The Impact of Trade Policy Reforms on Economic Performance in Africa

Abstract

This study examined the impact of common policy reform on trade and economic performance in Africa. It adopted a quantitative research approach using the Difference in Differences (DID) econometric technique to establish empirical evidence on the effect of Common External Tariff (CET) as a proxy for trade reforms on economic performance. The East African Community (EAC) was used as treatment variable while other randomly selected African countries which do not exercise CET approach were used as a control group. The time series data from the WDI for the period of 1994 to 2019 were used to reveal empirical evidence. The key findings indicate that common external tariff which is a proxy for trade policy reforms indicates a significant and positive effect on economic performance. However, the magnitudes of DID coefficients across EAC member states used in the study as treatment group indicate asymmetrical results; which are (β3= 38,453.1355, p<0.001), (β3= 34,846.2112, p<0.001), and (β3= 32,419.3868, p<0.001) for Tanzania Kenya and Uganda respectively. The reasons for this variation could be explained by differences in resources endowment that determine the levels of utilization of trade opportunities available among these countries. The policy implication of the study implies that, African economies should embrace a joint effort through trade policy reforms so as to boost their level of economic performance. The best way to achieve that is by adopting a common trade policy initiative through economic integration in order for individual countries to experience the increase in trade volume that may boost economic growth.