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Reciprocal Trade Agreements: Impacts on Bilateral Trade Expansion and Contraction in the World Agricultural Marketplace

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Author Info

  • Vollrath, Thomas L.
  • Hallahan, Charles B.

Abstract

The rapid increase in the number of bilateral and regional free-trade agreements since 1995 is a striking development. The proliferation of these agreements has raised questions about whether they have, in fact, opened markets, created trade, promoted economic growth, and/or distorted trade. This study uses panel data from 1975 to 2005 and a gravity framework model to identify the influence of reciprocal trade agreements (RTAs) on bilateral trade in the world agricultural marketplace. A benchmark, Heckman sample-selection and two generalized models, one of which accounts for RTA phase-in effects, are used to gauge the impact on partner trade of mutual as well as asymmetric RTA membership. Empirical results show that RTAs increase agricultural trade between member countries but decrease trade between member and nonmember countries. Interestingly, RTAs were found to be particularly effective at expanding agricultural trade and opening markets in developing countries when developing- country trading partners are part of the same agreement.

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Bibliographic Info

Paper provided by United States Department of Agriculture, Economic Research Service in its series Economic Research Report with number 102755.

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Date of creation: Apr 2011
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Handle: RePEc:ags:uersrr:102755

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Related research

Keywords: trade policy; reciprocal trade agreements; bilateral; regional; missing trade; gravity models; Agricultural and Food Policy; International Development; International Relations/Trade;

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References

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  1. Vincent Vicard, 2009. "On trade creation and regional trade agreements: does depth matter?," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 145(2), pages 167-187, July.
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  7. Soloaga, Isidro & Winters, L. Alan, 1999. "Regionalism in the Nineties: What Effect on Trade?," CEPR Discussion Papers 2183, C.E.P.R. Discussion Papers.
  8. Gert-Jan M. Linders & Henri L.F. de Groot, 2006. "Estimation of the Gravity Equation in the Presence of Zero Flows," Tinbergen Institute Discussion Papers 06-072/3, Tinbergen Institute.
  9. I-Hui Cheng & Howard J. Wall, 2005. "Controlling for heterogeneity in gravity models of trade and integration," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 49-63.
  10. Thomas L. Vollrath & Charles B. Hallahan & Mark J. Gehlhar, 2006. "Consumer Demand and Cost Factors Shape the Global Trade Network in Commodity and Manufactured Foods," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 54(4), pages 497-511, December.
  11. Peter Egger & Michael Pfaffermayr, 2003. "The proper panel econometric specification of the gravity equation: A three-way model with bilateral interaction effects," Empirical Economics, Springer, vol. 28(3), pages 571-580, July.
  12. Thomas L. Vollrath & Mark J. Gehlhar & Charles B. Hallahan, 2009. "Bilateral Import Protection, Free Trade Agreements, and Other Factors Influencing Trade Flows in Agriculture and Clothing," Journal of Agricultural Economics, Wiley Blackwell, vol. 60(2), pages 298-317.
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Cited by:
  1. Grant, Jason H., 2012. "Is the Growth of Regionalism as Significant as the Headlines Suggest? Lessons from Agricultural Trade," Working Papers 142374, Canadian Agricultural Trade Policy Research Network.
  2. Vollrath, Thomas L. & Grant, Jason H. & Hallahan, Charles B., 2012. "Reciprocal Trade Agreements: Impacts on U.S. and Foreign Suppliers in Commodity and Manufactured Food Markets," Economic Research Report 131618, United States Department of Agriculture, Economic Research Service.

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