International Journal of Modern Research in Engineering & Management (IJMREM)

||Volume|| 1||Issue|| 11 ||Pages|| 27-34 || December 2018|| ISSN: 2581-4540


Predicting Trade Conflict Outcomes using a Third-Party
Intervention Model
1,
Rejoice Nyatsanza, 2,Haiyan Xu
1,2,3,
Department of Management Science and Engineering, Nanjing University of Aeronautics and Astronautics

---------------------------------------------------ABSTRACT-----------------------------------------------------
As anti-import sentiment and protectionism have been increasing, more papers have focused on using theories
to explain or resolve them. However, most research has focused on disputes involving larger nations such that
there is not much relatable information for disputes such as the one between South Africa and Zimbabwe. The
aim of this paper was to bridge the knowledge gap by using the graph model for conflict resolution and the
decision support software GMCRII to simulate possible responses to this regional trade conflict. This third-
party intervention model will assist in investigating and prescribing a diplomatic solution with fair compromise
to resolve the unequal trade problem between Zimbabwe and South Africa without harming the economies of
both the countries. This research found that a peaceful resolution of the disagreement could be found by the
addition of a third-party to help in the conflict resolution thereby ending the prolonged trade conflict. This
undertaking will serve as a template for modelling and predicting an outcome in the event of third-party
intervention for future trade disputes involving regional trade partners with emerging or developing economies
such as those that exist in Africa.

KEYWORDS: non-tariff measures, regional trade, third-party intervention model, GMCRII.

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Date of Submission: Date, 02 December 2018 Date of Accepted: 06 December 2018
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I. INTRODUCTION
Trade deficits and the negative impact of non-tariff measures to trade have historically fascinated economists and
scholars alike. Both have positive and negative impacts on the national gross domestic product and if mishandled
have the impact of ruining economies and affecting the livelihoods of the societies within them. Over the last
decade, institutions such as the World Trade Organization (WTO) and the Southern African Development
Community (SADC) have been called upon to resolve disputes between international and African nations. This
paper will look at a trade war in which retaliatory trading decisions are negatively affecting the wellbeing of each
nation’s citizens.

The Trade Conflict Between Zimbabwe And South Africa: South Africa and Zimbabwe are currently in a
conflict over the non-tariff measures that were introduced by Zimbabwe over the period 2012 - 2017. Zimbabwe
introduced these measures to mitigate the effects of trading arrangements that are heavily in favor of South
Africa and contribute to Zimbabwe’s unsustainable net importer status. Both nations are part of the same
regional economic community and rely on export revenue from similar goods and products. This has led to great
competition for markets, especially since South Africa originally targeted non-African countries but now trades
extensively with SACU and SADC and other non-REC members. With prolonged economic difficulties,
Zimbabwe now imports an average of 60% of its total imports from South Africa resulting in the nation’s
hypersensitivity to any changes in trade between the two states.

In 2012, facing continued economic collapse and increased lack of competitiveness due to the recession and
hyperinflation that lasted from 2002-2008, the Zimbabwean government decided to suspend its obligations to
SADC and any other regional trade agreements. The aim was to boost government revenue by curbing any
further outflow of foreign currency and at the same time bringing in more forex revenue through import duties
and tariffs. This suspension meant that Zimbabwe would not operate under the purview of the SADC agreements
and could officially place tariffs less than 15% on imports from SADC members [1]. Officially, such a move was
allowable upon request for a two-year derogation, a process through which any SADC member state may delay
full liberalization of trade within their borders. This delay was supposed to begin in 2012 and end in 2014.

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However, Zimbabwe did not honor the derogation terms with regards to imports from South Africa. Tariffs
ranging up to as much as 15% were only placed on goods from South Africa while imports from other countries
within the region were imported duty free. Moreover, Zimbabwe maintained the tariff schedules against South
Africa longer than the permissible period and introduced new tariffs the same year. In 2012 alone 46 goods were
added to the tariff schedule in the new Statutory Implement 112 (S.I. 112) [2]. Also, the new tariffs included a
25% surcharge on imported goods such as second-hand cars, footwear and eggs among others. Further measures
were taken against South African goods such as enforcing permits for importing goods such as soap and body
care creams. Furthermore, there was the introduction of a permit system for importing basics such as milk, sugar,
poultry and meat of swine. These were added as Statutory Implement 6 (S.I. 6) and Statutory Implement 126
(S.I. 126) of 2014 and 2015 [3] respectively.

