The Impact of the Economic Partnership Agreement on East African Community Trade with European Union: A Gravity Model Approach

Abstract

This paper analyzes the impact of the Framework Economic Partnership Agreement (FEPA) on East African Community (EAC) trade with European Union (EU) for the period from 2000 to 2018. The analysis was carried out to estimate the impact of the interim EPA on EAC trade with EU using Gravity model approach. The variables employed in the study included trade flow of goods (exports and imports) between the two trade blocs, mass variables (real GDP growth, and per capita GDP) and dummy variables for capturing FEPA and time. The findings show that generally interim EPA did not benefit EAC economies and suggest potential for trade diversion. Burundi trade was adversely affected by FEPA while Kenya and Tanzania exports were positively impacted. The results may be influenced by weak productive capacities in EAC, global financial crisis which reduced global consumption demand, increased intra-EAC trade and trade with COMESA and SADC as well as low supply of goods for EU market.

Keywords: Gravity model approach, Economic Partnership Agreement, EAC, EU

DOI: 10.7176/JESD/10-10-22

Publication date:May 31^st 2019