REGIONAL integration is South Africa's urgent next challenge. Now that South Africa is free, largely peaceful, and making strides, however tentative, toward greater prosperity for all its peoples, a critical issue for President Nelson Mandela and his government is how best to uplift the southern African neighborhood. South Africa's gross domestic product is four times larger than the combined GDPs of the 10 other countries of southern Africa and more than 100 times larger than the GDP of Zimbabwe, its comparatively wealthy neighbor to the near north. For the last two decades of apartheid, from about 1974 to 1994, most of the newly independent states of the region formed political and economic alliances against South Africa. The Front Line States and the Southern African Development Coordinating Council attempted to reduce their economic dependence on white-run South Africa. But South Africa's economic domination of southern Africa - founded on the imperialistic overtures, railway extensions, and commercial forays of the late 19th and early 20th centuries - continued despite the physical and economic war against apartheid. Today, that economic domination can be employed for the benefit of both South Africa and southern Africa, but only if wise, statesmanlike leadership prevails. South Africa remains protectionist. Its economy, after decades of defending itself against world sanctions, is largely closed. Its trade barriers keep out goods from its neighbors, particularly textiles and electrical manufactures from Zimbabwe. Its exchange control mechanisms prevent easy investment by South African firms in the region. South Africa's trade policies invite retaliation. At a recent trade and investment conference in Zimbabwe, speaker after speaker threatened to raise local tariffs in response. Southern Africa cannot afford a trade war. Even South Africa, desperately attempting to raise the incomes of its own inhabitants, hardly wishes to contemplate a region with falling incomes and falling economic expectations. Already, paralleling the experiences along the southern borders of the United States, southern Africans from as far away as Zaire are scrambling to enter South Africa illegally Shifting South Africa from thinking of itself as an economy under siege to one capable of prospering from free trade and open markets will take internal rethinking, as well as encouragement from the World Bank, the International Monetary Fund, and the United States. Mr. Mandela and his government have demonstrated their ability to react with maturity to internal and global events. Now they need to think constructively about how to help themselves by helping the region. Already, South Africa provides the nucleus of a southern African common market - a proto-NAFTA. The Southern African Customs Union has existed since 1910. Because South Africa controls most of the ports and import and export trade, Namibia, Botswana, Lesotho, and Swaziland have been content since their respective dates of independence to receive a slice of the annual South African customs and excise pie. Even Botswana, next to South Africa the wealthiest regional country per capita, hardly wants to start up its own customs service. It has a separate currency, unlike the other members of the customs union, but after years of benefiting from open borders, becoming more protectionist is not a favored option. Now the test will be how best to follow the century-old rails and the commercial instincts of South African supermarket and mining conglomerates into the wider neighborhood. If Mandela and his government can be persuaded by the logic of free trade that what is good for the region is good for South Africa, then a southern African extension of the existing customs union will be a plausible goal. It will certainly be a goal worth arguing and working toward. The weaker and poorer countries of the region - as far away as Zaire and Angola - need trade and investment more than aid. They need markets for their exports. They also need to be reassured that the benefits of South African corporate investment in their own countries will be beneficial locally, and not purely exploitative. Everyone has to be persuaded that what is good for Europe and North America, and what has been positive for South Africa's customs union, will be good for southern Africa, possibly as a harbinger of greater economic cooperation for Africa as a whole. The alternative is rising levels of poverty, probably for all.