COMESA trade potential: a gravity approach

Sawkut Rojid

Applied Economics Letters, 2006, vol. 13, issue 14, 947-951

Abstract: The aim of this study is twofold: first, to find out whether COMESA is a building or stumbling bloc; and second, to estimate trade potentials within the COMESA region for COMESA members. In addressing the issue of regionalism, the gravity model can be used to simulate trade potentials corresponding to any regional integration scheme. This study uses a panel data analysis to estimate export flows from 147 exporting countries for a period of 21 years (1980-2001). The equation is estimated using a Tobit model. The coefficients on the observable effects determining bilateral trade, except real effective exchange rate, are as expected and highly significant. COMESA seems to be a building bloc; that is, the bloc liberalized trade more internally than it diverted trade from the rest of the world. These results suggest that COMESA's trade potential within the region is limited. In fact, the results suggest that members of COMESA trading bloc are overtrading within the region. Potentials for more trade exist for Angola and Uganda.

Date: 2006
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DOI: 10.1080/13504850500426061

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