Impact of regional trade agreements on trade: A case of Zimbabwe (2000-2014).

Abstract

The study was aimed at analysing the impact of regional trade agreements on Zimbabwe’s trade using the augmented gravity model for the period 2000 to 2014. The trade agreements under study were Southern Africa Development Community (SADC) and Common Market for East and Southern Africa (COMESA). The results of the gravity model revealed that GDP is negatively related to both exports and imports, whilst population and distance had the theoretically expected effect on trade. Exchange rate was positive and statistically insignificant for both regressions meaning exchange rate had no effect on trade in the period under study. Results also show that the impact of SADC and COMESA FTAs is the same for both imports and exports. Overally the implementation of the two trading agreements has caused intra and extra-regional trade diversion as Zimbabwe’s trade levels are below what is predicted by the standard gravity model in the period 2000 to 2014. This study recommends that, for Zimbabwe to experience the full gains of regional integration they should revise their RTA membership, ensure economic and political stability, increase productivity, adopt policies that foster both intra and extra regional trade and develop its infrastructure.