Regional Trading Arrangements evolved out of challenges of implementing greater multilateral liberalization within the context of the World Trade Organizationand the need to go beyond the trade agenda to ?deeper integration?.
One of the key instruments in a regional integration is the Customs Union – an agreement by partner states to adopt a Common External Tariff, over and above Free Trade Area arrangements.
The EAC Customs Union came into force on 1st January, 2005 with Uganda, Kenya and Tanzania as the initial members. Rwanda started implementing the EAC Customs Union on 1stJuly 2009.
Implementation of a customs union, not least the EAC Customs Union,faces many challenges, prime being the cost and benefits of joining.
This paper assesses the gains for Rwanda out of implementing the East African Customs Union using a Partial Equilibrium model. Revenue loss is found to be the main cost of implementing the Customs Union. However, Rwanda experiences welfare gains.
The paper argues for staying the course of the East Africa Customs Union since increased benefits are realized with time as integration deepens.