Effects of East African community customs union on trade and economic growth in Kenya
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Date
2015
Authors
Boiwo, Silas Tuitoek
Journal Title
Journal ISSN
Volume Title
Publisher
Kenyatta University
Abstract
During the 1990' s the world experienced a new wave of regional integration agreements
(RlAs) that reached unprecedented proportions. The increasing importance of regional
integration agreements and in particular their extraordinary expansions during the
1990's are among the most salient developments of the international trading system and
its believed to be a vehicle for the promotion of trade and economic growth. The main
driver for increasing number of Regional Integrations Agreements on the African subcontinent
is the need to increase regional co-operation by creating a unified economic
bloc and building blocs for stronger integration between member countries that will
eventually lead to the creation of an African Economic Community. The East Africa
Community was resurrected in 1999 which was transformed to a custom union in the
year 2005. One of the objectives of the custom union was aimed at improving trade
between the member states. To facilitate this, transitional arrangements have been put in
place to liberalize inter and intra-regional trade among the partner states. The objectives
of this study were to determine the trade effect of the EAC custom union and to analyze
the effect of intra-EAC trade on economic growth in Kenya. Time series data for the
years 2000 to 2013 was used for analysis. The coefficient of the EAC dummy used to
measure the effect of custom union was found to be statistically significant and positive.
This finding shows that after the formation of the custom union, the volume of trade in
Kenya has increased proportionately by 0.9083 percent. For the effect of the custom
union on Kenya intra-EAC trade, the EAC dummy coefficient was also found to be
positive and statistically significant. This means that after the formation of the custom
union, the GDP of Kenya has proportionately increased by 0.6214 percent. The study
revealed that the formation of the EAC Custom Union has had positive effect on trade
and economic growth in Kenya. The findings also show that after the formation of the
custom union, increase in the volume of trade for Kenya has been realized. Therefore
the formation of the EACĀ· customs union is an important step in the process of
deepening regional integration among the member states.
Description
A research project submitted to the department of applied economics in partial fulfilment of the requirements for the award of the degree of master of economics (international trade and finance) of Kenyatta University