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THE SOUTH HFfllCflN IHSTITUTE CH »U OF IHTEflHflTIDHflLflFFfllBS c TANZANIA \Dares Salaam Luanda I ' \ ZIMBABWE I ^. j WalvisBayb o T BOTSWANA/—-/ J Windhoek | /' Cape Town SOUTH AFRICA in the GLOBAL ECONOMY Edited By GREG MILLS ALAN BEGG and ANTHONI VAN NIEUWKERK Published by The South African Institute of International Affairs Jan Smuts House, Johannesburg with assistance from The Standard Bank Foundation ©SAIIA, 1995 Greg Mills, Alan Begg and Anthoni van Nieuwkerk and contributors, 1995 All rights are reserved While copyright in the volume as a whole is vested in the South African Institute of International Affairs, copyright in the individual chapters rests with their respective authors, and no chapter may be reproduced in whole or in part without the express permission, in writing, of both authors and publishers. It should be noted that any opinions expressed are the responsibility of the individual authors and not of the SAIIA or The Standard Bank Foundation. ISBN: 1-874890-58-7 First published by the SAIIA, February 1995 (Printed by Print Inc.) Cover designed by Belinda Rowles The South African Institute of International Affairs gratefully acknowledges the generous financial assistance of The Standard Bank Foundation in the publication of this volume. Preface After the long isolation of the sanction years, South Africa can now as a full democracy, rejoin the community of nations with pride. This is a major challenge but must also be seen as an opportunity for South Africa's business community to play its full part, alongside the Government of National Unity, in conceiving new policies for this new age. These policies will have to synchronise our realities with those of a world in which trade and global competitiveness are as important as the political dimensions of diplomacy. How then South Africa chooses to integrate itself with regional economic trade blocs is a vital question if we are to utilise political goodwill to economic benefit. Of course, issues of peace, security and human rights should be equally important factors in determining our foreign policy. This book tackles these questions and other issues and is thus a timely contribution to a debate at the heart of our potential success as a nation in the future. The readers have the benefit of insightful academic thought presented in accessible and thought-provoking form by the contributors to whom thanks and praise arc deservedly given. Dr. Conrad Strauss National Chairman South African Institute of International Affairs Editor's Note Initiating change is difficult but glamorous. Sustaining change is even more difficult and much less glamorous. This book is set against a backdrop of conflicting and emergent national, regional, continental and global interests. It was born out of a perceived need by practitioners, academics, students and laypeople alike to understand the trends in international economic relations and world politics. Effort has been made to solicit expert and diverse comment and analysis on the issues highlighted in this introduction. In doing so, the volume is divided essentially into three parts: the first looks at The Changing Nature of the International Political-Economic System; the second concentrates on The African Context where South Africa wittingly or not finds itself cast; and the final section deals with South Africa and Southern Africa. In each of these general areas, the emphasis has been on the need for explanation of what is most times a confusing and complicated mosaic of organisations, acronyms, trends, shifts, needs, designs and motives. While it has not been possible to cover every area of South Africa's international economic relations, at the same time, however, it was intended that the topics chosen and the authors solicited would reflect and represent a wide range of views and constituencies. There are many people who have helped in various ways with this project. Dr. Sara Pienaar, the Director-General of the South African Institute of International Affairs, is both an inspiration and encouragement. Dr. Conrad Strauss, who kindly agreed to preface this volume, has given much of his valuable time and effort in support of the Institute. All the members of the authorial team must be thanked for their ability to produce chapters at short notice and with much grace. Anne Katz performed her usual typing and production wizardry in keeping to a tight deadline. Alan Begg gave willingly of his time and wise advice, and with Anthoni van Nieuwkerk and the rest of the Research Group at SAIIA helped enormously in seeing this labour to fruition. The financial support of The Standard Bank Foundation is also gratefully acknowledged. Finally, this book is dedicated to Annie Wothini (1942-94), whose life epitomised the plight and the struggle for survival and prosperity of Africa's women who most often bear the brunt of injustice and economic failure. It is hoped that her four daughters will reap the promise of the new South Africa. Hamba kahle usisi warn. Greg Mills, February 1995 Contents Map ii Preface v Editor's Note vi Introduction: Waiting for the Fig Leaf to Drop? 1 Greg Mills The International Political-Economic System 1. The World Economy in the 1990s 25 Robert McKinlay 2. From the GATT to the WTO: The Global Trade Regime and its Implications for South Africa 41 Alan Hirsch 3. The Formation of Regional Economic Super-Biocs: European Economic Co-operation, APEC and NAFTA 56 Nitesh Dullabh 4. Framing the Economic Future: South Africa's Relations with the IMF 74 Duncan Wood 5. The European Union: A Most Important Trading Partner? 