Export Competitiveness Effects On Economic Growth Of East African Community

Export competitiveness, seems like an objective concept, but it remains conceptually and empirically hard to comprehend. With the gradual reduction in trade barriers, stressing on export-led growth strategy by nations, more emphasis is now on export competitiveness since the world today has become a global village, greatly due to globalization. Once a country open up to the world, it is inviting other countries’products which may be superior in terms of quality, low prices and in terms of variety to the domestic products. For a countries industry to survive and thrive, competition with other industries is inevitable. In so doing, the industries bring about innovations, increased productivity hence increased income leading to economic growth.This paper presents a distinct way of thinking about export competitiveness and attempts to explain it empirically for EAC nations. First, two data sets are constructed:First, an indepth Exports analysis through RCA and related indices. Competitiveness of major exports commodities have been analyzed through a Revealed Comparative Advantage (RCA), Revealed symmetric advantage (RSCA) and the Net Trade Reveal Comparative advantage (NTRCA) to measure export competitiveness of EAC exports. Secondly, an annual panel dataset to regress the above competitive exports with GDP has been used to determine the effect of Export competitiveness on the small open economies of least developing Countries of EAC.EAC exports are still dominated by primary agricultural products.These exports are disaggregated into two distinctive categories:Exports of Coffee and tea (selected overall competitive exports from RCA analysis) and OTHER exports of goods and services, which is the residual of exports after removing exports of coffee and tea.For the two categories of exports, an empirical model has been specified that incorporate GDP (as a proxy for economic growth and welfare change, additional variables include Capital, and Labor competitive exports of coffee and tea (comparative and concentrated), competitive Otherexports, Import price index, export price index, terms of trade, trade openness, gross capital formation, Literacy rate, CPIA and exchange rate, using FEM regression analysis on balanced panel data for Five countries of EAC:Burundi, Kenya, Rwanda, Tanzania and Uganda with GDP to determine exports competitiveness effects on EAC economies.Results from FEM regression analysis are that the variables of competitive coffee and tea, capital, labor and Literacy rate are significant and positively correlated to GDP; other variables are insignificant. Conclusion is that, the impacts of exports category of Coffee and tea on GDP is minute but significant. It supports that capital and labor, control variable of literacy rate have significant impact on GDP than that of other exports of goods and the other variables.