How Can Tariff Elimination and Trade Facilitation Affect East African Economies?
| Published date | 01 February 2024 |
| DOI | http://doi.org/10.1177/00157325231165643 |
| Author | Pousseni Bakouan,Mahamadou Diarra,Idrissa M. Ouedraogo |
| Date | 01 February 2024 |
How Can Tariff
Elimination and Trade
Facilitation Affect
East African Economies?
Pousseni Bakouan1, Mahamadou Diarra2
and Idrissa M. Ouedraogo3
Abstract
The article assesses the potential economic implications of tariff elimination and
trade facilitation (TF) in the context of the African Continental Free Trade Area
(AfCFTA) agreement for East Africa. Using the most recent GTAP database and
computable general equilibrium model, the article provides additional evidence
on the socio-economic benefits of the ongoing trade integration process. The
results show that the elimination of tariffs would improve economic dynamism
in most sectors of activity and household consumption. However, the elimina-
tion of tariffs alone would not be sufficient to achieve a significant level of trade
integration. From a policy perspective, although a gradual implementation of tar-
iff elimination is more beneficial for the zone, the results highlight the relevance
of combining tariff elimination with complementary TF reforms. These reforms
amplify the socio-economic gain from the AfCFTA.
JEL Codes: F13, F14, F15, E23, C68
Keywords
AfCFTA, trade facilitation, international trade, computable general equilibrium,
East Africa
Article
Foreign Trade Review
59(1) 117–145, 2024
©2023 Indian Institute of
Foreign Trade
Article reuse guidelines:
in.sagepub.com/journals-permissions-india
DOI: 10.1177/00157325231165643
journals.sagepub.com/home/ftr
1 Virtual University of Burkina Faso, Ouagadougou, Burkina Faso
2 University Norbert Zongo, Koudougou, Burkina Faso
3 New Dawn University, Ouagadougou, Burkina Faso
Corresponding author:
Pousseni Bakouan, Virtual University of Burkina Faso, Ouagadougou, Burkina Faso.
E-mail: bakouan7pousseni@gmail.com
118 Foreign Trade Review 59(1)
Introduction
Trade agreements have grown phenomenally over the past three decades. They
have become a remarkable integral part of the global trading system since the
1990s. For example, the number of regional trade agreements (RTAs) notified to
the World Trade Organization (WTO) has increased from 22 in 1990 to over 577
in 2022 (WTO, 2022). Thus, the regional entity is becoming the scale of regula-
tion of the world economy (Hugon, 2002). Regional economic integration is a
process leading to the removal of barriers to trade in goods and services. The
process can go beyond trade to consider the flow of capital and labour (common
market), the establishment of a common institutional environment or the coordi-
nation of policies allowing for the convergence of economies and the anchoring
of economic policies (economic union). To this end, a successful process of eco-
nomic integration is one that amplifies the interdependence of countries in terms
of trade in goods, services, labour, capital, etc.
From a theoretical point of view, the amplification of trade through free trade
agreements is presented as a factor of economic development, although the debate
is far from being settled, particularly in the case of developing countries. The
effects of trade agreements were initially presented, from a neoclassical perspec-
tive, in terms of trade ‘creation’ and ‘detour’ (Viner, 1950). Beyond these essen-
tially static and short-term effects, the literature highlights much more important
dynamic effects. These include the enlargement of market size, the stimulation
of competition and the creation of economies of scale (Siroën, 2004), the attrac-
tion of foreign direct investment (FDI) (Fujita et al., 1999; Krugman, 1992), the
strengthening of growth and economic convergence (Grossman & Helpman,
1990, 1991, 2015; Perera-Tallo, 2003; Rivera-Batiz & Romer, 1991), etc.
However, Stiglitz (2002) and Rodrik (1992, 2016) believe that the positive effects
of free trade and trade integration should be put into perspective.
For these authors, economies that lack a comparative advantage in manufactur-
ing are under competitive pressure from imports of manufactured goods for which
relative international prices are falling. Therefore, trade agreements induce mac-
roeconomic gains/losses depending on the structure of the economies.
Moreover, the effect of reducing tariff barriers in addition to trade facilitation
(TF), which consists of measures to simplify and harmonize international trade
procedures, reduces transaction costs and thus helps amplify the potential effects
of trade agreements (Valensisi et al., 2016).
In the case of Africa’s Regional Economic Communities (RECs), these links
are weak or non-existent. In the area of trade in goods and services, statistics show
the inadequacy of the integration process in this part of the world. Indeed, the
share of intra-African exports in total merchandise exports rose from an average
of 10.74% over the period 1995–2007 to 14.94% between 2007 and 2018. In
2019, this ratio barely exceeds 16%, while it is 53.3% in developing countries in
Asia, 53.7% in the Free Trade Area of the Americas and 62.7% in the European
Union (EU) 28 (UNCTAD, 2022). In the specific case of East Africa, the same
shortcomings are apparent. Indeed, the share of exports between East African
countries, although slightly increasing, remains low: it fell from an average of
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