Is foreign trade relevant to economic growth in the SADC region?

Abstract

The relationship between foreign trade and economic growth is one of the controversial subjects in economics. Theoretical models have been developed and empirical studies have been carried out but the results obtained are mixed and up to now, there is no unique answer with regard to the same study. This paper examines the relationship between foreign trade and economic growth taking SADC countries as the laboratory test ground. Growth performances have not been consistent within the SADC region and weak regional trade performance is by the virtue of the fact that they focused more on elimination of trade barriers instead of concentrating on the development of the productive capacities necessary for trade. The research used panel data gathered from SADC trade database, International Monetary Fund, and World Bank. Using panel regression analysis of 15 SADC member states, the paper demonstrates that foreign trade promotes economic growth but it was found to have a moderate effect on growths of SADC countries. Based on the findings, the paper recommends SADC member countries to devise energetic industrial policies geared towards developing export industries and also to implement the SADC Regional Infrastructure Development Master Plan in order to improve trade within the region so as to realise real market access benefits brought about by trade liberalization.