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The impact of North-South and South-South trade agreements on bilateral trade

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  • Alberto Behar

Abstract

Free trade agreements (FTAs) lead to a rise in bilateral trade even if the signatories include developing countries.� Furthermore, the percentage increase in bilateral trade is higher for South-South agreements than for North-South agreements.� The results are robust across a number of gravity model specifications in which we control for the endogeneity of FTAs (with bilateral fixed effects) and also take account of multilateral resistance in both estimation (with country-time fixed effects) and comparative statics (analytically).� Our analytical model shows that multilateral resistance dampens the impact of FTAs on trade by less in South-South agreements than in North-South agreements, which accentuates the difference implied by our gravity model coefficients, and that this difference gets larger as the number of signatories rises.� For example, allowing for lags and multilateral resistance, a four-country North-South agreement raises bilateral trade by 53% while the analogous South-South impact is 107%.

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Bibliographic Info

Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number CSAE WPS/2010-30.

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Date of creation: 01 Aug 2010
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Handle: RePEc:oxf:wpaper:csae-wps/2010-30

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  1. Cies´lik, Andrzej & Hagemejer, Jan, 2009. "Assessing the Impact of the EU-sponsored Trade Liberalization in the MENA Countries," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 24, pages 343-368.
  2. Jeffrey A. Frankel, 1998. "The Regionalization of the World Economy," NBER Books, National Bureau of Economic Research, Inc, number fran98-1, October.
  3. Lee, Jong-Wha & Shin, Kwanho, 2006. "Does regionalism lead to more global trade integration in East Asia?," The North American Journal of Economics and Finance, Elsevier, vol. 17(3), pages 283-301, December.
  4. Alberto Behar & Benjamin D. Nelson, 2012. "Trade Flows, Multilateral Resistance, and Firm Heterogeneity," IMF Working Papers 12/297, International Monetary Fund.
  5. Anne O. Krueger, 1999. "Are Preferential Trading Arrangements Trade-Liberalizing or Protectionist?," Journal of Economic Perspectives, American Economic Association, vol. 13(4), pages 105-124, Fall.
  6. Pabo Sanguinetti & Alok Bohara & Kishore Guatanabe, 2003. "Trade Diverion and Declinning Tariffs: Evidence from MERCOSUR," Department of Economics Working Papers 003, Universidad Torcuato Di Tella.
  7. Antoni Estevadeordal & Kati Suominen, 2005. "Rules of Origin in Preferential Trading Arrangements: Is All Well with the Spaghetti Bowl in the Americas?," Journal of LACEA Economia, LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION.
  8. Carrère, Céline & de Melo, Jaime, 2004. "Are Different Rules of Origin Equally Costly? Estimates from NAFTA," CEPR Discussion Papers 4437, C.E.P.R. Discussion Papers.
  9. Alberto Behar & Benjamin D. Nelson, 2009. "Exports and Logistics," Economics Series Working Papers 439, University of Oxford, Department of Economics.
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