Non-tariff barriers may be particularly prohibitive to small traders, and therefore may have the unintended consequence of concentrating market power at the border. This can influence the degree of competition in domestic markets within each country. The result is that border policies may affect businesses, farmers, and consumers throughout the country through not only the direct costs of engaging in cross-border trade, but also indirectly through the competitiveness of the trading and logistics sector.
This study will investigate trade and regional integration within the East African Community (EAC), with a particular focus on agricultural goods traded between Kenya and Uganda. It will explore how non-tariff barriers affect the flow of goods, prices on both sides of the border, and the ability of firms of different sizes to engage in trade.
Research on the welfare costs of trade barriers typically focuses on how they distort the production decisions of firms and the consumption decisions of individuals. This project examines a novel channel: the role of trade barriers in distorting intermediation and arbitrage across locations.
The study will demonstrate how recent changes in trade policy within the EAC have influenced intra-regional flows and market structure both at and away from the border. These changes include the introduction of the common market, one-stop border posts, and the single-window policy. The impact of these reforms on the number and type of traders engaged in cross-border trade will be explored. As well as the impact on domestic market outcomes such as volumes, prices, and mark-ups charged in domestic agricultural markets at varying distances to the border.
The results will provide valuable evidence, particularly to stakeholders like the Kenya Revenue Authority and Uganda Revenue Authority on the effect of changes in border-relevant policies in recent years. It will also provide guidance for future integration and agricultural policies affecting both farmers and consumers.