Risks to Global Trade and Implications for South Africa's Economy and Policy

The past two decades have witnessed an unprecedented globalisation of trade in goods and services. This process has been driven, inter alia, by technology, ideology and the availability of relatively cheap energy. By extrapolating this trend, one may expect further integration of world markets and increasingly unhindered international trade. However, there is mounting evidence of significant risks to the globalisation of free trade, at least in goods and possibly in certain services as well. Three main risk areas are identified: (1) fossil fuel depletion, in particular a possible peak in world oil production within the next five to ten years; (2) climate change, and especially its effect on agricultural production; (3) and instability in the world financial system caused primarily by the US's unsustainable twin deficits. The paper explores some possible implications of these risks for the South African economy and its foreign trade in particular. It argues that South Africa's trade policy should take due cognizance of these threats to global trade, and advocates adaptation and mitigation strategies designed to improve self-sufficiency and to protect the poor in sensitive areas, especially food and energy security.