88 Adrian Guelke 6. The Asian Example: What Hope for an African Tiger? !06 Anthony Leysens and Lisa Thompson 1. Current Trends in International Defence Spending 128 Martin Edmonds The African Context 8. Africa's Economic Prospects 146 Douglas Rimmer 9. The Politics of Structural Adjustment Programmes in Africa 166 Haroub Othman 10. Aid and Poverty in a Time of Rapid Change 181 Tony German and Judith Randel South Africa and Southern Africa 11. An Overview of South Africa's Future International Economic Relations 199 Thomas Scott 12. The History of Regional Integrative Attempts: The Way Forward? 214 Greg Mills 13. Big or Small, Open or Closed? A Survey of Views on Regional Integration 245 Anthoni van Nieuwkerk 14. Considering the Methods and Effects of Regional Integration 265 Erich Leistner Notes on the Contributors 280 Glossary 281 Select Index 285 Introduction: Waiting for the Fig Leaf to Drop? Greg Mills Tin' primary motivation of the ANC 's foreign economic policies as a whole will be to place South Africa on the path of rapid economic development with a view to addressing three problem areas: slow growth, severe poverty and extreme inequalities in living standards, income and opportunity. Nelson Mandela, 19931 The inauguration of President Nelson Mandela on 10 May 1994, was a catalytic event in the history of South Africa. A huge sense of pride, opportunity and achievement was generated by this moment. Accordingly, it is expected that the Republic will be able finally to take its rightful place in the international community. This position, it is believed, will now no longer be influenced so markedly by the nature of South Africa's domestic system. Under apartheid, domestic concerns and more specifically, security priorities, had dominated the foreign policy agenda. 'Normal' international economic relations were consumed by the threat of sanctions as well as the opposite countcr- sanctions and sanctions-busting varieties. South Africa's foreign relations should now, it is believed, be shaped by a whole range of factors and issues unrelated to domestic concerns. In the economic sphere, these include the membership of international organisations and regimes, as well as trade and investment partnerships. Yet it is clear that domestic policy will continue to influence events and activities in the international sphere, and that the constraints on South Africa's foreign and domestic policies are still greater than the freedom of choice, even without apartheid. Some of these constraints relate to the politico-economic organisation of the international system, others to the manner in which South African choices impact on its foreign relations. Quite clearly, in the latter regard, the latitude for choice and degree of change that confronts the new South African regime will not solely be determined by influences from the top down, but those from the bottom up in particular. Questions that the international community is currently asking of South Africa include: * What is (or will be) the perception of these 'rules' of the international system in the new South African government, and how realistic then are Pretoria's current strategies? * What policies are expected to work in the international and African contexts? * What are the constraints, challenges and opportunities that face South Africa's future economic and trade relations? In this, unless the South African government pursues a truly revolutionary code (and probably suffer the consequences) by inventing a new structure of politico-economic organisation that it can persuade others to follow, it will be obliged to align itself with global developments. Yet since the end of the Cold War, we have been confronted by what appear to be sweeping changes in the international system: what Francis Fukuyama described as The end of history', others the third act of a 'triptych' in a century characterised, first, by two world wars punctuated by a crippling depression and, second, by a period of relative economic and political stability in the West - the Cold War.2 In a third 'panel' of the triptych, powerful economic forces have emerged alongside pervasive and devastating forms of nationalism. Ideology - previously to the fore in the battle between socialism/communism and liberalism/capitalism (as commonly portrayed) - has all but disappeared as the key determinant of international relations.

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