TRADE, REVENUE AND WELFARE EFFECTS OF THE EAST AFRICAN COMMUNITY CUSTOMS UNION PRINCIPLE OF ASYMMETRY ON UGANDA: AN APPLICATION OF WITS-SMART SIMULATION MODEL

Using the WITS-SMART simulation model, this paper provides insights on the effects of the East African Community Customs Union principle of asymmetry on Uganda with regard to trade, welfare and revenue effects since 2005. The end to the phased tariff reduction on category B products (these products were treated as sensitive products in 2005) increased trade creation and welfare effects. This effect shall have a reflection on consumer surplus in terms of reduced prices. The results also suggest that government shall incur a tariff revenue loss which should not be ignored given the fluctuating growth in the general trade tax revenue; hence the need to strengthen domestic ability to mobilise revenue or seek alternative source of funding. The results also suggest that to realise more trade created and welfare, effective elimination of non-tariff barriers to trade that would affect the expected benefits accruing from the trade reforms within the region is necessary. The diversion effect resulting from the CET on respective products like woven fabrics of cotton, soap products and paints and vanishes by inefficient producers within the union could equally be displaced through building specialised capacity in the sectors.