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Evaluating the trade effect of developing regional trade agreements : a semi-parametric approach
 
Author:Coulibaly, Souleymane; Collection Title:Policy, Research working paper ; no. WPS 4220
Country:Latin America; Africa; Asia; Date Stored:2007/04/23
Document Date:2007/05/01Document Type:Policy Research Working Paper
SubTopics:Economic Theory & Research; Free Trade; Trade Policy; Trade and Regional Integration; Trade LawLanguage:English
Region:East Asia and Pacific; Africa; South Asia; Latin America & CaribbeanReport Number:WPS4220
Volume No:1 of 1  

Summary: Many recent papers have pointed to ambiguous trade effects of developing regional trade agreements (RTAs), calling for a reassessment of their economic merits. The author focuses on seven such agreements currently in force in Sub-Saharan Africa (ECOWAS and SADC), Asia (AFTA and SAPTA) and Latin America (CACM, CAN, and MERCOSUR), estimating their impacts on their members' trade flows. Instead of the usual dummy variables for RTAs, he proposes a variable taking into account the number of years of membership. He then combines a gravity model with kernel estimation techniques to capture the non-monotonic trade effects while imposing minimal structure on the model. The results indicate that except for SAPTA, these RTAs have had a positive impact on their members' intra-trade over the estimation period (1960-99). AFTA seems to be the most successful among them, with an estimated positive impact on its members' imports from the rest of the world (hence no trade diversion), but its impact on their exports to the rest of the world is rather limited. During its first 10 years of existence, ECOWAS appears to have had a positive impact on its members' imports from the rest of the world (hence no trade diversion), but this positive impact vanished over time. SAPTA's negative impact on its members' intra-trade is probably an implicit effect of the India-Pakistan tensions over the estimation period.

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