The Impact of Intra-Regional Country to Country-Bilateral Trade Agreements on Trade Flows between Zimbabwe and its SADC Trading Partners

Abstract

As part of an overall package, open and more liberal trade policies are increasingly being regarded as the main route towards economic growth and development in this fast globalising world. A number of initiatives, including the establishment of a various forms of Free Trade Agreements, have been taken by various countries eying improved terms of trade. This study is an assessment of the ex post bilateral trade effect of Zimbabwe’s country to country bilateral trade agreements with its SADC trading partners. The major objective was to find out whether the bilateral trade agreements have been trade creating or trade diverting.Using a country-specific fixed effects panel data estimation of the gravity model of bilateral trade involving a sample of 10 countries (Zimbabwe and its 9 trading partners- Botswana, DRC, Madagascar, Malawi, Mozambique, Namibia, South Africa, Tanzania and Zambia) from 1980 to 2012, the results show that the country to country bilateral trade agreements have been trade creating and expanding. Another important finding of the study is that trading partners’ multiple-membership to regional trade agreements has been constraining bilateral trade. The results therefore indicate that Zimbabwe should negotiate for more bilateral trade agreements especially with closer countries such as Zambia, Lesotho and Swaziland. More importantly, it adds voice on the calling for the coming into effect of the establishment of the COMESA-EAC-SADC FTA.

Keywords: Bilateral Trade Agreement, Panel data Estimation, gravity model of bilateral trade, Fixed Effects Model, SADC.