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

Geoffroy Guepie (1) , Julie Schlick (1)

1 CATT - Centre d'Analyse Théorique et de Traitement des données économiques

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.

Mots clés: Trade integration; Gravity; RTA

Domaines: Economies et finances; Économie et finance quantitative [q-fin]

Geoffroy Guepie, Julie Schlick. Gains and Losses in a Trade Bloc: The Case of the East African Community. 2019. ⟨hal-02625875⟩