IDEAS home Printed from https://ideas.repec.org/p/uwe/wpaper/20151507.html
   My bibliography  Save this paper

Effects of preferential trade agreements in the presence of zero trade flows: the cases of China and India

Author

Listed:
  • Rahul Sen

    (Auckland University of Technology)

  • Sadhana Srivastava

    (Auckland University of Technology)

  • Don J Webber

    (University of the West of England, Bristol)

Abstract

The two most populous countries have embarked upon an extensive array of preferential trading agreements (PTAs). This paper examines the impacts of eleven PTAs on China’s and India’s trade creation and trade diversion using an augmented gravity model incorporating zero trade flows. Results suggest that PTAs were net trade creating for China’s exports and imports; the same PTAs were net trade diverting for India’s exports and insignificant for her imports. For both countries, most ASEAN+6 PTAs had created intra- and extra-bloc trade. The partial scope Asia-Pacific Trade Agreement generated the strongest net export creation effect.

Suggested Citation

  • Rahul Sen & Sadhana Srivastava & Don J Webber, 2015. "Effects of preferential trade agreements in the presence of zero trade flows: the cases of China and India," Working Papers 20151507, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
    • Handle: RePEc:uwe:wpaper:20151507
    as

    Download full text from publisher

    File URL: http://www2.uwe.ac.uk/faculties/BBS/BUS/Research/Economics%20Papers%202015/1507.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Bagwell, Kyle & Staiger, Robert W, 1997. "Multilateral Tariff Cooperation during the Formation of Free Trade Areas," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(2), pages 291-319, May.
    2. Bernhard Herz & Marco Wagner, 2011. "The ‘Real’ Impact of GATT/WTO – a Generalised Approach," The World Economy, Wiley Blackwell, vol. 34(6), pages 1014-1041, June.
    3. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March.
    4. Martijn Burger & Frank van Oort & Gert-Jan Linders, 2009. "On the Specification of the Gravity Model of Trade: Zeros, Excess Zeros and Zero-inflated Estimation," Spatial Economic Analysis, Taylor & Francis Journals, vol. 4(2), pages 167-190.
    5. Andrew K. Rose, 2004. "Do We Really Know That the WTO Increases Trade?," American Economic Review, American Economic Association, vol. 94(1), pages 98-114, March.
    6. Bergstrand, Jeffrey H, 1985. "The Gravity Equation in International Trade: Some Microeconomic Foundations and Empirical Evidence," The Review of Economics and Statistics, MIT Press, vol. 67(3), pages 474-481, August.
    7. Jeffrey A. Frankel, 1998. "Introduction to "Regionalization of the World Economy, The"," NBER Chapters, in: The Regionalization of the World Economy, pages 1-6, National Bureau of Economic Research, Inc.
    8. Jeffrey Frankel & Miles Kahler, 1993. "Regionalism and Rivalry: Japan and the United States in Pacific Asia," NBER Books, National Bureau of Economic Research, Inc, number fran93-1, March.
    9. Aitken, Norman D, 1973. "The Effect of the EEC and EFTA on European Trade: A Temporal Cross-Section Analysis," American Economic Review, American Economic Association, vol. 63(5), pages 881-892, December.
    10. Jeffrey A. Frankel, 1997. "Regional Trading Blocs in the World Economic System," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 72, October.
    11. Boriss Siliverstovs & Dieter Schumacher, 2009. "Estimating gravity equations: to log or not to log?," Empirical Economics, Springer, vol. 36(3), pages 645-669, June.
    12. David H. Romer & Jeffrey A. Frankel, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June.
    13. Juyoung Cheong & Do Won Kwak & Kam Ki Tang, 2015. "Can Trade Agreements Curtail Trade Creation and Prevent Trade Diversion?," Review of International Economics, Wiley Blackwell, vol. 23(2), pages 221-238, May.
    14. Peter Egger & Mario Larch & Kevin E. Staub & Rainer Winkelmann, 2011. "The Trade Effects of Endogenous Preferential Trade Agreements," American Economic Journal: Economic Policy, American Economic Association, vol. 3(3), pages 113-143, August.
    15. Robinson, Sherman & Thierfelder, Karen, 2002. "Trade liberalisation and regional integration: the search for large numbers," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 46(4), pages 1-20.
