Dynamics of Tea Trade Competitiveness in EAC: Evidence from Tea Exports of Burundi

Abstract

In the recent periods, tea exports in EAC (East African Community) have declined due to internal and external forces of both supply and demand sides. This paper focuses on the degree of EAC’s comparative advantage in this cash crop in the third market. The study is based on proposition of trade theory that the patterns of international trade are determined by comparative advantage. An improved normalized comparative advantage index, NRCA (Normalized Revealed Comparative Advantage) is used on data of tea exports, SITC (Standard International Trade Classification) 3 4-digit, for the period 2000-2012. In order to carry out a dynamic comparative analysis, we use a time trend regression model to detect whether a country has gained or lost its comparative advantage during the period under study. Empirical results reveal that both EAC countries had comparative disadvantages in world tea market, though Kenya is the leading tea exporter in the EAC region and even in the world. Besides, they exhibited a loss of competitiveness in the world market during the period under study but at different level. The study suggests that if the countries of EAC, specifically Burundi, want to strengthen their position in the tea global market, good local and international marketing strategies have to precede the act of exportation.

Keyword: Tea, NRCA, Exports, Burundi and EAC