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Expanding RTAs, Trade Flows, and the Multinational Enterprise

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  • Michele Fratianni

    (Department of Business Economics and Public Policy, Indiana University Kelley School of Business)

  • Chang Hoon Oh

    (Faculty of Business, Brock University)

Abstract

We test the relationship between the size of regional trade agreements (RTA) and openness by using a gravity equation with multilateral trade factors. Our sample includes eleven RTAs, seven with constant membership and four with expanding membership. Regional trade bias declines with the size of the club; three of the four expanding RTAs have already surpassed their ‘optimal’ size. We also explore the link between openness of the RTA and the geographic strategy of the multinational enterprise. We find strong evidence in favor of the regionalization strategy, which has been enhanced by the presence of RTAs.

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Paper provided by Indiana University, Kelley School of Business, Department of Business Economics and Public Policy in its series Working Papers with number 2008-02.

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Date of creation: Mar 2008
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Handle: RePEc:iuk:wpaper:2008-02
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Keywords: Trade Blocks; Regional Integration; Multinational Enterprises (MNEs); Plurilateral RTAs; Trade Creation; Trade Diversion;

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  • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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Cited by:

  1. Chang Hoon Oh & Michele Fratianni, 2010. "Do Additional Bilateral Investment Treaties Boost Foreign Direct Investments?," Working Papers 2010-04, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
  2. Michele Fratianni & Francesco Marchionne, 2011. "Trade Costs and Economic Development," Working Papers 2011-01, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
  3. Selmier, W. Travis & Oh, Chang Hoon, 2012. "International business complexity and the internationalization of languages," Business Horizons, Elsevier, vol. 55(2), pages 189-200.
  4. Filippov, Sergey, 2012. "European investment promotion agencies vis-à-vis multinational companies from emerging economies: Comparative analysis of BRIC investor targeting," MERIT Working Papers 076, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  5. Zwinkels, Remco C.J. & Beugelsdijk, Sjoerd, 2010. "Gravity equations: Workhorse or Trojan horse in explaining trade and FDI patterns across time and space?," International Business Review, Elsevier, vol. 19(1), pages 102-115, February.
  6. Anselm Mattes & Philipp Meinen & Ferdinand Pavel, 2012. "Goods Follow Bytes: The Impact of ICT on EU Trade," Discussion Papers of DIW Berlin 1182, DIW Berlin, German Institute for Economic Research.
  7. Bailey, Nicholas & Li, Sali, 2015. "Cross-national Distance and FDI: The Moderating Role of Host Country Local Demand," Journal of International Management, Elsevier, vol. 21(4), pages 267-276.
  8. Rugman, Alan M. & Oh, Chang Hoon, 2010. "Does the regional nature of multinationals affect the multinationality and performance relationship?," International Business Review, Elsevier, vol. 19(5), pages 479-488, October.
  9. Stirbat, Liviu & Record, Richard & Nghardsaysone, Konesawang, 2015. "The Experience of Survival: Determinants of Export Survival in Lao PDR," World Development, Elsevier, vol. 76(C), pages 82-94.
  10. Suder, Gabriele & Liesch, Peter W. & Inomata, Satoshi & Mihailova, Irina & Meng, Bo, 2015. "The evolving geography of production hubs and regional value chains across East Asia: Trade in value-added," Journal of World Business, Elsevier, vol. 50(3), pages 404-416.
  11. Anwar, Sajid & Nguyen, Lan Phi, 2011. "Foreign direct investment and trade: The case of Vietnam," Research in International Business and Finance, Elsevier, vol. 25(1), pages 39-52, January.
  12. Michele Fratianni & Francesco Marchionne, 2009. "The Limits to Integration," Mo.Fi.R. Working Papers 20, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
    • Michele Fratianni & Francesco Marchionne, 2011. "The Limits to Integration," Chapters, in: International Handbook on the Economics of Integration, Volume I, chapter 9 Edward Elgar Publishing.
  13. Oh, Chang Hoon & Rugman, Alan M., 2012. "Regional integration and the international strategies of large European firms," International Business Review, Elsevier, vol. 21(3), pages 493-507.

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