    16. Shang-Jin Wei & Jeffrey A. Frankel, 1998. "Open Regionalism in a World of Continental Trade Blocs," IMF Staff Papers, Palgrave Macmillan, vol. 45(3), pages 440-453, September.
    17. Soloaga, Isidro & Alan Wintersb, L., 2001. "Regionalism in the nineties: what effect on trade?," The North American Journal of Economics and Finance, Elsevier, vol. 12(1), pages 1-29, March.
    18. Arvind Panagariya, 1999. "The Regionalism Debate: An Overview," The World Economy, Wiley Blackwell, vol. 22(4), pages 455-476, June.
    19. T.N. Srinivasan & Vani Archana, "undated". "India in the Global and Regional Trade: Determinants of Aggregate and Bilateral Trade Flows and Firms' Decision to Export," Indian Council for Research on International Economic Relations, New Delhi Working Papers 232, Indian Council for Research on International Economic Relations, New Delhi, India.
    20. Robert Scollay & John P. Gilbert, 2001. "New Regional Trading Arrangements in the Asia Pacific?," Peterson Institute Press: All Books, Peterson Institute for International Economics, number pa63, October.
    21. J. M. C. Santos Silva & Silvana Tenreyro, 2006. "The Log of Gravity," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 641-658, November.
    22. Richard Baldwin, 1993. "A Domino Theory of Regionalism," NBER Working Papers 4465, National Bureau of Economic Research, Inc.
    23. Jeffrey A. Frankel, 1998. "The Regionalization of the World Economy," NBER Books, National Bureau of Economic Research, Inc, number fran98-1, March.
    24. T.N. Srinivasan & Vani Archana, 2009. "India in the Global and Regional Trade - Determinants of Aggregate and Bilateral Trade Flows and Firms’ Decision to Export," Trade Working Papers 22261, East Asian Bureau of Economic Research.
    25. John Piggott & Alan Woodland (ed.), 1999. "International Trade Policy and the Pacific Rim," International Economic Association Series, Palgrave Macmillan, number 978-1-349-14543-0, December.
    26. Hamanaka, Shintaro, 2012. "Evolutionary paths toward a region-wide economic agreement in Asia," Journal of Asian Economics, Elsevier, vol. 23(4), pages 383-394.
    27. Haq, Zahoor Ul & Meilke, Karl D. & Cranfield, John A.L., 2010. "Does the Gravity Model Suffer from Selection Bias?," Working Papers 90884, Canadian Agricultural Trade Policy Research Network.
    28. Takatoshi Ito & Anne O. Krueger, 1997. "Regionalism versus Multilateral Trade Arrangements," NBER Books, National Bureau of Economic Research, Inc, number ito_97-1, March.
    29. C.A. Primo Braga & Raed Safadi & Alexander Yeats, 1994. "Regional Integration in the Americas: Déjà Vu All Over Again?," The World Economy, Wiley Blackwell, vol. 17(4), pages 577-602, July.
    30. Jeffrey A. Frankel & Miles Kahler, 1993. "Introduction to "Regionalism and Rivalry: Japan and the United States in Pacific Asia"," NBER Chapters, in: Regionalism and Rivalry: Japan and the United States in Pacific Asia, pages 1-18, National Bureau of Economic Research, Inc.
    31. Sejuti Jha, 2013. "Utility of Regional Trade Agreements? Experience from India’s Regionalism," Foreign Trade Review, , vol. 48(2), pages 233-245, May.
    32. Shujiro Urata & Kozo Kiyota, 2003. "The Impacts of an East Asia FTA on Foreign Trade in East Asia," NBER Working Papers 10173, National Bureau of Economic Research, Inc.
    33. Peter Chow & Mitchell Kellman Yochanan, 1999. "A test of the Linder hypothesis in Pacific NIC trade 1965-1990," Applied Economics, Taylor & Francis Journals, vol. 31(2), pages 175-182.
    34. Alexander J. Yeats, 2012. "Implications of COMTRADE Compilation Practices for Trade Barrier Analyses and Negotiations," The World Bank Economic Review, World Bank, vol. 26(3), pages 539-555.
    35. Sumana Dhar & Arvind Panagariya & Junichi Goto, 1999. "Is East Asia Less Open than North America and the EEC? No," International Economic Association Series, in: John Piggott & Alan Woodland (ed.), International Trade Policy and the Pacific Rim, chapter 5, pages 105-127, Palgrave Macmillan.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Suhas Jadhav & Ishita Ghosh, 2024. "Future Prospects of the Gravity Model of Trade: A Bibliometric Review (1993–2021)," Foreign Trade Review, , vol. 59(1), pages 26-61, February.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Rahul Sen & Sadhana Srivastava & Don Webber, 2015. "Preferential trading agreements and the gravity model in presence of zero and missing trade flows: Early results for China and India," Working Papers 2015-02, Auckland University of Technology, Department of Economics.
