Do you recall the butterfly approach to trade? Do not judge yourself harshly if you don’t; even the most widely used search engine does not recall. But it does recall the ‘the butterfly effect’, which, in chaos theory, is a situation whereby a butterfly flapping its wings in one part of the world can cause devastating consequences in another part. It has become a present-day metaphor for how a small and insignificant event can cause a major change in circumstances.

Not finding any reference to the butterfly approach on the Internet, I started questioning my memory. But, alas, my memory is sound. I recall, shortly after 1994, attending presentations on ‘The Butterfly Approach to Trade’. To comprehend this approach, one has to visualise the world in one dimension, with Africa at the centre, the Americas to the left, and Asia and Australasia to the right.

I vividly recall the way in which it was explained. Africa, as the centre, constituted the body of the butterfly and signified the immediate need to seek close economic integration of the continent by expanding the existing ‘core’, the Southern African Customs Union (Sacu).

The Americas constituted one wing of the butterfly, where closer economic relationships between the North American countries, grouped under the North American Free Trade Agreement banner, and the South American countries in Mercosur should be sought.

Asian countries were then known as the Asian Tigers.

If one was paying attention during those presentations, one would notice that there was one part of the butterfly that was missing. I recall it as if it happened yesterday. My boss at the time, a great but unsung economist, questioned the lack of reference to Europe. In between the gasps and stunned silence, he proposed that the link be through the butterfly’s tentacles.

One could contend that this was not so much an approach, as it merely covered all probabilities. It equated to going to the casino and placing chips on the Roulette table to cover all possible outcomes.

I am intrigued that trade agreements are still perceived to be a catalyst for economic growth in South Africa. In the National Treasury’s ‘Economic Transformation, Inclusive Growth, and Competitiveness: Towards an Economic Strategy for South Africa’ document, to which I referred last week, the phrase ‘trade agreement(s)’ features ten times and ‘bilateral trade agreements’ twice; ‘multilateral trade agreements’ does not feature at all.

What should one read into the aforementioned? That the World Trade Organisation and trade agreements with more than one country are not part of South Africa’s approach?

I am cognisant of the fact that I have almost reached my word limit, so let me cut to the chase. The National Treasury states in its document: “Negotiating new trade agreements is complicated by two factors: South Africa is part of a customs union, which requires certain trade-offs that need to be considered alongside other members of Sacu, and getting new trade agreements through the National Economic Development and Labour Council introduces an additional hurdle that is often insurmountable.” Synonyms for ‘insurmountable’ include ‘hopeless’ and ‘impossible’.

What is a glaring omission is that trade agreements are more than just agreements to liberalise the customs duty on physical goods; nowadays, agreements also include services. Goods and services are no longer mutually exclusive. So, to think of a trade agreement in terms of goods only is simply not realistic.

However, the National Treasury is correct in pointing out that “South African trade policy is currently administered by the International Trade Administration Commission (Itac), which considers trade measures on a case-by-case basis through applications. “This means that trade policy evolves on a piecemeal basis through applications to Itac, which lends the process to an inherent bias towards larger, more organised firms.” But what it neglects to mention is that Itac determines and recommends tariff and trade policy to Sacu.

Could the effects of the flutter of a distant butterfly’s wings soon be felt on these shores?