State trading and regional economic integration: the East African experience

Abstract

The paper examines the impact of state trading on the operation of the East African Common Market. The first part of the paper develops a general framework for the analysis of this question. After setting out the alternative concepts of integration corresponding to the principles of integration in market economies and centrally planned economies and the role of state trading therein, the paper contrasts them with the situation in integration attempts among developing countries with different economic systems. This is followed by a discussion of the definition, functions, structure and operation of state trading enterprises. An attempt is then made to explore the impact of state trading systems on intra-regional trade in the light of various obstacles to the expansion of such trade. The second part of the paper traces the evolution and structure of state trading enterprises in the East African countries. The characteristics of state trading enterprises are then related to their impact on the growth of East African trade in recent years. Consideration is also given to other developments such as the increasing foreign exchange difficulties being experienced by the Partner States, especially Uganda and Tanzania, and the growth of the system of foreign trade planning in Tanzania. The implications of these developments for the East African Common Market are spelled out. In conclusion, the paper considers various recommendations to overcome obstacles to trade expansion posed by state trading enterprises, increasing foreign exchange difficulties and foreign trade planning.