Assessment of the impact of the East African Community -EAC-2005-Customs Union on economic growth for former three EAC Countries - Evidence from sythetic control methodology

A customs union is a trade agreement that removes tariffs between members and adopt a same set of external tariffs to non-members. Trade and political ties among member nations are two ways that the Customs Union can specifically fosters economic growth. This paper assesses the impact of the launching the EAC customs union in 2005 to the economic growth of the three founding member countries, namely Tanzania, Kenya and Uganda. The study applies five indicators from world development indicators provided by the World Bank database. Accordingly, we use GDP per capita as an outcome variable and gross domestic investment, inflation, industry share and population growth are used as covariates. Furthermore, the study employs the recent and novel technique in causal inference in producing plausible counterfactual referred to as synthetic counterfactual approach. On average, the findings suggest that the customs union has led to about 10, 4 and 2 percentage increase in GDP per capita increase for Tanzania, Kenya and Uganda respectively than it would have been without such intervention for ten years since inception of EAC customs union.