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Bilateral Trade Patterns and Welfare: An Egypt-EU Preferential Trade Agreement

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  • Denise Eby Konan

    (Department of Economics, University of Hawaii at Manoa)

  • Keith E Maskus

Abstract

This paper considers the welfare implications of a discriminatory preferential trading arrangement in a general equilibrium model where imports are differentiated by region of origin and terms of trade are fixed. The relationship between the initial (pre-reform) relative volume of trade with the potential partner and welfare changes is theoretically ambiguous. Applied general equilibrium analysis of Egyptian trade illustrates that potential Egyptian welfare gains from a European PTA are modest. Experiments altering the composition of Egyptian trading patterns show that trade creation and diversion are non-monotonic, concave functions of the benchmark share of trade with the PTA partner. Nonetheless, aggregate welfare gains rise with the initial partner trade share. Thus, in the particular case considered here, the more focused Egypt's trade patterns are on the EU, the more the country would gain from a preferential trading arrangement.

Suggested Citation

  • Denise Eby Konan & Keith E Maskus, 2000. "Bilateral Trade Patterns and Welfare: An Egypt-EU Preferential Trade Agreement," Working Papers 200001, University of Hawaii at Manoa, Department of Economics.
    • Handle: RePEc:hai:wpaper:200001
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    File URL: http://www.economics.hawaii.edu/research/workingpapers/001.pdf
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    References listed on IDEAS

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    11. Denise Eby Konan & Keith E. Maskus, 2012. "Preferential Trade and Welfare with Differentiated Products," Review of International Economics, Wiley Blackwell, vol. 20(5), pages 884-892, November.
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    Cited by:

    1. Denise KONAN & Bernard HOEKMAN, 2001. "Deepening Egypt-US Trade Integration: Economic Implications of Alternative Options," Middle East and North Africa 330400039, EcoMod.
    2. Jeffrey B. Nugent & Abla M. Abdel-Latif, 2010. "A Quiz on the Net Benefits of Trade Creation and Trade Diversion in the QIZs of Jordan and Egypt," Working Papers 514, Economic Research Forum, revised 04 Jan 2010.

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