Production networks,economic integration and the services sector: Implications for regional trade agreements in southern Africa

Debate on an appropriate framework for economic integration in southern Africa has hitherto focused largely on matters relating to trade in final goods, with little analysis of the potential benefits of production sharing and fragmented trade, or of challenges related to the accompanying role of the services sector. The first goal of this article is thus to explore the possible benefits for the development of specialisation and trade expansion related to the international fragmentation of production, and whether such benefits may be better harnessed by southern African countries in a context of regional integration. Secondly, the critical role of the services sector in production-sharing arrangements leads to questions about developing country services sectors and regional versus multilateral services liberalisation. The article therefore considers the importance of the services sector in the fragmentation context, and the growing debates surrounding services aspects of developing country regional trade agreements. It is argued that while there may be a case for the promotion of production-sharing arrangements in regional trade agreements in southern Africa, key constraints that continue to hinder the region's trade and development agenda remain the conflicting rules of origin in economic arrangements with overlapping membership, and non-tariff barriers to trade, particularly intra-regional transport costs.