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Will the Real “Natural Trading Partner” Please Stand Up?

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Author Info

  • Schiff, Maurice

    ()
    (World Bank)

Abstract

Adherents to the “natural trading partner” hypothesis argue that forming a PTA is more likely to raise welfare if member countries already trade disproportionately with each other. Opponents of the hypothesis claim that the opposite is true: welfare is likely to be higher if member countries trade less with each other. This paper shows that neither analysis is correct and that the “natural trading partner” hypothesis can be rescued if it is redefined in terms of complementarity or substitutability rather than in terms of volume of trade.

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Bibliographic Info

Article provided by Center for Economic Integration, Sejong University in its journal Journal of Economic Integration.

Volume (Year): 16 (2001)
Issue (Month): ()
Pages: 245-261

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Handle: RePEc:ris:integr:0163

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Web page: http://econo.sejong.ac.kr/
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Related research

Keywords: Regional Integration; Partner Relations with the Rest of the World; Choice of Partner;

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References

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  1. Panagariya, A., 1997. "Preferential trading and the myth of natural trading partners," Japan and the World Economy, Elsevier, vol. 9(4), pages 471-489, December.
  2. Schiff, Maurice, 1997. "Small is Beautiful: Preferential Trade Agreements and the Impact of Country Size, Market Share, and Smuggling," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 12, pages 359-387.
  3. Grossman, Gene & Helpman, Elhanan, 1993. "Protection for Sale," CEPR Discussion Papers 827, C.E.P.R. Discussion Papers.
  4. Olarreaga, Marcelo & Soloaga, Isidro, 1998. "Endogenous Tariff Formation: The Case of Mercosur," CEPR Discussion Papers 1848, C.E.P.R. Discussion Papers.
  5. Martin Richardson, 1994. "Why A Free Trade Area? The Tariff Also Rises," Economics and Politics, Wiley Blackwell, vol. 6(1), pages 79-96, 03.
  6. Schiff, Maurice, 1996. "Small is beautiful : preferential trade agreements and the impact of country size, market share, efficiency, and trade policy," Policy Research Working Paper Series 1668, The World Bank.
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Citations

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Cited by:
  1. Khadan, Jeetendra & Hosein, Roger, 2014. "Trade, Economic and Welfare impacts of the CARICOM-Canada Free Trade Agreement," MPRA Paper 54836, University Library of Munich, Germany.
  2. Rym Ayadi & Luc De Wulf & Moez El Elj & Michael Gasiorek & Ahmed Ghoneim & Javier Lopez Gonzalez & Selen Guerin & Peter Holmes & Hammad Kassal & Maryla Maliszewska & Mahmut Tekce, 2009. "Economic Integration in the Euro-Mediterranean Region," CASE Network Reports 0089, CASE-Center for Social and Economic Research.
  3. L. Alan Winters, 2000. "Regionalism and Multilateralism in the Twenty-First Century," IDB Publications 8749, Inter-American Development Bank.
  4. Schiff, Maurice & Wang, Yanling, 2004. "North-South Technology Diffusion, Regional Integration, and the Dynamics of the “Natural Trading Partners” Hypothesis," IZA Discussion Papers 1384, Institute for the Study of Labor (IZA).
  5. Khadan, Jeetendra & Hosein, Roger, 2013. "New Empirical Insights into the “Natural Trading Partner” Hypothesis for CARICOM Countries," MPRA Paper 50493, University Library of Munich, Germany.
  6. Schiff, Maurice & Wang, Yanling, 2009. "The Regional Dimension of North-South Trade-Related R&D Spillovers," Policy Research Working Paper Series 4826, The World Bank.
  7. Ng, Francis & Yeats, Alexander, 2003. "Major trade trends in East Asia : what are their implications for regional cooperation and growth," Policy Research Working Paper Series 3084, The World Bank.
  8. Islam, Sulequl, 2003. "Expansions of the European Union and the NAFTA: Implications for New and Non-Member countries," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 3(2).
  9. Kaminski, Bartlomiej & de la Rocha, Manuel, 2003. "Stabilization and association process in the Banlkans : integration options and their assessment," Policy Research Working Paper Series 3108, The World Bank.
  10. Maur, Jean-Christophe, 2008. "Regionalism and trade facilitation : a primer," Policy Research Working Paper Series 4464, The World Bank.
  11. Shamim Shakur & Chris Nees, 2011. "An application of the natural trading partner hypothesis to New Zealand- ASEAN trade," Economics Bulletin, AccessEcon, vol. 31(4), pages 3077-3088.

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