Twenty years of EAC: Leveraging Tanzania’s manufactured exports through EAC Trade Arrangements

Abstract

The empirical literature on Regional Trade Arrangements (RTAs) posits that regionalism improves intra-bloc trade, economic growth, and people’s welfare, particularly through enhancing exports of manufactured goods. Using panel data from various sources, this study examines the flow of Tanzania’s manufactured exports to a sample of 15 trading partners (including EAC member states) by estimating the gravity model, using a multiplicative form of the Poisson pseudo-maximum likelihood (PPML) estimator. The results show that the RTAs for the EAC lead to a decrease of 271.5% of Tanzania’s manufactured exports, on average, whereas controlling for trade costs suggests that the EAC-RTAs decrease the flow of Tanzania’s manufactured exports by 110%. Thus, for Tanzania to benefit from EAC-RTAs, there is need to strengthen its manufacturing sector. The key policy issue is to improve the export competitiveness of Tanzania’s manufactured goods, through cross-cutting sectoral interventions to support value-addition to agricultural products by initiating large and small-scale industrialization.