Inter-and intra- industry trade in the East African community:a case of Tanzania

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University of Dar es Salaam
Using Tanzania as a case study, this study focuses on inter- and antra-industry trade in the East Africa Community (EAC). It examines trade performance between Tanzania and its partner states in the EAC in terms of inter-and infra-industry trade. In so doing, Grubel-Lloyd and trade openness indices are calculated on one hand and a gravity model is estimated on the other hand to establish what have the effects of EAC Customs Union and Common Market provisions been on inter-and intra-industry trade for the case of Tanzania. The overall results show that Tanzania is not performing well in terms of intra-industry trade with other partner states in EAC. The trade between Tanzania and EAC partner states is more inter-industry than intra-industry. Calculations reveal that the value of the Grubel-Lloyd Index (GLI) is less than 0.5, which is an indication that trade between Tanzania and its partner states is based on the exchange of products that belong to dissimilar (different) industries. Existence of inter-industry trade implies that Tanzania fails to realize gains from specialization in differentiated products with its partner states simply because productive factors do not move from one industry to another, but only within industries. Estimation of the gravity model reveal that GDP of exporter, GDP per capita of importer and importer's corruption are the major driving factors of trade performance between Tanzania and its EAC partner states. Specifically, it indicates that GDP of exporter and GDP per capita of importer positively influence trade while importer's corruption affects trade negatively. Distance variable showed negative relationship with trade as expected but turned out to be statistically insignificant. This may he attributed to the initiatives of the EAC Heads of States in 2012 of endorsing key infrastructure projects for enhancing regional connectivity. However, more trade openness and further deepening of the EAC economic integration are indispensable in trying to achieve the ultimate goal of the Fast African States' political federation, which may pave the way for beneficial trade especially in terms of intra-industry among all members of the bloc.
Available in print form, East Africana Collection, Dr. Wilbert Chagula Library (THS EAF HF3892.S92)
Economic integration, Commerce,, Africa, East, Tanzania
Stephano, Joel (2016) Inter-and intra- industry trade in the East African community:a case of Tanzania.Masters dissertation,University of Dar es Salaam, Dar es Salaam