The conflict worsened the following year. As South Africa had maintained its silence during 2012 up to 2015,
Zimbabwe decided to act further against South African imports. In 2016, 43 South African product categories
were banned from being imported into Zimbabwe. This was done under Statutory Instrument 64 of 2016 (SI64).
This move blatantly disregarded all trade arrangements with South Africa and was in direct violation of the
protocols set by SADC and COMESA, the two leading Regional Economic Communities (RECs) in Africa.
Zimbabwe, which had been experiencing deflation from the years 2014-2016 with the inflation rate as low as -
1.69% in May 2016 (according to the Reserve Bank of Zimbabwe, 2016), claimed it was merely trying to curb
dependence on imports and allow its manufacturing sectors the opportunity to compete fairly in the market.

From the beginning of the conflict, South Africa had chosen to practice “quiet diplomacy” in its dispute with
Zimbabwe. This approach involves trying to influence the behavior of others through secret negotiations or by
refraining from taking a specific action [4]. South Africa, which had been enjoying a stable economy post-1994,
was also beginning to experience low growth in GDP and now had an immediate need to increase exports so as
to increase government revenue. The effects of these trade restrictions and their own stagnated economy required
a response. So while they did not want to confront Zimbabwe, South Africa found it could no longer maintain
the status quo. South Africa had hopes that by merely complaining without taking a more drastic measure, it
could mobilize diplomacy and economic instruments to bring about a resolution [5]. However, this method was
not working and at this point South Africa officially requested to meet with Zimbabwe to discuss a way forward.

The state of affairs was having other undesirable effects. For instance, the livelihoods of informal traders from
both countries had been affected. South African businesses that thrived on Zimbabwean demand experienced
great losses and were demanding compensation for the increased cost of trade. In addition, spill-over effects
such as increased economic immigrants from Zimbabwe increased. Moreover, local South Africans who had
always been complaining about facing excessive competition for jobs from Zimbabweans and other immigrants
resorted to violence in order to elicit a response from their government, risking international outrage against
South Africa’s lack of action. All these made it difficult to practice silent diplomacy. So South Africa requested
that Zimbabwe remove SI64 and give them compensation for the business lost during the implementation of the
non-tariff measures. Economists and other observers expressed their concern that the next move by South Africa
may not be as diplomatic and that retaliation for unfair practices might follow.

As noted above, this dispute can have costly consequences for Zimbabwe if South Africa chooses to act and
retaliate on the events that began in 2012. According to regional trade law and SADC protocols, South Africa is
entitled to compensation for the disruption caused to its companies through S.I. 64. Furthermore, South Africa
has a number of ways in which it can easily retaliate against Zimbabwe. It can stop selling electricity to
Zimbabwe or even stop issuing work permits to Zimbabweans in South Africa among other things. Also, South
Africa can take the case up to member states of SADC and WTO and request that economic sanctions be placed
against Zimbabwe.

On its part, Zimbabwe can refuse to bow down to South Africa. It can demand that South Africa first address and
rectify the unfair measures it has taken against Zimbabwean imports since 1996 as it feels these have led to
Zimbabwe’s dependence on South African goods. As Zimbabwe feels justified in their trade restrictions they can
also take the case up to third parties such as SADC or the WTO to support their move against South African
goods.

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II. METHODOLOGY
In this section we will look at the options and actions available to each decision maker. Next, we will examine
the preferences of each party and then conduct a stability analysis to predict potential solutions for the conflict.
The analysis will be carried out using the decision support software GMCRII [7].

