Do Democratic Agreements Foster Bilateral Trade Flows ?
AbstractFor several years, preferential trade agreements have been oriented towards initiating a deep integration process. As a result, treaties include clauses concerning the harmonization of regulations, policies and standards. In order to join the European Union, a future member must be a stable democracy that respects human rights, the rule of law and the protection of minorities. The inclusion of such a clause can be interpreted as a political choice to promote democracy. But it can also be viewed as a pre-condition for implanting a "deep integration" process : only democracies are able to drive the harmonization process of rules and standards. If democratic constraints imply deeper integration, we can expect that such agreements will have a higher impact on trade inside the area concerned by the agreement. The aim of this paper is to verify that preferential trade agreements (PTAs), which are bound by a democratic constraint, have a higher positive effect on trade inside the area, than non-constraining agreements. To achieve this, we use an Anderson and van Wincoop (2003) type of gravity model, and we differentiate between PTAs according to whether or not they include a democratic clause. Whereas trade between democratic countries is higher than trade between autocratic countries, empirical evidence shows that the inclusion of a democratic clause fosters bilateral trade between the partners has no significant effect relative to no PTA, and is neutral relative to a non-democratic PTAs between South countries.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/4103.
Date of creation: Sep 2005
Date of revision:
Free Trade Agreements; Gravity Model; Democracy;
Find related papers by JEL classification:
- P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- F15 - International Economics - - Trade - - - Economic Integration
- O19 - Economic Development, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- James E. Anderson & Douglas Marcouiller, S.J., 1999.
"Insecurity and the Pattern of Trade: An Empirical Investigation,"
Boston College Working Papers in Economics
418, Boston College Department of Economics, revised 03 Aug 2000.
- James E. Anderson & Douglas Marcouiller, 2002. "Insecurity And The Pattern Of Trade: An Empirical Investigation," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 342-352, May.
- James E. Anderson & Eric van Wincoop, 2004.
Journal of Economic Literature,
American Economic Association, vol. 42(3), pages 691-751, September.
- Wacziarg, Romain & Welch, Karen Horn, 2003.
"Trade Liberalization and Growth: New Evidence,"
1826, Stanford University, Graduate School of Business.
- Milner, Helen V. & Kubota, Keiko, 2005. "Why the Move to Free Trade? Democracy and Trade Policy in the Developing Countries," International Organization, Cambridge University Press, vol. 59(01), pages 107-143, January.
- Andrew K. Rose & Eric van Wincoop, 2001. "National Money as a Barrier to International Trade: The Real Case for Currency Union," American Economic Review, American Economic Association, vol. 91(2), pages 386-390, May.
- Clotilde Granger & Jean-Marc Siroen, 2001.
"Les democraties sont-elles plus ouvertes a l'echange ?,"
CEPII research center, issue 88, pages 59-76.
- Granger, Clotilde & Siroën, Jean-Marc, 2001. "Les démocraties sont-elles plus ouvertes à l'échange ?," Economics Papers from University Paris Dauphine 123456789/6061, Paris Dauphine University.
- Siroën, Jean-Marc & Granger, Clotilde & Duc, Cindy, 2004. "Trade costs and democracy," Economics Papers from University Paris Dauphine 123456789/6251, Paris Dauphine University.
- Mayer, Wolfgang, 1984. "Endogenous Tariff Formation," American Economic Review, American Economic Association, vol. 74(5), pages 970-85, December.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Alexandre Faure).
If references are entirely missing, you can add them using this form.