Quantifying Mega-Regional Spillovers into Excluded Countries: Impacts on East Africa

Abstract

The major area of activity in international trade regulation is currently within the mega-regional trade negotiations – the Trans-Pacific Partnership, the Transatlantic Trade and Investment Partnership, the Regional Comprehensive Economic Partnership, and the Trade in Services Agreement. These negotiations have important implications for excluded parties, including East African economies, which are themselves engaged in mega-regional negotiations within an African context – the Tripartite Free Trade Agreement talks, which aim to form a trade bloc of 23 countries, and the Continental Free Trade Area formally launched in June 2015. Preferential trade agreements generate well-understood spillovers on third parties, including the erosion of preferences under the World Trade Organization-authorized General System of Preferences and the competitive shock from the internal productivity improvements induced within the free trade zones. However, the ambitious regulatory agenda being addressed in the mega-regionals raises additional spillovers in the form of new and likely more demanding standards and procedural requirements to access global markets, as well as possibly new positive spillovers. This study addresses these issues both in qualitative and quantitative terms, with a focus on East Africa.

Keywords: mega-regionals, TPP, TTIP, TISA, RCEP, TFTA, East Africa, trade diversion, regulatory standards, compliance costs, spillovers

JEL Classification: F13