Customs Union Theory and Economic Integration: Towards a Contextualization of the East Africa Community

Kenya, Uganda and Tanzania have engaged in various forms of integration since independence. This led to the inauguration of the East African Community in 2001. Today, the EAC has enlarged with Rwanda and Burundi as new members and a customs union established (East African Community-Customs Union) which has further led to the creation of a common market. This study aims at contextualizing the EAC and examining the trade effects of the customs union using a quantitative model of East African trade based on simple Vinerian customs union theory. Since the community was started, there are signs of both trade creation and trade diversion in different time periods during the 1990s and early 2000, but since 2002, trade creation has been on the increase. This is a positive development especially since the official launch of the new EAC was in 2000. However, trade concentration index shows that the countries have started to trade less with each other. Further, the Kenyan dominance is shown to be pressing the cooperation which is troublesome since this dominance was one of the main reasons for the breakup of the first EAC in 1977. Moreover, this thesis found out that the EAC region is too small and therefore, the supply in the region far surpasses the demand. This means that there is need to extend the EAC membership to other countries. There is also need for continued study into the EAC integration scheme to help reduce the challenges and limitation in the Community.