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Effects of Regional Trade Agreements on Trade in Agrifood Products: Evidence from Gravity Modeling Using Disaggregated Data

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Author Info
Sampath Jayasinghe
Rakhal Sarker
Abstract

The recent proliferation of regional trade agreements (RTAs) has intensified the debate on their merits. A growing literature has addressed this policy debate, focusing on the welfare and trade effects of RTAs and their likely impacts on the multilateral trading system. Some view them as stepping-stones toward multilateral trade liberalization while others see them as stumbling blocks against free trade. The existing literature has neglected some important aspects of RTAs dealing with trade in agrifood products. This study analyzes trade creation and diversion effects of the North American Free Trade Agreement (NAFTA) on trade of six selected agrifood products from 1985 to 2000. The investigation estimates an extended gravity model using pooled cross-sectional time-series regression and generalized least squares methods. The result shows that the share of intraregional trade is growing within NAFTA and that NAFTA has displaced trade with the rest of the world. NAFTA has served to boost trade significantly among its members rather than with the rest of the world. Countries participating in NAFTA have moved toward a lower degree of relative openness in agrifood trade with the rest of the world.

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Paper provided by Center for Agricultural and Rural Development (CARD) at Iowa State University in its series Center for Agricultural and Rural Development (CARD) Publications with number 04-wp374.

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Date of creation: Sep 2004
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Handle: RePEc:ias:cpaper:04-wp374

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Related research
Keywords: agrifood products; gravity model; NAFTA; North American Free Trade Agreement; regional trade agreements; trade creation; trade diversion.;

References listed on IDEAS
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  1. Grant, Jason H. & Lambert, Dayton M., 2005. "Regionalism in World Agricultural Trade: Lessons from Gravity Model Estimation," 2005 Annual meeting, July 24-27, Providence, RI 19269, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
  2. Cardamone, Paola, 2007. "A survey of the assessments of the effectiveness of Preferential Trade Agreements using gravity models," Working Papers 7282, TRADEAG - Agricultural Trade Agreements. [Downloadable!]
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