Comparative advantage of the Eastern and Central Africa in the coffee export sector: the case of Burundi

Abstract

Coffee is a major contributor to the economies of East African Community (EAC) members. However, recently, export of the crop has declined due to internal and external forces of supply and demand. This paper sheds light on the EAC’s comparative advantage in this cash crop in the international coffee market, with a special focus on Burundi, whose green coffee export is a backbone to its total exports (75%). The study is based on the proposition of the trade theory that partnership in international trade is determined by the prevailing comparative advantage. An improved normalised comparative advantage index, Normalised Revealed Comparative Advantage (NRCA), was used on data of coffee exports of Standard International Trade Classification (SITC) 3 4-grade, for the period 2000-2012. In order to conduct a dynamic comparative analysis, we used a time trend regression model to detect whether a country has gained or lost its comparative advantage during the period under study. Instability analysis was also used to depict the extent of NRCA volatility when the time trend was not statistical significant. Empirical results reveal that EAC countries had comparative advantage, with Uganda and Kenya leading the group during the period under study. However, they exhibited a simultaneous reduction in competitiveness in the global market, though at different levels. For the ECA countries to remain competitive in the global market, they must strengthen their position in the market by tackling coffee price volatility at ^producer level and show willingness to revamp the coffee industry.