Alternative Market Models

In its edition of 11th June 2016 The Economist has an article on the virtues of the recently re-established East African Community (EAC):

http://www.economist.com/news/middle-east-and-africa/21700398-regional-co-operation-has-been-good-least-part-continent-worth?frsc=dg%7Ca

The EAC is a relatively simple trade agreement between six East African countries, without the ideology and complex bureaucracy of the EU.

EAC trade

A regional club of six countries, the EAC is now the most integrated trading bloc on the continent. Its members agreed on a customs union in 2005, and a common market in 2010. The region is richer and more peaceful as a result…”

The article is based on research by the International Growth Centre. Their research highlights the economic benefits from the focus on trade and, by implication, the absence of political motives. Indeed, the researchers warn against deepening the community by implementing a common currency. From the article:

The researchers are warier of the EAC’s other grand project: creating a common currency by 2024. The impact on trade would be small, they say, and not worth the risks. A study last year by the IMF found that east African economies move out of sync with each other, using exchange rates to absorb shocks. Greater convergence might make a common currency viable; without it, a single currency would mean that wages might have to do the work of adjustment, as Greece has become painfully aware. The euro crisis should give policymakers pause for thought.”

The original research is described here: http://www.theigc.org/project/preferential-trade-arrangements-and-the-pacification-of-eastern-africa/#outputs

EAC & EU

Worth noting (from the EAC website):

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