Epsilon Archive for Student Projects

Abstract

This paper investigates how the removal of the South Africa trade embargo in 1994 affected its wine exports. The goal is to determine the significance of the sanctions and trade agreements for this export. Specifically, sanctions and certain trade agreements are examined between the years 1990 to 2010. During this time, sanctions were imposed on South Africa because of apartheid. In 1994, apartheid ended, and then all sanctions had ended as well. To assess this, a gravity model is used. In this case, the model specifically estimates the parameters for South Africa's wine exports, South Africa's GDP, and the GDP for South Africa’s trading partners. An additional parameter that estimates the sanctions is included in this model. The results are compared to the change of wine exports for the world's largest wine exporting countries. This is done to exclude that the changes in wine exports are due to other parameters. South Africa’s economic growth effect is also illustrated. The data for the gravity model and for the complementary analyses are collected from the FAO State and the World Bank. The estimated results show that wine exports increased by 244 percent after the embargo was removed. This is a large increase that is economically significant. This may be due to the general globalization in the world at the same time. Although, as no other large wine exporting countries have such a high increase in their export (maximum 128 percent) this would suggest that the ending of all sanctions indeed had an effect. The results also show that the world’s GDP had an impact on South Africa's exports. The changes in South Africa's wine exports increased after 1994 and after 2000. These changes appear to be specific to South Africa. South Africa's GDP increased mainly after 2002. The conclusion of these findings is that the removal of trade sanctions had a large impact on South Africa's wine exports. This is especially evident in the results of the gravity model. The results also indicate that trade policy appears to have an impact on South Africa's economic growth. This can open for speculation about how trade policy can be used to control other countries.