    2. Jong‐Wha Lee & Innwon Park, 2005. "Free Trade Areas in East Asia: Discriminatory or Non‐discriminatory?," The World Economy, Wiley Blackwell, vol. 28(1), pages 21-48, January.
    3. Jong‐Wha Lee & Innwon Park & Kwanho Shin, 2008. "Proliferating Regional Trade Arrangements: Why and Whither?," The World Economy, Wiley Blackwell, vol. 31(12), pages 1525-1557, December.
    4. Estrella Gómez-Herrera, 2013. "Comparing alternative methods to estimate gravity models of bilateral trade," Empirical Economics, Springer, vol. 44(3), pages 1087-1111, June.
    5. Robert J. R. Elliott & Kengo Ikemoto, 2004. "AFTA and the Asian Crisis: Help or Hindrance to ASEAN Intra‐Regional Trade?," Asian Economic Journal, East Asian Economic Association, vol. 18(1), pages 1-23, March.
    6. Jin, Seung Ha, 2013. "The Effect of South Korean FTAs on Trade: Country-level and Industry-level Analyses," Master's Theses and Plan B Papers 149430, University of Minnesota, Department of Applied Economics.
    7. Simon Guttmann & Anthony Richards, 2006. "Trade Openness: An Australian Perspective," Australian Economic Papers, Wiley Blackwell, vol. 45(3), pages 188-203, September.
    8. 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.
    9. C.de Sá Porto, Paulo & Roberto Azzoni, Carlos, 2006. "How International Integration Affects the Exports of Brazilian States," TD NEREUS 1-2006, Núcleo de Economia Regional e Urbana da Universidade de São Paulo (NEREUS).
    10. Anna Golovko & Hasan Sahin, 2021. "Analysis of international trade integration of Eurasian countries: gravity model approach," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 11(3), pages 519-548, September.
    11. Scott L. Baier & Amanda Kerr & Yoto V. Yotov, 2018. "Gravity, distance, and international trade," Chapters, in: Bruce A. Blonigen & Wesley W. Wilson (ed.), Handbook of International Trade and Transportation, chapter 2, pages 15-78, Edward Elgar Publishing.
    12. 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.
    13. Alberto Behar & Laia Cirera-i-Crivillé, 2013. "Does it Matter Who You Sign With? Comparing the Impacts of North–South and South–South Trade Agreements on Bilateral Trade," Review of International Economics, Wiley Blackwell, vol. 21(4), pages 765-782, September.
    14. (ed.), 0. "Research Handbook on Economic Diplomacy," Books, Edward Elgar Publishing, number 16053.
    15. Shadat Hossain, 2018. "SAFTA and AFTA: a comparative welfare analysis of two regional trade agreements," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 7(1), pages 1-27, December.
    16. Peter Egger & Douglas Nelson, 2011. "How Bad Is Antidumping? Evidence from Panel Data," The Review of Economics and Statistics, MIT Press, vol. 93(4), pages 1374-1390, November.
    17. Guglielmo Caporale & Christophe Rault & Robert Sova & Anamaria Sova, 2009. "On the bilateral trade effects of free trade agreements between the EU-15 and the CEEC-4 countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 145(3), pages 573-573, October.
    18. Head, Keith & Mayer, Thierry, 2014. "Gravity Equations: Workhorse,Toolkit, and Cookbook," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 131-195, Elsevier.
    19. Salvador Gil & Rafael Llorca & J. Antonio Martínez‐Serrano, 2008. "Assessing the Enlargement and Deepening of the European Union," The World Economy, Wiley Blackwell, vol. 31(9), pages 1253-1272, September.
    20. Cardamone, Paola, 2007. "A Survey of the Assessments of the Effectiveness of Preferential Trade Agreements using Gravity Models," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 60(4), pages 421-473.

    More about this item

    Keywords

    Trade creation; Trade diversion; Distance; Trade agreements;
    All these keywords.

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:uwe:wpaper:20151507. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Jo Michell (email available below). General contact details of provider: https://edirc.repec.org/data/seuweuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.