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Reciprocal Trade Agreements: Impacts on Bilateral Trade Expansion and Contraction in the World Agricultural Marketplace

Author

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  • Vollrath, Thomas L.
  • Hallahan, Charles B.

Abstract

The rapid increase in the number of bilateral and regional free-trade agreements since 1995 is a striking development. The proliferation of these agreements has raised questions about whether they have, in fact, opened markets, created trade, promoted economic growth, and/or distorted trade. This study uses panel data from 1975 to 2005 and a gravity framework model to identify the influence of reciprocal trade agreements (RTAs) on bilateral trade in the world agricultural marketplace. A benchmark, Heckman sample-selection and two generalized models, one of which accounts for RTA phase-in effects, are used to gauge the impact on partner trade of mutual as well as asymmetric RTA membership. Empirical results show that RTAs increase agricultural trade between member countries but decrease trade between member and nonmember countries. Interestingly, RTAs were found to be particularly effective at expanding agricultural trade and opening markets in developing countries when developing- country trading partners are part of the same agreement.

Suggested Citation

  • Vollrath, Thomas L. & Hallahan, Charles B., 2011. "Reciprocal Trade Agreements: Impacts on Bilateral Trade Expansion and Contraction in the World Agricultural Marketplace," Economic Research Report 102755, United States Department of Agriculture, Economic Research Service.
    • Handle: RePEc:ags:uersrr:102755
    DOI: 10.22004/ag.econ.102755
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    1. Vollrath, Thomas L. & Grant, Jason H. & Hallahan, Charles B., 2012. "Reciprocal Trade Agreements: Impacts on U.S. and Foreign Suppliers in Commodity and Manufactured Food Markets," Economic Research Report 131618, United States Department of Agriculture, Economic Research Service.
    2. Jason H. Grant, 2013. "Is the growth of regionalism as significant as the headlines suggest? Lessons from agricultural trade," Agricultural Economics, International Association of Agricultural Economists, vol. 44(1), pages 93-109, January.
    3. Jason H. Grant & Kathryn A. Boys, 2012. "Agricultural Trade and the GATT/WTO: Does Membership Make a Difference?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 94(1), pages 1-24.
    4. Vanzetti, David & Huong, Pham Lan, 2014. "Rules of origin, labour standards and the TPP," Conference papers 332549, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.

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    Keywords

    Agricultural and Food Policy; International Development; International Relations/Trade;
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