Trade Effects of the East African Community Customs Union: Hype Versus Reality

Abstract

This study uses a theoretically consistent gravity model to assess the average trade effect of the East African Community customs union implemented in 2005. The estimation is carried out using a framework that controls for endogeneity. Country-pair fixed effects are included to control for time constant factors while importer-year and exporter-year fixed effects account for time varying multilateral resistance variables. To check for robustness a Poisson pseudo-maximum likelihood estimation is used. The study covers the period 2000 to 2013 with a total of forty nine trading partners. The results suggest that the EAC customs union has produced a moderate positive effect on intra-EAC trade of about 22.1%.