By expanding market size and lower trade costs, regional integration can enhance export diversification and competitiveness, that are important drivers of economic growth. Using disaggregated trade statistics at 6 HS code digits and applying Grubel-Lloyd Index (GLI), this study examines whether Tanzania’s pattern of trade structure with its trading partners’ in the EAC markets has transformed overtime, from more of inter-industry trade to more of intra-industry trade.
The latter is a measure of Tanzania’s export diversification and competitiveness in the EAC markets, which also is a better gauge for economic transformation (structural convergence) and regional integration value addition. We find that there has been a moderate improvement of intra-industry trade (ITT), mostly with Kenya and Uganda in the EAC markets, as IIT indices increased from about 2% in 2000 to 10.3% for Kenya and 8.7% for Uganda. Even though, this only gives indication of potential intra-industry trade in the future, as an indication for intra-industry trade requires a country to have an ITT greater than 33%.
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