# 1) INTRODUCTION

International trade is viewed as one of the key factors underlying the success of the fastest growing economies yet many countries remain isolated and have failed to achieve this integration. To what extent are the SADC countries afflicted? To answer this question, this paper looks at recent trends in intra-regional trade flows and in the region‟s trade with the rest of the world. Its analytic objective is to identify the extent to which SADC economies have integrated into the global trading system as well as the regional market. In addition, the paper addresses some of the main institutional and policy barriers to trade in the region.

The extent of market integration is evaluated using trade flow data. SADC‟s aggregate trade performance since 1990 is benchmarked against international counterparts. One aim of this analysis is to identify whether SADC is being marginalized in world trade. The results in section 2 show that SADC has continued to experience a decline in its share of world trade over the past decade and a half. However, the decline also reflects relatively poor economic growth and not necessarily structural impediments to trade. Benchmarked against GDP, SADC has experienced an increase in openness over the past decade that is comparable to other developing countries. Similarly, regressions indicate increased exports by SADC members over time even controlling for GDP growth. This change is equal in magnitude for SADC exporters as other countries. SADC has therefore become more integrated with the world economy over the past decade and a half and the extent of this increase in integration is equivalent to other comparable countries.

In section 3, the paper then looks at intra-SADC trade. Intraregional trade rose as a share of total trade during the 1990s, but progress in this regard has slowed recently. The level of and trends in intra-regional trade, however, are not even across countries. South Africa has become an important source of imports for SADC countries with the ending of sanctions in the early 1990s, yet imports by South Africa from the SADC region remain small. Regression results suggest that, _ceteris paribus_ , SADC countries trade with each other more than they do elsewhere. The coefficients indicate they trade with each other more than twice as much as other pairs do. Trade is in this sense regionalized in SADC.

We continue with an analysis of product market integration in section 4. High levels of concentration are found; the top 10 products at the 6-digit HS level account for upwards of 70% of intra-SADC trade flows for each country. Most of these products are resource-based, which reflects the comparative advantage of the region. Such high levels of concentration are not unique to intra-SADC trade. In fact, exports to nonSADC members appear to be even more concentrated.

Additional measures that compare the proportion of possible goods traded yield similar outcomes. Most SADC countries actually export more products to the region than the rest of the world. The product composition of exports to the rest of SADC also differs from the product composition of exports to the rest of the world. To the extent that product market integration leads to a greater dispersion or diversification 2