Patterns of global and regional value chain participation in the EAC

Using global Multi-Region Input-Output (MRIO) data from 2005-2015, this paper empirically investigates the extent and patterns by which East African Community (EAC) countries have integrated into Global Value Chains (GVCs) and Regional Value Chains (RVCs). Results imply that the foreign content of exports (I2E) and the share of exports being re-exported (E2R) are between 10% and 20% in most EAC countries. During 2005-2015, all EAC members apart from Kenya experienced a decline in E2R. Trade in intermediates with the rest of the world remains 12-14 times greater in value-added (VA) terms than inside the EAC. Kenya expanded its role as a regional supplier of manufactured inputs (higher E2R with EAC partners), and Uganda slightly increased its agricultural input to the Kenyan food processing sector. Furthermore, a downstream shift is evident, by which more VA (both domestic and foreign) is used for the production of final goods while maintaining high levels of exports in primary agriculture and mining. Only Kenya was able to broadly maintain and improve its comparative advantage in manufacturing. Econometric analysis suggests that higher I2E and E2R shares increase GDP with an average elasticity of ≥ 0.25 over 2 years. Estimates for manufacturing sectors were slightly higher at elasticities ≥ 0.3 in response to E2R shifts. These results imply that policy measures to increase manufacturing competitiveness and promote more horizontal RVCs would benefit EAC economic growth in the medium run.