Does regionalism increase industrial policy space? An analytical framework applied to the East African textiles and apparel sector

We introduce a multidimensional and multilevel framework for industrial policy space as the set of legally permitted, economically viable and politico-institutionally feasible policy options for industrial development, given constraints at the national, regional and global levels. This is applied to the East African Community (EAC) textiles and apparel (T&A) sector, using data from policy documents and semi-structured interviews. The EAC customs union nominally transfers trade policy sovereignty to the regional level, but we present evidence showing how the duty remission scheme allows governments to provide targeted trade policy rents to domestic T&A firms, maintaining national legal policy space. This comes at a cost, because firms benefiting from national duty remission rents may not sell their goods duty free in other EAC countries, so the expanded economic policy space offered by regional integration is curtailed. In the political-institutional sphere, the EAC allowed a new policy option to emerge at the regional level – import substitution of used clothes – but global-level policy space constraints prevented implementation when US authorities threatened to remove trade preferences underpinning thousands of jobs. Regional integration policies should take into account tensions between different dimensions and levels of industrial policy space to maximise prospects for sustainable development.