Modelling the conflict between Zimbabwe and South Africa: The conflict commences with two decision
makers, namely South Africa (DM1) and Zimbabwe (DM2). These are the key decision makers and they
represent the wishes of the government and the business sectors of each country. Each of the decision makers has
to select an action to take and these actions are known as “options”.

Table 1 Decision Makers (DMs) and descriptions of their Options

DM Option Explanation
South Africa 1. Retaliate Retaliate by introducing NTMs as well as blocking exports and
(SA) services to Zimbabwe
Zimbabwe 2. Delay Delay and negotiate for temporary protection of sunrise and sunset
(ZIM) industries. Also continue to retool and reindustrialize
3. Accept Accept complaint, remove SI64 NTMs and compensate affected
SA businesses

As shown in Table 1, South Africa has one option while Zimbabwe has two. South Africa’s option is to retaliate
by introducing its own barriers to trade and services against Zimbabwe. This forceful option is due to the fact
that they already requested for the removal of the Statutory Implement 64 (SI64) NTMs as well as compensation.
As Zimbabwe has not yet responded, retaliation is the only option available to South Africa. Zimbabwe’s options
include delaying and maintaining the NTMs while retooling and reindustrializing. The second option involves
accepting South Africa’s request to remove the SI64 measures.

States and movement: Once options have been determined we take a look at the possible states associated with
the options. The states reveal all the possible movements from one option to the next as the DMs move through
their conflict. The states are combinations of Yes (Y) and No (N) and only realistic states, known as feasible
states, are to be considered. That is, only one option may be chosen by each party, to the exclusion of any other
move, thereby establishing the feasibility or infeasibility of each state. To illustrate, using Table 2, s4 is a feasible
state as it is possible for South Africa to retaliate against Zimbabwe. It is also possible that Zimbabwe will
respond by delaying to give a response. On the other hand, s2 is infeasible as it is illogical for Zimbabwe to do
nothing if South Africa retaliates. At this stage of the conflict, the two decision makers and their collective three
options produce 23 = 8 feasible states as shown in Table 2.

Table 2 Feasible States for Decision Makers (DMs)

DM Option
SA 1. Retaliate N Y N Y N Y N Y
ZIM 2. Delay N N Y Y N N Y Y
3. Accept N N N N Y Y Y Y
STATE s1 s2 s3 s4 s5 s6 s7 s8

Preferences: As in any situation, each party has their own ideas of desired outcomes. These outcomes are
known as preferences and conflict arises when the two decision makers want different outcomes. In this case the
preferences for the two countries were inferred based on the public actions that have been taken since the
conflict began right up to the point where it escalated in 2016. The preferences and their conditions are shown in
Table 3.

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Table 3 Decision Makers (DMs) Preferences without Third Party

DM Statement Explanation
South Africa 3 Zimbabwe removes SI64 NTMs
-2 Zimbabwe stops delaying and either agrees or declines to remove SI64
-1 Does not want to retaliate
Zimbabwe 3 IFF 1 Accept removal request if and only if SA retaliates
2 Delay deciding thereby buying time to protect local industries from
competition
-1 Does not want retaliation

South Africa’s Preference: South Africa’s ultimate preference is that Zimbabwe not delay. The next preference
is that Zimbabwe agrees to remove the SI64 measures or else South Africa will choose to retaliate. Retaliate is
the least preferred option as it has far reaching economic and social consequences. Retaliation will not only
affect the operations of the South African businesses located in Zimbabwe but will also negatively impact those
whose main market is in Zimbabwe. Moreover, retaliation would have the undesired effect of increasing
spillover effects. The most immediate spillover effect would be an increase in the number of Zimbabwean
immigrants settling in South Africa. Apart from this, retaliation is not in line with the principles of regional trade
and would cause South Africa to be in breach of SADC rules. It is, therefore, South Africa’s wish that retaliation
be a course of last resort to be chosen only when Zimbabwe has refused to accept the request to remove the
statutory implements and has continued to add to the current ones.

