Estimates of the trade and welfare effects of the EAC integration,

Abstract

This paper quantifies the trade and welfare consequences of the East African Community (EAC) customs-union-cum-common-
market integration using a multi-country, multi-sector computable general equilibrium (CGE) model calibrated to the latest available
social accounting matrices and WITS-COMTRADE tariff-line data. Simulating the progressive removal of intra-EAC tariffs, the
harmonisation of the Common External Tariff (CET) and the reduction of selected non-tariff barriers since 2005 reveals a 12–18 %
increase in intra-EAC merchandise trade relative to a 2000 baseline, with Kenya and Tanzania experiencing the largest trade-
creation gains. Aggregate real income for the EAC as a whole rises by 0.6–0.9 %, but the distribution is uneven: landlocked
members (Uganda, Rwanda, Burundi) register welfare gains of 1.1–1.4 % of GDP, while Kenya and Tanzania record modest gains of
0.4–0.6 %. Consumers benefit from lower prices and wider variety, whereas import-competing firms in textiles, food processing and
light manufacturing face contraction and job reallocation. Revenue losses from forgone tariffs amount to 1.5–2.2 % of government
receipts, partially offset by higher VAT and excise collections on expanding trade volumes. Extending the analysis to include trade-
facilitation measures and behind-the-border reforms doubles the estimated welfare gains, underscoring the importance of deep
integration. Robustness checks using partial-equilibrium SMART simulations confirm the CGE results and highlight sensitive product
lines where phased liberalisation or safeguards may be warranted. The findings inform ongoing negotiations on EAC monetary and
political union by demonstrating that further integration yields positive but heterogeneous welfare effects that can be mitigated
through targeted compensation and revenue-enhancing tax reforms.

IPRAA WORKING PAPER 25

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