Volume 3, Issue 2, December 2019, Page: 43-51
Common External Tariffs and Trade Efficiency: Lessons for Cross-listed Firms in the East African Community
Abwao Geofrey Magani, Department of Commerce and Economics, School of Business, Jomo Kenyatta University of Agriculture & Technology, Nairobi, Kenya
Received: Jul. 1, 2019;       Accepted: Aug. 7, 2019;       Published: Sep. 4, 2019
DOI: 10.11648/j.ipa.20190302.12      View  97      Downloads  30
Abstract
The East African Community’s trading bloc has attracted a lot of investment from the member countries yet it has not lived to its expectations. Some of the region’s members have fallen out in the past and even re-considered their membership in EAC. Among other areas of focus on the region’s integration is the implementation of common external tariffs and protection of the region’s members in regional and global market spheres. However, trade efficiency still lags behind in the region compared to global benchmarks. There exists flimsy evidence in literature on whether the implementation of common external tariffs revitalizes trade efficiency in the region. This paper, therefore, propounds the relationship between the implementation of common external tariffs and cross-border trade efficiency within the EAC considering experiences from other regional blocs and the implications for cross-listed Kenyan firms. The paper analyzes secondary data for Kenyan imports and exports from World Integrated Trade Solution (WITS) and the Observatory of Economic Complexity (OEC) as well as Economic review reports from the World Bank, the African Development Bank (AfDB) and EAC. The analysis covering the financial years: 1995 to 2017 shows a number of factors, other than tariffs, that drive trade and trade efficiency. The study also reveals non-tariff barriers, inward-looking trade policies, protectionist policies, redundant trading rules across border, increasing cost of trading among other shortcomings to regional trade that arise from implementation of common external tariffs. Statistical evidence also indicate that trade efficiency is independent of the implementation of common external tariffs. In addition, empirical evidence shows prolonged trade deficit not only in the developed countries, but in the developing world as well. The study concludes that tariffs are good for trade regulation to the detriment cross-border trading even beyond the regional bloc. However, besides macroeconomic correlates, factors other than common external tariffs influence regional and cross-border trade efficiency. This calls for comprehensive in-region trade policy review, revitalization and commitment by the member states even as individual trading entities pursue advanced competitiveness in the regional and global markets.
Keywords
Common External Tariffs, Cross-Listing, Cross-Border Trading Efficiency
To cite this article
Abwao Geofrey Magani, Common External Tariffs and Trade Efficiency: Lessons for Cross-listed Firms in the East African Community, International and Public Affairs. Vol. 3, No. 2, 2019, pp. 43-51. doi: 10.11648/j.ipa.20190302.12
Copyright
Copyright © 2019 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/) which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
Reference
[1]
Abdalla, A. A., & Abdalla, W. (2019). Does cross-listing in the US improve investment efficiency? Evidence from UK firms. The Quarterly Review of Economics and Finance, https://doi.org/10.1016/j.qref.2018.12. 005.
[2]
African Development Bank Group. (2018). African Economic Outlook 2018. Retrieved June 24, 2019, from African Development Bank Group: https://www.afdb.org/fileadmin/uploads/afdb/Documents/Publications/African_Economic_Outlook_2018_-_EN.pdf
[3]
Aladesanmi, O., Casalin, F., & Metcalf, H. (2019). Stock market integration between the UK and the US: Evidence over eight decades. Global Finance Journal, Vol. 41 (1) pp. 32-43.
[4]
Alissa, S. (2007). The Political Economy of Reform in Egypt: Understanding the Role of Institutions. Carnegie Endowment for International Peace, pp. 1-32.
[5]
Avdasheva, S., & Gimadi, V. (2019). Investor Response to Tariff Options under Regulation by Contract: Evidence from Russian Heating Concessions. Utilities Policy, Vol. 57, April 2019, Pages 64-74.
[6]
Battistini, N., Callegari, G., & Zavalloni, L. (2019). Dynamic fiscal limits and monetary fiscal policy interactions. European Central Bank: Working Paper Series.
[7]
Berger, A. N. (2003). The Efficiency effets of a single market for Financial services in Europe. European Journal of Operational Research, vol. 150 (3); pp. 466-481.
[8]
Casu, B., & Girardone, C. (2010). Integration and Efficiency Convergence in EU banking markets. Omega, 38 (5), pp. 260-267.
[9]
Chen, X. (2019). The Future of Free Trade Agreements: Singapore Perspetive. International Journal of Economic Policy Studies, vol. 13 (1), pp. 259-271.
[10]
East African Community. (2000-2019). Overview of the EastAfrican Community. Retrieved April 20th, 2019, from East African Community: https://www.eac.int/overview-of-eac
[11]
Elewa, A. (2019). Trade Openness and Domestic Market Share: Evidence from Egypt Firm-Level Data. Journal of Industry, Competition and Trade, pp. 1-23.
[12]
Erixon, F. (2016). What is Wrong with the Single Market. European Centre for International Political Economy.
[13]
Ghoneim, A. (2005). Law-Making for Trade Liberalization and Investment Promotion in Egypt. Cairo University, pp. 1-32.
[14]
Holynskyy, Y., & Onyusheva, I. (2019). Budget and fiscal policies' Modernization as a factor of national competitiveness increase (the case of Ukraine). The EUrASEANs: Journal on Global socio-economic dynamics, vol. 1 (14), pp. 16-29.
