Deep Integration in Eastern and Southern Africa: What are the Stakes?

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Evidence indicates that trade costs are a much more substantial barrier to trade than tariffs, especially in sub-Saharan Africa. We decompose trade costs into (a) trade facilitation; (b) non-tariff barriers and (c) the costs of business services. We develop a conceptually innovative model and new dataset to assess deep integration to reduce these three types of trade costs in the East African Community, the Common Market of East and Southern Africa and South African Development Community (EAC-COMESA-SADC) ‘Tripartite’ Free Trade Area (FTA), within the EAC alone and unilaterally by the EAC. We find that there are substantial gains for all six of our African regions from deep integration in the Tripartite FTA or comparable unilateral reforms by the EAC; but the estimated gains vary considerably across countries and depend on the reform. Thus, countries would have an interest in negotiating for different reforms in different agreements. Tariff removal in the Tripartite FTA would produce only small losses or gains, depending on the country. Interestingly, we estimate that Kenya gains less from comparable unilateral liberalisation by the EAC than from the Tripartite FTA, due in part to an umbrella of protection in services markets in the Tripartite region.