- Title
- Regional integration, trade duration and economic growth in the East African community: three empirical essays
- Creator
- Ejones, Francis
- Relation
- University of Newcastle Research Higher Degree Thesis
- Resource Type
- thesis
- Date
- 2021
- Description
- Research Doctorate - Doctor of Philosophy (PhD)
- Description
- The objective of this thesis is to investigate empirically the impact of regional trade agreements (RTAs) on trade, the duration of trade and economic growth in the East African Community (EAC) consisting of the republics of Kenya, Uganda, Burundi and Rwanda and the United Republic of Tanzania. Since the birth of the World Trade Organization (WTO) in 1995 and the establishment of the multilateral trading system, both developed and developing countries have initiated policies aimed at promoting North–South and South–South trade. Despite these efforts, the impact of multilateral trade agreements on trade and economic growth has been complex and is not well understood. The changing global marketplace—a consequence of external shocks and trade policy reforms across the developed and developing world—has led to increased regionalisation globally. Lack of scholarship on specific regional integration (RI) entities, such as the EAC, motivates the current research. In addition, as much as trade liberalisation in the EAC is commendable, there is strong evidence that trade reforms perform very poorly (Mishra, 2018; Rodrik, 1992). For instance, the EAC remains a marginal player in the global trade in goods (United Nations Conference on Trade & Development [UNCTAD], 2019). Further, the EAC’s level of intraregional trade is the lowest among all African RTAs, implying that the EAC does not perform as well as it does in the area of trade integration (Economic Commission for Africa [ECA], 2017). Such low levels of intraregional trade are still observed even though tremendous resources and strong political will continue to back progress towards implementation of the bloc (Vickers, 2017). Further, there are still discrepancies in the size and relative strength of the economies of the countries participating in the EAC, creating tensions over the perceived distribution of the benefits of RI (ECA, 2017). This thesis reports three empirical studies. The first examines the impact of RTAs on trade in the EAC. Utilising the traditional gravity model, this study extends the model to account for zero trade, endogeneity and heterogeneity. The model is estimated using the Poison pseudo-maximum likelihood estimator and a comprehensive panel dataset for the EAC for the period 1990–2017. The empirical results indicate, first, that although RTAs enhance trade in the EAC, the impact varies across the Common Market for Eastern and Southern Africa (COMESA), WTO markets and regional blocs. Second, although the RTAs enhance trade at the bloc level, results vary by country. Kenya, Rwanda and Uganda experience pure trade creation in the EAC market, though Uganda’s intra-bloc trade is below expectation. Third, the results indicate that there is asymmetry across products. For example, food trade leads to pure trade creation in the EAC and COMESA markets, but pure trade diversion in the WTO. Fourth, there is variation in the performance of products within countries, though the EAC RTA leads to trade creation for all products across the EAC. These empirical findings are robust to alternative model specifications. The second empirical study examines the impact of RTAs on the duration of trade in the EAC. The study specifies a variant of survival models and estimates the models using a comprehensive dataset for the period 1988–2015. The model is estimated using Kaplan–Meier, Cox proportional hazards and discrete time estimators. The empirical results show, first, that RTAs enhance the duration of exports in the EAC market, and inconsistently drive the duration of exports of the EAC in the COMESA market. However, RTAs do not lengthen the duration of EAC exports in the WTO trading market in aggregate. Second, the impact of RTAs on the duration of exports varies across countries: the EAC bloc leads to the persistence of exports in Tanzania and Uganda, while the COMESA bloc increases the duration of Kenya’s exports. Third, the impact of RTAs is heterogeneous across products. Fourth, the impact of RTAs on the duration of EAC exports is short lived with 50% of exports coming to an end within 2–3 years. Fifth, export hazards are quite high at the beginning of trading relationships but stabilise over time, albeit for only a few trade spells. That is, the key drivers of trade duration are gravity-like covariates, fixed trade cost variables and duration ‘type’ covariates. The third empirical study examines the impact of RTAs on economic growth in the EAC. The study specifies an endogenous growth model and estimates the model using feasible generalised least squares and panel corrected standard error estimators. The empirical results indicate, first, that RTAs and trade openness enhance economic growth in the EAC. Second, RTAs have impacts that are more significant for economic growth in the EAC than for trade openness measures. Third, the impact of trade liberalisation varies across regional markets. For instance, the EAC regional market has a more significant impact on economic growth than do plurilateral (COMESA) and multilateral (the WTO) trade agreements. Fourth, the impacts of RTAs on economic growth vary across countries in the EAC. These empirical results are robust to alternative model specifications. The thesis makes three major contributions that have important policy implications. The first draws from the empirical findings of Study 1, which provides new evidence that RTAs do have a positive effect on trade in the EAC and support third countries’ trade. However, the impacts of RTAs on trade vary across countries and product groupings. The policy implication is that there is a need to strengthen trade liberalisation within the EAC with a special focus on strengthening RTAs. Adopting holistic policies may not be appropriate because of their varying impacts at country and sectoral levels. Policies should be particularly cognisant of each country’s economic conditions. The second contribution draws from the empirical findings of Study 2. Utilising a new and comprehensive dataset, the study provides new empirical evidence that RTAs increase the duration of exports in the EAC. That is, it takes 2–3 years for half of the exports to dissipate in the EAC. The policy implication is that there is a need to explore ways in which RTAs can be used to increase the duration of trade in the EAC. Country and product characteristics in the EAC should be taken into account in plans to expand trade opportunities within particular regional markets, if trade relationships are to be extended. The third contribution draws on the empirical findings of Study 3. The study provides new empirical evidence that although RTAs do have a positive effect on economic growth, this varies across countries in the EAC. Empirical results reveal that investment and human capital are growth enhancing, while expansion of domestic credit by the private sector and ‘import openness’ are growth impeding. The policy implication is that there is a need to factor in trade liberalisation through RTAs in economic growth strategies other than via trade openness measures alone.
- Subject
- regional integration; gravity model; regionalism; duration; Cox Proportional hazard models; discrete survival models; thesis by publication; panel data; East African community; trade survival; the duration of trade; trade duration; economic growth; PCSE; FGLS
- Identifier
- http://hdl.handle.net/1959.13/1421878
- Identifier
- uon:37777
- Rights
- Copyright 2021 Francis Ejones
- Language
- eng
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| Thumbnail | File | Description | Size | Format | |||
|---|---|---|---|---|---|---|---|
| View Details Download | ATTACHMENT01 | Thesis | 2 MB | Adobe Acrobat PDF | View Details Download | ||
| View Details Download | ATTACHMENT02 | Abstract | 310 KB | Adobe Acrobat PDF | View Details Download |