The "New" East African community : effects on trade, welfare and productive activities in East Africa
This research seeks to examine the effects of the establishment of regional trade agreements (RTAs) among developing nations on trade, welfare and production activities. The focus here is on the “new” East African Community (EAC) formed between Kenya, Uganda and Tanzania and established in 1999. The formation of the “new” EAC raises the important question of whether this regionally based trading agreement is of economic merit to its members. This study begins by reviewing trends in regional trade flows and the extent to which regional integration has affected trade patterns and productive activities. Using a gravity model augmented with several sets of dummy variables, I estimate the effect of the EAC-RTA on trade and welfare on members and non-members. The results show that intra-bloc trade is on average 18 times higher than what would be expected in the absence of the agreement. However, this trend does not seem to be influenced by the official lowering of trade barriers with the formation of the EAC. Model results also show a decline in bloc exports to the rest of the world suggesting that the bloc has trade diverting tendencies. Since static gains from the EAC-RTA are quite low, possibly dynamic gains from regional integration lend more support to the economic merit of the EAC.
DegreeMaster of Arts (M.A.)
SupervisorBruneau, Joel F.
CommitteeEchevarria, Cristina; Dyaglo, Natalya; Kerr, William A.
Copyright DateJanuary 2006
East African Community