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On the trade-diversion effects of free trade agreements

Author

Listed:
  • Dai, Mian
  • Yotov, Yoto V.
  • Zylkin, Thomas

Abstract

Trade-diversion effects of free trade agreements (FTAs) have not been thoroughly examined empirically. Using a novel empirical approach, we confirm that FTAs divert trade away from non-member countries and even more so from internal trade (domestic sales) in member countries.

Suggested Citation

  • Dai, Mian & Yotov, Yoto V. & Zylkin, Thomas, 2014. "On the trade-diversion effects of free trade agreements," Economics Letters, Elsevier, vol. 122(2), pages 321-325.
    • Handle: RePEc:eee:ecolet:v:122:y:2014:i:2:p:321-325
    DOI: 10.1016/j.econlet.2013.12.024
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    References listed on IDEAS

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    1. Anderson, James E. & Yotov, Yoto V., 2016. "Terms of trade and global efficiency effects of free trade agreements, 1990–2002," Journal of International Economics, Elsevier, vol. 99(C), pages 279-298.
    2. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    3. 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.
    4. 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 138-160, February.
    5. 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.
    6. I-Hui Cheng & Howard J. Wall, 2005. "Controlling for heterogeneity in gravity models of trade and integration," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 49-63.
    7. María Pía Olivero & Yoto V. Yotov, 2012. "Dynamic gravity: endogenous country size and asset accumulation," Canadian Journal of Economics, Canadian Economics Association, vol. 45(1), pages 64-92, February.
    8. James E. Anderson, 2011. "The Gravity Model," Annual Review of Economics, Annual Reviews, vol. 3(1), pages 133-160, September.
    9. 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.
    10. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Natalya Ketenci, 2017. "The Effect of the European Union Customs Union on the Balance of Trade in Turkey," Foreign Trade Review, , vol. 52(4), pages 219-232, November.
    2. Gabriel Felbermayr & Jasmin Katrin Gröschl & Thomas Steinwachs, 2016. "The Trade Effects of Border Controls: Evidence from the European Schengen Agreement," ifo Working Paper Series 213, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    3. Zakaria Sorgho, 2016. "RTAs' Proliferation and Trade-diversion Effects: Evidence of the ‘Spaghetti Bowl’ Phenomenon," The World Economy, Wiley Blackwell, vol. 39(2), pages 285-300, February.
    4. repec:elg:eechap:17028_2 is not listed on IDEAS
    5. Gabriel Felbermayr & Clemens Fuest & Jasmin Katrin Gröschl & Daniel Stöhlker, 2017. "Economic Effects of Brexit on the European Economy," EconPol Policy Reports 4, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    6. Gabriel Felbermayr & Jasmin Katrin Gröschl & Thomas Steinwachs, 2016. "Handelseffekte von Grenzkontrollen," ifo Forschungsberichte, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 73, October.
    7. Heid, Benedikt & Larch, Mario & Yotov, Yoto, 2017. "Estimating the Effects of Non-discriminatory Trade Policies within Structural Gravity Models," School of Economics Working Paper Series 2017-10, LeBow College of Business, Drexel University.
    8. Scott L. Baier & Amanda Kerr & Yoto V. Yotov, 2018. "Gravity, distance, and international trade," Chapters,in: Handbook of International Trade and Transportation, chapter 2, pages 15-78 Edward Elgar Publishing.
    9. Scott L. Baier & Yoto V. Yotov & Thomas Zylkin, 2016. "On the Widely Differing Effects of Free Trade Agreements: Lessons from Twenty Years of Trade Integration," CESifo Working Paper Series 6174, CESifo Group Munich.
    10. Machado, José A.F. & Santos Silva, J.M.C. & Wei, Kehai, 2016. "Quantiles, corners, and the extensive margin of trade," European Economic Review, Elsevier, vol. 89(C), pages 73-84.
    11. Gabriel Felbermayr & Rahel Aichele & Inga Heiland & Arne Melchior & Marina Steininger, 2016. "TTIP – Potential Effects on Norway," ifo Working Paper Series 228, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    12. Roberta Piermartini & Yoto V. Yotov, 2016. "Estimating Trade Policy Effects with Structural Gravity," CESifo Working Paper Series 6009, CESifo Group Munich.
    13. Toshiyuki Matsuura & Kazunobu Hayakawa & Nuttawut LAKSANAPANYAKUL & Yuta Watabe, 2014. "Price and Quality Changes in Outsiders of Regional Trade Agreements," Working Papers e84, Tokyo Center for Economic Research.
    14. repec:bla:kyklos:v:70:y:2017:i:2:p:278-305 is not listed on IDEAS
    15. Sorgho, Zakaria, 2014. "RTAs’ Proliferation and Trade-diversion effects: Evidence of the “Spaghetti Bowl” Phenomenon," MPRA Paper 60503, University Library of Munich, Germany.
    16. repec:kap:asiaeu:v:16:y:2018:i:1:d:10.1007_s10308-017-0481-6 is not listed on IDEAS
    17. Christian Elleby & Wusheng Yu & Qian Yu, 2018. "The Chinese Export Displacement Effect Revisited," IFRO Working Paper 2018/02, University of Copenhagen, Department of Food and Resource Economics.

    More about this item

    Keywords

    International trade; Gravity; Free trade agreements; Trade diversion;

    JEL classification:

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

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