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Gains and Losses in a Trade Bloc: The Case of the East African Community

Author

Listed:
  • Geoffroy Guepie

    (CATT - Centre d'Analyse Théorique et de Traitement des données économiques - UPPA - Université de Pau et des Pays de l'Adour)

  • Julie Schlick

    (CATT - Centre d'Analyse Théorique et de Traitement des données économiques - UPPA - Université de Pau et des Pays de l'Adour)

Abstract

From birth to death in the 1970s, to rebirth in the 2000s, the East African Community (EAC) had several lives. What were the economic consequences of this regional trade agreement? This paper shows that the former EAC was inefficient in term of trade creation while on the contrary the current one has increased trade by 75%. These results are obtained with a structural gravity equation with importer-year, exporter-year effects and bilateral fixed effects. To assess the global effect of the EAC, including trade diversion and general equilibrium effects, we then use a multi-sector and multi-country model. We find that despite trade creation, the total welfare gains of the EAC is small for most countries. All members endured a depreciation of the terms of trade, trade diversion and a decrease in real wages at the exception of Kenya.

Suggested Citation

  • Geoffroy Guepie & Julie Schlick, 2019. "Gains and Losses in a Trade Bloc: The Case of the East African Community," Working papers of CATT hal-02625875, HAL.
    • Handle: RePEc:hal:wpcatt:hal-02625875
    Note: View the original document on HAL open archive server: https://hal-univ-pau.archives-ouvertes.fr/hal-02625875
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    References listed on IDEAS

    as
    1. Fabien Candau & Geoffroy Guepie & Julie Schlick, 2019. "Moving to autarky, trade creation and home market effect: an exhaustive analysis of regional trade agreements in Africa," Applied Economics, Taylor & Francis Journals, vol. 51(30), pages 3293-3309, June.
    2. Jaime DE MELO & Yvonne TSIKATA, 2014. "Regional integration in Africa: Challenges and prospects," Working Papers P93, FERDI.
    3. Bernard Hoekman & Dominique Njinkeu, 2017. "Integrating Africa: Some Trade Policy Research Priorities and Challenges†," Journal of African Economies, Centre for the Study of African Economies, vol. 26(suppl_2), pages 12-39.
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    Full references (including those not matched with items on IDEAS)

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    Keywords

    Trade integration; Gravity; RTA;
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