Do regional trade agreements promote international trade? New empirical evidence from the East African Community

Abstract

Using an extended gravity model that corrects for zero trade, endogeneity and heterogeneity, we empirically investigate whether regional trade agreements (RTAs) promote trade. The model was estimated using a comprehensive panel dataset of the East African Community (EAC) from 1990 to 2017 and applying the Poisson Pseudo-Maximum Likelihood estimator. Empirical results show that RTAs have enhanced trade within the EAC regional bloc, but the impact varied across countries and sectors. We find that RTAs have led to an increase in imports from and exports to non-bloc countries, and this impact persists after 12 years. Our empirical findings are robust to alternative model specifications. Exploiting RTAs policy implication, this paper provides new empirical evidence highlighting that promoting RTAs could promote trade in the East African Community.

KEYWORDS:

• Regional integration
• gravity model
• panel data
• East African Community

JEL Classifications:

• F10
• F13
• F14
• F15

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 For practical purposes, we drop the year 1990 from our final analysis since renewed EAC regional endeavours started after 1990.