Trade Effect of Regional Economic Integration: The Case of COMESA

Abstract

One key aspect of development strategies is the dynamic potential of regional cooperation and integration. The wave of regionalism in the 1990s has spurred academic and professional interest towards the economic effects of Regional Trade Agreements (RIA). An RTA is expected to strengthen trade links and hence enhance economic growth. Common Market for Eastern and Southern Africa (COMESA) is one of such RTA’s in Africa which was established 1994 as a regional economic integration for the coordination and promotion of economic cooperation and sustainable development in East and Southern Africa. The challenges of economic development in an underdeveloped and highly unstable environment such as the Sub-Sahara Africa appear to be enormous and so leave one to ponder on the possibility of success or otherwise in realizing such an ideal. The paper analyses the potential trade impact of RTA using the experience of COMESA as a case study. It examines the trade linkages among the member countries of the COMESA and the extent to which the introduction of the COMESA common external tariff will liberalize their trade regimes. To gauge the potential trade impact, descriptive data analysis method as well as econometric method using the standard Gravity Model is used. Bilateral trade flows among the regional groupings found to be explained by standard variables and the empirical result indicated that the COMESA trade agreement dummy variable to be negative. This must result from the fact that, on balance, trade diversion is more powerful than trade creation. The review of the issues indicates, also, that the performance of regional bloc is mainly constrained by problems of variation in initial condition, real political commitment, overlapping membership, policy harmonization, lack of competition policy, and poor private sector participation.