The Study On Trade Creation And Trade Diversion In The ECOWAS:The Case Of Togo

The Economic Community of West African States(ECOWAS)is a regional integration created by fifteen West African countries with the ultimate goal to promote the economic integration of member states.One of the main trade agreement features is the emergence of trade effects not only between member countries but also with the others around the world.These trading blocks can be sources of increased trade and export expansion allowing member countries to finance economic growth.The study is about the effects of ECOWAS formation,that is trade creation or trade diversion on Togo’s trade flows during the years 1994-2017 by using gravity model and panel data.Specifically,Togo’s exports are used as dependent variable while the key independent variables include Togo and its trade partners GDP,their respective populations and the distance between them.The originality of this study is that in addition to the key independent variables of the gravity model,we included some others trade cost observables as control variables namely the dummies variables border and common language,same colonial power,major trade partners and same trade block.The results imply that multilateral trade within ECOWAS are explained by the standard variables of gravity model since its creation.Togo’s GDP positively and significantly impacts trade,while distance appears as a barrier to trade.Evidence has shown the existence of trade creation in Togo due to ECOWAS formation.Policy implications include improving transport infrastructures both within ECOWAS and in its partner countries to minimize the trade cost.Togo policymaker should continue to enhance policies that are oriented towards economic growth,so that increased GDP will led to increased trade flow.