Zimbabwe’s Preference: For Zimbabwe, the most preferred state is s3 as it lets them maintain the NTMs and
protect sunrise and sunset industries so as to achieve economic independence from South Africa. Zimbabwe also
prefers that South Africa not retaliate as this would block access to inputs such as machinery and replacement
parts from South Africa. Zimbabwe needs these in order to increase the capacity of the local industries they are
trying to protect with the SI64 NTMs. The least preferred option is that South Africa retaliates and causes
Zimbabwe to accept the request to remove the non-tariff measures and provide compensation. By regional trade
law, South Africa is justified in demanding the removal of the non-tariff barriers as Zimbabwe failed to notify
South Africa beforehand. This failure to follow protocol inconvenienced and disrupted South African
businesses’ processes and may require compensation.

For this reason, any move by South Africa to retaliate may cause Zimbabwe to remove the barriers to trade. The
only way to maintain the barriers would be to investigate and show how South African imports harm the local
industry. However, Zimbabwe claims it does not have the technical capability to conduct such an investigation.
Moreover, it is difficult to prove causality as other economic circumstances, e.g. sanctions and increased
availability of cheap Chinese imports, have contributed to Zimbabwe’s lack of manufacturing competitiveness.
Ultimately, delaying and buying time so as to protect fledgling industries is a temporary solution and cannot
solve the problem.
The preferences can be listed in a descending order as follows:
South Africa’s preference: s5 s6 s7 s8 s1 s2 s3 s4
Zimbabwe’s preference: s3 s8 s1 s6 s7 s4 s5 s2

Analysis of Conflict without Third Party using GMCRII : In order to determine the outcome of the conflict,
the options and preference statements are combined and put through the GMCRII computer software. The
decision support system takes the information and establishes the equilibria of the various states. Table 4 shows
the calculated outcome of this conflict.
Table 4 Equilibrium results without third party

Solution Concepts s1 s2 s3 s4 s5 s6 s7 s8
Nash 
GMR     
SMR  
SEQ   

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In stability analysis the best obtainable stability definition is Nash as it shows a stable relationship with GMR,
SMR and SEQ. In this conflict, the only state that meets the requirements is s3. In s3 South Africa does not
retaliate and Zimbabwe delays in deciding and engages in negotiation. However, negotiation does not resolve the
matter as Zimbabwe refuses to acknowledge its violations of regional treaty. This leads to an escalation of the
conflict and creates the need for third party intervention.

Modelling the Conflict with a Third Party: A third party is any entity that inserts themselves in a conflict so
as to defuse or resolve a dispute. In Africa, trade dispute resolution is carried out using the codes set out by the
Common Market for Eastern and Southern Africa (COMESA), Southern African Development Community
(SADC) and East African Community (EAC). Both SADC and EAC set rules for free movement of labor,
capital, goods and services within the two respective regions while COMESA aligns the interests of both the
regions in such a way that promotes and enforces free trade. The COMESA-EAC-SADC Tripartite is regional
and deals with cases affecting eastern and southern Africa. It has certain policies that mirror those set by WTO
which has more resources and the most complete form of governance and enforcement. However, WTO
proceedings take far too long, is too expensive and as it was designed for European systems, it fails to meet the
needs of smaller African cases. In any case, African nations have a cultural tendency to negotiate things among
themselves and not in international platforms such as WTO.

As we have seen, Zimbabwe and South Africa have failed to resolve their conflict diplomatically. Instead, a third
party must be introduced so as to help come up with a solution that both sides can accept as fair and will allow
both parties to enjoy the benefits of bilateral trade with each other. This conflict has two options for a third party.
South Africa may formally lodge a complaint with the regional trade bloc known as Southern African
Development Community (SADC). Another option is to lodge a dispute claim with the World Trade
Organization (WTO). We will use SADC in this model.

Decision Makers (DMs): The involvement of SADC means the conflict now has three decision makers. They
are: South Africa (DM1), Zimbabwe (DM2) and Southern African Development Community (SADC) (DM3).

