Measuring the impact of East African community customs union on the trade balance of Rwanda, period of the study :1999-2017

Abstract

Customs union is defined as the third stage of Economic integration after preferential trade area and free trade area where Country members decide to remove import tariffs between them and adopt common import tariffs of goods imported from third country. This study covers the period of 1999 to 2017 with the explanatory variable (GDP, EACM, ENG and POP) for EAC Countries. With the help of gravity model this study evaluate the effect of East Africa Customs Union on the trade Balance of Rwanda. We found that the explanatory variables GDP, EACM and ENG as common language has no significant impact which means they do not influence the trade flow between Rwanda with EAC Countries and Population has a significant impact which means the population growth explain the trade flow of Rwanda with EAC Countries. We have also found that the net export of Rwanda has increased negatively particularly in 2015 but after it has started to decrease the negative values which is the results of increase in exports values where the net export of Rwanda has increased in 2015 to 2017 from -1,995.83 to -1,326.92 respectively. We recommended that the Governments and policy makers should set policies that help in reducing the deficit by encouraging people to produce for local supply and reduce the level of imported goods and to help them to standardize their products at international level so that they can be exported abroad especially in EAC Countries.