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Study of Mutual Influence of International Trade Agreements and International Trade
[Исследование Взаимного Влияния Международных Торговых Соглашений И Международной Торговли]

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  • Idrisov, Georgy (Идрисов, Георгий)

    (Russian Presidential Academy of National Economy and Public Administration (RANEPA))

  • Istomin, R. (Истомин, Р.)

    (Russian Presidential Academy of National Economy and Public Administration (RANEPA))

  • Kaukin, Andrey (Каукин, Андрей)

    (Russian Presidential Academy of National Economy and Public Administration (RANEPA))

Abstract

World trade has expanded significantly in the second half of the 20th century: in the period from 1948 to 1973 the value of trade at current prices increased from 59 to 579 billion dollars a year. World GDP in nominal terms over the same period increased by 6 times. The growth rate of exports in real terms, faster than the growth rate of real GDP doubled during the second half of the 20th century. A considerable role in this rapid growth of trade relations played the Bretton Woods agreements and the multilateral liberalization of trade regimes pursued in the framework of the GATT. Trade liberalization has in fact decline in trade barriers, expanding production capacity through the involvement of the world economy into the global production chain companies with more low relative cost of production, which contributes to the global division of labor, an increase in world production of equalization between the two countries and marginal rates of substitution of some other goods. In theory, a totally free trade is beneficial to all market participants if they are quite small in comparison with the global market and can not influence world prices. However, trade liberalization does not necessarily lead to an increase in the welfare of even small-sized countries which are not able to influence world prices. International trade theory does not give an unambiguous answer to the question of whether this specific agreement increasing the well-being of participants, or decreases. Effect of preferential trade agreements concluded on the welfare of his country depends on the manner in which trade flows are redistributed as a result of this agreement. If the increase in trade between the members of the agreement is due to the decrease in imports from third countries, the agreement has a negative effect on the welfare of its members. If the increase in trade with partners in the PTS associated with a reduction of trade costs between them and does not reject trade from third countries, the agreement increases the welfare of the members. The question of whether the agreement increasing the well-being of countries that have concluded it is important from the economic and political point of view as the goal of the government should be the welfare of their citizens. In practice, governments often when making a decision on the conclusion of a trade agreement governed the benefits of any industry or a limited group of persons. Such motives usually are in conflict with the objective of maximizing social welfare. The actual total impact of each preferential trade agreement on welfare can be found only empirically. In this paper we present an assessment entered into force in 2010. The agreement on the establishment of the Customs Union of Belarus, Kazakhstan and Russia, and examine whether it has a positive impact on the welfare of the participating countries. Evaluation is done by cross-sectional comparison of the world's trade in different periods of time. Use gravity empirical model of international trade, which has one of the highest explanatory power and, at the same time, a stable theoretical basis, following several general equilibrium models. This econometric model is a cross-sectional model, which means that in reality the long-term effect may be greater than estimated in the work due to the fact that at present not all barriers to trade between the two countries fell to their long-term levels and trade flows could not time to respond to changes that have occurred to date.

Suggested Citation

  • Idrisov, Georgy (Идрисов, Георгий) & Istomin, R. (Истомин, Р.) & Kaukin, Andrey (Каукин, Андрей), 2015. "Study of Mutual Influence of International Trade Agreements and International Trade [Исследование Взаимного Влияния Международных Торговых Соглашений И Международной Торговли]," Published Papers mn62, Russian Presidential Academy of National Economy and Public Administration.
  • Handle: RePEc:rnp:ppaper:mn62
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    Keywords

    trade agreements; international trade; trade liberalization;
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