Options : South Africa may retaliate and start blocking Zimbabwean exports as well as make it difficult for
Zimbabwe to obtain essential services such as electricity. Retaliation is however in violation of bilateral and
regional agreements so South Africa will choose this option cautiously. However due to the long time it has
taken to engage Zimbabwe it is likely that South Africa will retaliate if nothing is done soon.

Zimbabwe may delay and maintain the current trade protections. Or they may decide to accept South Africa’s
complaint, remove the NTMs as well as give South Africa compensation.

SADC’s option is to enforce or not enforce the trade protocol for the region. The new options and their brief
explanations are shown in Table 5.

Table 5 Decision makers (DMs) and their options

DM Option Explanation
SA 1. Retaliate Retaliate by introducing NTMs as well as blocking exports and
services to Zimbabwe
ZIM 2. Delay Delay and negotiate for temporary protection of sunrise and sunset
industries. Also continue to retool and reindustrialize
3. Accept Accept complaint, remove SI64 NTMs and compensate affected
SA businesses
SADC 4. Enforce Enforce the regional trade protocol

The updated preferences in descending order are as follows:

South Africa’s preference: s6 s14 s13 s5 s8 s16 s15 s7 s2 s10 s9 s1 s4 s12 s11 s3
Zimbabwe’s preference: s3 s8 s1 s6 s14 s9 s16 s11 s4 s7 s2 s5 s13 s10 s15 s12
SADC’s preference: s13 s5 s15 s7 s14 s16 s6 s8 s9 s1 s11 s3 s10 s12 s2 s4

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Table 6 Preference statements with third-party

DM Statement Explanation
SA 3 Wants Zimbabwe to remove SI64 NTMs
-2 Wants Zimbabwe to stop delaying and either agree or decline to
remove SI64
1 Wants to force a response through retaliation
ZIM 4 IFF -1 Will not retaliate if and only if SADC agrees to intervene and
enforce trade protocol
2 IFF -4 Keeps delaying if and only if SADC does not enforce the trade
rules
-4 Does not want SADC to enforce trade protocol
3 IFF 1 & 4 Will accept removal request if and only if South Africa retaliates or
SADC enforces trade protocol
2 Delay deciding thereby buying time to protect local industries from
competition
-1 Does not want retaliation
SADC 3 Wants Zimbabwe to remove trade barriers and give South Africa
compensation
-1 Does not want South Africa to retaliate
3 IFF -1 Wants Zimbabwe to remove SI64 without the threat of retaliation
4 IF 1 Will enforce trade rules if South Africa retaliates
-2 Does not want Zimbabwe to delay
4 Wants to enforce and uphold the trade protocol

The preference statements in Table 6 shows that as a third-party SADC aims to promote good trade between the
two countries. The preference statement 3IFF-1 means that SADC wants Zimbabwe to remove non-tariff
measures without being subjected to retaliation. Similarly, the statement -1 shows that SADC does not encourage
South Africa to retaliate.

Table 7 Feasible States for Decision Makers (DMs) with Third Party
DM Option
SA 1. Retaliate N Y N Y N Y N Y N Y N Y N Y N Y

ZIM 2. Delay N N Y Y N N Y Y N N Y Y N N Y Y

3. Accept N N N N Y Y Y Y N N N N Y Y Y Y

SADC 4. Enforce N N N N N N N N Y Y Y Y Y Y Y Y

STAT s1 s2 s3 s4 s5 s6 s7 s8 S9 S10 S11 S12 S13 S14 S15 S16

E

There are now 24 = 16 possible states with the inclusion of the third party. These are represented in Table 7. The
new equilibria for the conflict are revealed in Table 8.