[15]
Huang, Y., Lin, C., Liu, S., & Tang, H. (2018). Trade Linkages and Firm Value: Evidence from the 2018 US-China "Trade War". SSRN, Huang, Yi and Lin, Chen and Liu, Sibo and Tang, Heiwai, Trade Linkages and Firm Value: Evidence from the 2018 US-China 'Trade War' (Augushttp://dx.doi.org/10.2139/ssrn.3227972).
[16]
Igesa, B. S., Okiyama, M., & Tokunaga, S. (2018). Impacts of Tariff Reduction and Mixed Fiscal Policy on the Kenyan Agricultural and Food Industry: Using the Macro CGE Model. Jpn. J. Agric. Econ. , Vol. 20, pp. Sl-56, 2018.
[17]
Leeper, E. M., Plante, M., & Traum, N. . (2010). Dynamics of fiscal financing in the United States. Journal of Econometrics, Elsevier, vol. 156 (2), pp 304-321.
[18]
Mabe, Q. M., & Bonga-Bonga, L. (2019). How Financially Integrated are Trading Blocs in Africa. The Quarterly Review of Economics and Finance, https://doi.org/10.1016/j.qref.2019.05.013.
[19]
Makau, S. M., Onyuma, S. O., & Okumu, A. N. (2015). Impact of Cross-border Listing on Stock Liquidity: Evidence from East African Community. Journal of Finance and Accounting, Vol. 3 (1), pp. 10-18. doi: 10. 11648/j. jfa. 20150301. 12.
[20]
Minondo, A., & Choi, J. (2019). The Trade Effects of Albania's Trade Agreements with CEFTA members. Post-Communist Economies, Vol. 31 (4), pp. 451-463.
[21]
Observatory of Economic Complexity. (2019). OEC. Retrieved June 20, 2019, from OEC: https://atlas.media.mit.edu/en/profile/country/egy/
[22]
Odularu, G. (2019). Introduction: The Changing Landscape of Trade Facilitation and Regional Development Issues in West Africa. In A. P. Odularu G., Trade Facilitation Capacity Needs (pp. pp. 1-23). Palgrave Pivot, Cham.
[23]
Onyuma, S. O., Mugo, R. K., & Karuiya, J. K. (2012 ). Does Cross-Border Listing (STILL) Improve Firm Financial Performancein Eastern Africa? Journal of Business, Economics & Finance, Vol. 1 (1) pp. 92-109.
[24]
Rakotoarisoa, M. A., Khorana, s., & Narayanan, B. G. (2019). Trade Liberalization - Labour Productivity Nexus: The Case of Subsaharan Africa. Socio-Economic Challenges, Vol. 3 (1), pp. 5-26.
[25]
Rwehumbiza, D. A. (2010). The East African Community (EAC) and its Influence on Tanzania's Manufactured Exports Intensity and Competitiveness. Business Management Review, vol. 14, pp. 58-82.
[26]
Slany, a., & Riedel, J. (2019). The potential of African trade Integration - Panel data evidence for the COMESA-EAC-SADC Tripartite. The Journal of International Trade and Economic Development, DOI: 10. 1080/09638199. 2019. 1575457.
[27]
Tang, D. (2019). Has European monetary union influenced the European Union bank lending flows to the EU countries from Central and Eastern Europe? Journal of Financial Economic Policy, Vol. 11 Issue: 2, pp. 263-282, https://doi org/10.1108/JFEP-05-2018-0080.
[28]
Temouri, Y., Driffield, N., & Bhaumik, S. K. (2016). A strategic perspetive of cross-listing by emerging market firms: Evidence from Indonesia, Mexico, Poland and South Africa. Journal of International Management, vol. 22 (2016), pp. 265-279.
[29]
The New York Times. (2019, 05 09). Stock Market Drop Extends to Fourth Day as U. S. Prepares to Raise China Tariffs. Retrieved June 21, 2019*, from The New York Times: https://www.nytimes.com/2019/05/09/business/china-tariffs-stock-market. html
[30]
The World Bank. (2019, April 01). The World Bank in Egypt. Retrieved June 20, 2019, from World Bank: 1. https://www.worldbank.org/en/country/egypt/overview#1 2. https://www.worldbank.org/en/country/egypt/overview#3
[31]
The World Bank/East African Community Secretariat. (2016). East African Common Market Scorecard 2016: Tracking EAC Compliance in the Movement of Capital, Services and Goods. Retrieved June 21, 2019, from East African Community: https://d3n8a8pro7vhmx.cloudfront.net/eatradehub/pages/2893/attachments/original/1481012380/East-Africa-Common-Market-Scorecard-2016.pdf?1481012380
[32]
Wama, M. (2014). The Dynamics and Fallout of East African Community Common Market: Trade Aspect and Citizens Rights. Greener Journal of Political and Socila Sciences, pp. 26-38.
[33]
World Bank Group. (2018). Kenya Trade Statistics. Retrieved June 24, 2019, from World Integrated Trade Solution: https://wits.worldbank.org/CountryProfile/en/KEN#
[34]
York, E. (2018). The Impact of Trade and Tariffs on the United States. Tax Foundation: Fiscal Fact No. 595, pp. 1-9.
[35]
Zhang, T., & Mathews, K. (2019). Assesing the Degree of Financial Integration in Asean-A perspective of banking competitiveness. Research in International Business and Finance, vol. 47 pp. 487-500.
Browse journals by subject