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On the Trade-diversion Effects of Free Trade Agreements

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Author Info

  • Dai, Mian

    ()
    (Drexel University)

  • Yotov, Yoto

    ()
    (Drexel University)

  • Zylkin, Thomas

    ()
    (Drexel University)

Abstract

Standard trade theory suggests that Free Trade Agreements (FTAs) could disrupt trade between members and non-members. However, the trade diversion effects of FTAs have not been thoroughly examined empirically. Using a novel empirical approach, we confirm that FTAs that entered into force during the 1990s diverted trade away from non-member countries. Interestingly, we find that diversion from internal trade due to FTAs was significantly stronger than diversion from external trade.

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File URL: http://dl.dropboxusercontent.com/u/162210677/RePEc/drx/wpaper/LeBow%20College%20of%20Business%20Working%20Paper%202013-3.pdf
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Bibliographic Info

Paper provided by LeBow College of Business, Drexel University in its series School of Economics Working Paper Series with number 2013-3.

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Length: 11 pages
Date of creation: 16 Aug 2013
Date of revision: 08 Oct 2013
Handle: RePEc:ris:drxlwp:2013_003

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Web page: http://www.lebow.drexel.edu/
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Keywords: International Trade; Gravity; Free Trade Agreements; Trade Diversion;

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  1. Magee Christopher S, 2003. "Endogenous Preferential Trade Agreements: An Empirical Analysis," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 2(1), pages 1-19, December.
  2. James E. Anderson & Yoto V. Yotov, 2011. "Terms of Trade and Global Efficiency Effects of Free Trade Agreements, 1990-2002," Boston College Working Papers in Economics 780, Boston College Department of Economics, revised 11 Oct 2011.
  3. Trefler, Daniel, 1993. "Trade Liberalization and the Theory of Endogenous Protection: An Econometric Study of U.S. Import Policy," Journal of Political Economy, University of Chicago Press, vol. 101(1), pages 138-60, February.
  4. 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.
  5. Baier, Scott L. & Bergstrand, Jeffrey H., 2004. "Economic determinants of free trade agreements," Journal of International Economics, Elsevier, vol. 64(1), pages 29-63, October.
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