Table 8 Equilibrium results with SADC as third party

s1 s2 s3 s4 s5 s6 s7 s8 s9 s10 s11 s12 s13 s14 s15 s16
Nash 
GMR         
SMR     
SEQ  

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 Predicting Trade Conflict Outcomes using Third-Party…

The new equilibrium with the third-party intervention is s14. State 14 is one in which all stabilities (Nash, GMR,
SMR and SEQ) are satisfied. While it leads to the removal of the SI64 measures, it is not a satisfactory solution
as it forces Zimbabwe to accept the costs of compensating South Africa. As Zimbabwe is a fragile state with an
unstable economy this will cause trouble in future trade negotiations especially as Zimbabwe has a strong
influence in SADC. Moreover, Zimbabwe is likely to default on compensation payments, instead opting to apply
for derogation on the basis of a bad economy that needs bolstering. This will have the effect of either undoing
the efforts of the third party or delaying the results of the resolution indefinitely while Zimbabwe follows its
national industrialisation agenda.

South Africa itself may not be happy with this resolution as retaliation will do further harm to Zimbabwe’s
economy and consequently to South Africa through spill-over effects. The need to pay compensation will strain
Zimbabwe’s economy and lead to further shrinkage of the economy and ultimately lead to less purchasing power
for South Africa’s goods and services. Moreover, it will increase the number of economic refugees in South
Africa as more Zimbabweans search for jobs.

III. CONCLUSION
By using the graph model for conflict resolution and the third-party intervention model we have seen a possible
solution for the conflict over SI64 non-tariff measures. However, the resolution is based South Africa’s
willingness to be patient with their neighbor despite the fact that the barriers to trade are not in line with the
goals of both SADC and WTO which both countries are members. Moreover, the resolution is not a permanent
one as Zimbabwe still has other challenges that will affect their ability and willingness to remove or reduce non-
tariff measures. For instance, the inability to respond to extreme weather patterns from El Nino weather patterns
and slow growth in manufacturing sectors coupled with inconsistent national policies suggest that there will be
more problems within the region in the future. It is clear that inefficient practices and policies lead to leakages
which make economies worse off. Secondly, greater efforts should be made in aligning policies geared towards
supporting manufacturing sectors. For instance, a clear strategy with medium term objectives and long-term
goals for capacity-building will help align government and private sector efforts towards increasing exports and
reducing the total imports required to ensure a steady supply of goods for the nation. Such choices can be
informed by analyzing the goods that Zimbabwe has comparative and absolute advantage in and focusing on
those that will provide competitive markets producers can sustainably participate in. Similarly, further
industrialization efforts would be more successful if there was more capacity building prior to the removal of
imports or another drive towards local made products.

ACKNOWLEDGEMENTS
The authors appreciate the financial support from the National Natural Science Foundation of China
(71471087).
REFERENCES
[1] T. Iwanow, "Impact of Derogations from Implementation of the SADC FTA Obligations on Intra-
SADC Trade," SA Trade Hub, 2011.
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Import License) (No. 2) (Amendment) Notice, 2014 (No.3)," 2015. [Online]. Available:
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instruments&Itemid=1&limitstart=150.
[3] K. Dlamini, "“Is Quiet Diplomacy an Effective Conflict Resolution Strategy?,”," SA Yearbook of
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Zimbabwe Policy," Africa Spectrum, vol. 39, no. 2, pp. 249-276, 2004.
[5] ZIMRA, "Statutory Instruments," 2012. [Online]. Available:
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[6] T. Iwanow, "Impact of Derogations from Implementation of the SADC FTA Obligations on Intra-
SADC Trade," USAID/Southern Africa, 2011.
[7] K. W. Hipel and M. D. Kilgour, "The Graph Model for Conflict Resolution: Past, Present, and Future,"
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BIOGRAPHIES
Rejoice Nyatsanza is a graduate student currently working on her master’s degree at NUAA. Her research
interest is decision analysis and she is using this knowledge to improve her decision making as well as in
analyzing world trends and everyday economic decisions.

Professor Xu Haiyan has many years’ experiences mentoring and teaching postgraduates in the complexities of
decision and conflict analysis; risk decision-making; environmental control; financial mathematics; portfolio
optimization, as well as financial investment. Her contributions to the field of management science and
engineering are well-documented by the quality of work she has published while working at the Nanjing
University of Aeronautics and Astronautics and during time at the University of Waterloo.

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