Two decades of trade liberalization and market expansion in Eastern Africa : towards a new economic geography?

Abstract

Trade liberalisation over the last two decades in Eastern Africa has been pronounced, and has resulted in significant increases in exports and imports both through inter-regional trade and intra-regional trade. Measures of diversification show that trade liberalisation has resulted in a more diversified export structure, however the regions comparative advantage has not changed significantly. There is still scope for pursuing further trade liberalisation especially regional integration as a way to diversify export markets. Ambitious regional trade liberalisation programs, such as the Tripartite Agreement between COMESA/EAC/SADC, undoubtedly have the potential to change the economic geography of the region and inducing greater structural change. A GTAP computable general equilibrium model was used to evaluate the possible trade and welfare effects of the proposed Tripartite Agreement. Simulation results showed increased net welfare gains and higher levels of aggregate industrial production and realignment of production between countries in the region. The Tripartite would result in increased aggregate regional demand which in turn would lead to higher industrial production in the region.