Effects of Regional Economic Integration on Regional Trade in Africa: The Case of Regional Economic Communities

Abstract

A lot of existing literature on African regional integration bloc has ignored the effects of regional economic integration by dealing with disaggregated data. This is forgetting that there is a welfare impact of trade creation versus trade diversion of regional trade in Africa. With this in mind, this article analyses the effects of regional economic integration on regional trade in Africa by concentrating on five regional economic communities. Using panel data and fixed effects estimator, the article employs an augmented Gravity Model. The results show that the creation of the African Union contributed greatly to the intra-regional trade, inter-regional trade, and trade with the rest of the world. Therefore, regional economic integration should be considered as an aspect of the strategy for Africa's development and growth, and that the benefits of such integration are essential as the central pillar of African development. Partner states should commit themselves to good governance and create a stable political environment which will lead to an increase in regional economic activities. As a result, poverty levels will be reduced leading to a high standard of life in Africa as a result of the welfare effects of this integration.