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What is the Cause of Growth in Regional Trade: Trade Liberalisation or RTAs? The Case of Agriculture

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Author Info

  • Xinshen Diao
  • Terry Roe
  • Agapi Somwaru

Abstract

This paper delves into the debate on the proliferation of regional trade arrangements by focusing on bilateral agricultural trade data over the 1962-1995 period for countries that currently are members of NAFTA, Mercosur, the EU and APEC. Agricultural is chosen because it has historically been protected by developed and dis-protected by developing nations, while in the case of the EU, its Common Agricultural Policy was the major policy jointly managed and funded by member countries. We suggest that the literature has tended to focus on factors explaining the level of trade, and neglected factors affecting growth in trade. While neighborhood characteristics affect neighborhood trade, they also appear to affect the policy regimes of neighboring countries. The shift to more outward oriented regimes is thus likely to induce a dynamic in trade among neighboring countries requiring several years to stabilize. As neighborhood trade grows, it is natural to form trade arrangements so as to harmonize policies and to remove other barriers. If this is the case, then we should expect the growth in intra regional trade to exceed growth in extra-regional trade, and these patterns should occur before the formation of regional trade arrangements. Our results support this explanation.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal The World Economy.

Volume (Year): 24 (2001)
Issue (Month): 1 (01)
Pages: 51-79

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Handle: RePEc:bla:worlde:v:24:y:2001:i:1:p:51-79

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References

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  1. Stern, R.M. & Deardorff, A.V., 1992. "Multilateral Trade Negociations and Preferential Trading Arrangements," Working Papers 307, Research Seminar in International Economics, University of Michigan.
  2. Gopinath, Munisamy & Arnade, Carlos & Shane, Mathew & Roe, Terry, 1997. "Agricultural competitiveness: The case of the United States and major EU countries," Agricultural Economics, Blackwell, vol. 16(2), pages 99-109, May.
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  5. Robert C. Feenstra, . "Integration Of Trade And Disintegration Of Production In The Global Economy," Department of Economics 98-06, California Davis - Department of Economics.
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  7. André Sapir, 1992. "Regional integration in Europe," ULB Institutional Repository 2013/8200, ULB -- Universite Libre de Bruxelles.
  8. Paul Krugman, 1995. "Growing World Trade: Causes and Consequences," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 327-377.
  9. Robinson, Sherman & Thierfelder, Karen, 1999. "Trade liberalization and regional integration: the search for large numbers," TMD discussion papers 34, International Food Policy Research Institute (IFPRI).
  10. Fernandez, Raquel & Portes, Jonathan, 1998. "Returns to Regionalism: An Analysis of Nontraditional Gains from Regional Trade Agreements," World Bank Economic Review, World Bank Group, vol. 12(2), pages 197-220, May.
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  13. Ernesto Stein & Jeffrey Frankel, 1994. "The welfare implications of continental trading blocs in a model with transport costs," Pacific Basin Working Paper Series 94-03, Federal Reserve Bank of San Francisco.
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Cited by:
  1. Shane, Mathew & Roe, Terry L. & Somwaru, Agapi, 2008. "Exchange Rates, Foreign Income, and U.S. Agricultural Exports," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 37(2), October.
  2. Sampath Jayasinghe & Rakhal Sarker, 2004. "Effects of Regional Trade Agreements on Trade in Agrifood Products: Evidence from Gravity Modeling Using Disaggregated Data," Food and Agricultural Policy Research Institute (FAPRI) Publications 04-wp374, Food and Agricultural Policy Research Institute (FAPRI) at Iowa State University.
  3. Shane, Mathew & Roe, Terry L. & Somwaru, Agapi, 2006. "Exchange Rates, Foreign Income, and U.S. Agriculture," Conference Papers 6686, University of Minnesota, Center for International Food and Agricultural Policy.
  4. Doan, Darcie & Goldstein, Andrew & Zahniser, Steven & Vollrath, Thomas L. & Bolling, H. Christine, 2004. "North American Integration In Agriculture: A Survey Paper," North American Agrifood Integration: Situation and Perspectives, May 2004, Cancun, Mexico 16730, Farm Foundation.
  5. Sampath Jayasinghe & Rakhal Sarker, 2004. "Effects of Regional Trade Agreements on Trade in Agrifood Products: Evidence from Gravity Modeling Using Disaggregated Data," Center for Agricultural and Rural Development (CARD) Publications 04-wp374, Center for Agricultural and Rural Development (CARD) at Iowa State University.
  6. Colyer, Dale, 2001. "Impacts Of Nafta On U.S.-Mexico Agricultural Trade," Conference Papers 19105, West Virginia University, Department of Agricultural Resource Economics.

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