Preferential trade arrangements and the pacification of Eastern Africa
Building on the most recent international trade theory and best practices of regional integration around the world, this study assesses the consequences of existing and prospective trade integration in the East African Community (EAC).
The authors show that:
- The EAC customs union has been very successful in increasing bilateral trade among members, by 213% on average, much more than the Common Market for Eastern and Southern Africa (COMESA), which led to an increase of 80%, or the Southern African Development Community (SADC), which led to an increase of 110%
- The trade gains have translated in welfare improvements and stability. Real GDP is estimated to have risen by 0.45% in the EAC, and the statistical risk for bilateral conflicts between members decreased by 12% in response to the trade increase.
- Efficient implementation of the EAC common market area is estimated to further double the gains in welfare achieved so far.
- An EAC common currency is estimated to have only small trade and welfare effects that may not justify the risks and costs associated with it
- The estimated benefits from integration with COMESA and SADC are relatively small largely because the EAC already overlaps with both regional trade agreements, so the main value in the Tripartite Free Trade Area (TFTA) would lie in paving the way to a continental free trade area (FTA)