COMESA Customs Union Commitments and the Impact on Kenya: Using the Wits-Smart Simulation Model

Abstract

This research article included quantitative estimations of the likely outcomes of the welfare effects, trade diversion effects, changes in export and import quantities, revenue effects, and trade creation effects resulting from the Common Market for Eastern and Southern Africa Customs Unions Commitments (COMESA CU). Kenya was used as the case study in this research project, which utilized the Software for Market Analysis and Restrictions on Trade (SMART) and Pan-Euro-Mediterranean tools (PEM). The World Integrated Trade Solution (WITS)/SMART software has access to the most recent data on Kenya and uses databases and records of trade-related information, including those maintained by the United Nations Conference on Trade and Development (UNCTAD), the World Trade Organization (WTO), the Common Format for Transient Data Exchange for Power Systems (COMTRADE), and the Transportation Reporting and Accounting Information System (TRAINS). The results of the analyses show that COMESA CU has no indication of trade diversion and had a trade-creation impact of US$310.50 million. Further analysis revealed that the COMESA CU procedure is expected to record losses in the amount of US$327 million. Additionally, a US$56.27 million consumer welfare effect was projected for COMESA CU. Imports increased by 2.8% at COMESA CU, but exports fell. The research recommends that export-boosting actions be taken, including bolstering export processing zones, offering export subsidies, developing supply-side infrastructure, offering trade financing, and enhancing export-supporting institutions. Kenya and other developing countries now have the ability to implement policies that will make sure they benefit the most from the various regional trade agreements, thanks to the findings of this study.