Comparative Advantage of Trade in Food Products among the Selected East African Community Partner States: Implication for Policy Formulation

Abstract

Despite the potential benefits of regional trade, economic disparities among East African Community (EAC) member states persist. This study investigated the relationship between trade openness, comparative advantage in food trade, and economic performance within the EAC, focusing on Tanzania, Kenya, and Uganda. The study adopted export data from the United Nations Commodity Trade Statistics Database, the World Bank, and the International Trade Centre, as well as GDP data from the Bank of Tanzania and the National Bureau of Statistics. Data were analysed through descriptive statistics, causality analysis, Revealed Comparative Advantage (RCA), and vector autoregressive model. Findings reveal a positive impact of trade openness on Tanzania’s economy but negative impacts on Kenya and Uganda, suggesting Tanzania benefits from EAC integration while Kenya and Uganda face trade challenges. The causality analysis shows that Tanzania’s economic performance drives food exports, trade openness impacts Kenya’s economic performance significantly, and Uganda sees a reciprocal link between economic growth and food exports; however, trade openness does not significantly affect Ugandan economic growth. The analysis of the Balassa index indicates Kenya’s food export advantage, a decline in Uganda’s export advantage since 1996, and Tanzania’s lack of export advantage with potential for improvement. The study recommends cautiously implementing trade openness policies within the EAC to prevent trade distortions and currency devaluation.