Trade Effects of Regional Economic Integration in Africa using Disaggregated Data: The Case of Southern Africa Development Community (SADC)
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Date
2009-05
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A.A.U
Abstract
Empirical studies on regional economic integration process in Africa exhibit sluggish progress
and there by limited level of intra trade. The existing literatures in Africa, particularly in
Southern African regional integration bloc, SADC have neglected effects of regional economic
integration dealing with disaggregated data. This study analyzes trade creation and diversion
effects of the Southern Afi"ican Development Community (SADC) using disaggregated data from
2000 to 2007. The investigation estimates an augmented gravity model using panel data and
random effect estimator methods applying instrumental variables where needed.
The results show that the intra -SADC trade is growing in fuel and minerals, and heavy
manufacturing sectors while it di!>plays a declining trend in agricultural and light manufacturing
sectors. This implies that SA DC has displaced trade with the rest of the world in both fuel and
minerals, and heavy manufacturing sectors. SADC has served to boost trade significantly among
its members rather than with the rest of the world. Countries participating in SADC have moved
toward a lower degree of relative openness in these sectors trade with the rest of the world.
However, the increasing trend of extra-SA DC trade bias over the sample period in both
agricultural commodities and light manufacturing sectors means that there has been a negative
trade diversion effect. In other words, the value of trade between members and non-members has
been increasing (and not falling as would be the case with trade diversion) for the two sectors.
These results seem to suggest that SADC countries retained their openness and outward
orientation despite they signed the trade protocolfor enhancing intra-SADC trade.
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Keywords
Agricultural Sector, Fuel and Minerals