, and CEPR
1In the case of South Africa, Levy (1999) presents a provocative thesis that state-led trade-
based economic sanctions played only a ‘trivial’ role in toppling the apartheid regime.
industrialised countries’ trade with developing countries that, like South Africa,
are classified by the World Bank as middle income. The latter nations’ export
patterns probably provide a better benchmark for South Africa’s exports than
do the exports of both the lower income nations and the industrialised countries.
It turns out that the effect of these industrialised nations’ sanctions on South
African exports depends critically on the composition of the sample in
systematic ways. Ignoring the potential biases created by outliers leads to the
conclusion that the sanctions imposed by the (then) European Communities had
the greatest adverse effect on South African exports. However, this finding is
entirely dependent on the inclusion in the sample of bilateral trading
relationships where observed imports are (compared to their national incomes)
relatively large or relatively small. Removing these bilateral trading partners
from the sample results in lower estimated effects of the economic sanctions.
What is more, the United States’ sanctions are now found to have reduced South
African exports the most. The estimates also suggest that South African exports
have not recovered after the removal of US sanctions in 1991. In contrast, the
end of EC sanctions may have led to some ‘bounce back’ in South African
exports. Overall, though, the impression is that these trade sanctions continue to
have effects well after their removal.2On the basis of the South African
experience, then, the promise of the removal of sanctions if foreign behaviour
improves may provide weaker incentives than previously thought, as trade flows
need not return to their pre-sanctions levels.
The econometric findings presented in this paper may have broader
implications for the estimation of the gravity equations. Like many other
applications of the gravity equation, the effect of sanctions is essentially
estimated using a dummy variable.3Furthermore, I include the standard
distance term to (imperfectly) proxy for transportation costs. My econometric
findings suggest that the presence of outliers tends to substantially increase the
absolute value of the estimated distance parameter and the estimated dummy
variable. In fact, the distance elasticity falls 50% once the outliers are excluded,
going some way to remedy the implausibly large size of typical gravity-inspired
estimates of this elasticity— an anomaly that was pointed out in Grossman
(1998). My findings also imply that, when studying North-South trade flows,
special care must be taken in assembling (in so far as this is possible)
representative samples of bilateral trading partners. Given the growing focus on
market access to industrialised economies by developing country exporters, then
ensuring that the key estimated elasticities are not inflated by the inclusion of
outliers assumes greater importance.
This paper is organised into four further sections. The next section contains a
brief overview of the sanctions that were imposed on South Africa during the era
of apartheid, and motivates the subsequent empirical analysis. Section III
2This may point to considerable hysteresis in trade patterns, perhaps caused by sunk costs
associated with developing and maintaining export relationships.
3I hasten to add that, in this case, there are good theoretical reasons for using a dummy
variable for this purpose, see Section IV.
558 SIMON J. EVENETT
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