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Has The World Trade Organization Promoted Successful Regional Trade Agreements?

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Author Info
Grant, Jason H.
Parmeter, Christopher F.
Abstract

This study uses econometric gravity equations to test whether the WTO has promoted successful regional trade agreements (RTA). Two important findings emerge. First, we find that two countries that are members of the GATT/WTO and enter into a regional trade agreement stimulate trade. However, the effect on trade is not nearly as large as that between two RTA members that belong to the GATT/WTO. Contrary to the findings in Rose (2004), this result tends to support the fact that the GATT/WTO has liberalized multilateral trade, outside of RTAs. In other words, the effect of an RTA on countries’ trade who are not party to the GATT/WTO should generate a large RTA trade response due to relatively large pre-existing trade distortions. Second, we show that the GATT/WTO has not promoted successful RTAs using explicit RTA variables that controls for the notification status (to the GATT/WTO) of an RTA. Interestingly, non-notified RTAs trade significantly more than their notified counterparts.

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Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida with number 6551.

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Date of creation: 2008
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Handle: RePEc:ags:aaea08:6551

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Keywords: International Relations/Trade;

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  1. Baier, Scott L. & Bergstrand, Jeffrey H., 2007. "Do free trade agreements actually increase members' international trade?," Journal of International Economics, Elsevier, vol. 71(1), pages 72-95, March. [Downloadable!] (restricted)
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  2. Robert C. Feenstra & Robert E. Lipsey & Haiyan Deng & Alyson C. Ma & Hengyong Mo, 2005. "World Trade Flows: 1962-2000," NBER Working Papers 11040, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Frankel, Jeffrey & Stein, Ernesto & Wei, Shang-jin, 1995. "Trading blocs and the Americas: The natural, the unnatural, and the super-natural," Journal of Development Economics, Elsevier, vol. 47(1), pages 61-95, June. [Downloadable!] (restricted)
  4. Ghosh, Sucharita & Yamarik, Steven, 2004. "Are regional trading arrangements trade creating?: An application of extreme bounds analysis," Journal of International Economics, Elsevier, vol. 63(2), pages 369-395, July. [Downloadable!] (restricted)
  5. Jason H. Grant & Dayton M. Lambert, 2008. "Do Regional Trade Agreements Increase Members' Agricultural Trade?," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 90(3), pages 765-782, 08. [Downloadable!] (restricted)
  6. Brada, Josef C & Mendez, Jose A, 1985. "Economic Integration among Developed, Developing and Centrally Planned Economies: A Comparative Analysis," The Review of Economics and Statistics, MIT Press, vol. 67(4), pages 549-56, November. [Downloadable!] (restricted)
  7. Barry Eichengreen & Douglas A. Irwin, 1996. "The Role of History in Bilateral Trade Flows," NBER Working Papers 5565, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. Andrew K. Rose, 2004. "Do We Really Know That the WTO Increases Trade?," American Economic Review, American Economic Association, vol. 94(1), pages 98-114, March. [Downloadable!]
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  9. Frankel, Jeffrey A & Stein, Ernesto & Wei, Shang-Jin, 1996. "Regional Trading Arrangements: Natural or Supernatural," American Economic Review, American Economic Association, vol. 86(2), pages 52-56, May. [Downloadable!] (restricted)
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  10. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March. [Downloadable!]
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