The Impact of Regional Trade Agreements on International Trade
- 1
Abstract
The gravity model of international trade states that bilateral trade flows based on the economic sizes and distances between two units can be used to examine reasons for international trade. Regional Trade Agreements (RTAs) have appeared recently and have increased markedly in number; however, despite their importance, little study has been performed to analyze the effects of RTAs on international trade. The difference between RTAs and world trade organizations (WTO) is important. Studies of currency integration have appeared recently; however, most assume that currency integration varies the level of international trade between countries by making the proportion constant. This paper eliminates this socalled constant hypothesis and indicates that RTAs alters the slope of the relationship between countries and promote international trade. Empirical analysis indicates that the proportion is not constant. Also, this study shows that RTAs promote international trade more in OECD countries than in non-OECD countries.
- Y. Lee, “Reconciling RTAs with the WTO Multinational Trading System: Case for a New Sunset Requirement on RTAs and Development Facilitation,” Journal of World Trade, Vol. 45, No. 3, 2011, pp. 629-651.
- J. Varzary, “The Failure of Regional and Multinational Trade Agreements,” The Business Review, Vol. 17, No. 1, 2011, pp. 235-240.
- P. Krugman, “Lessons of Massachusetts for EMU,” In: F. Glavazzi and F. Torres, Eds., The Transition to Eco- nomic and Monetary Union in Europe, Cambridge Uni- versity Press, New York, 2001, pp. 241-261.
- R. Baldwin, “The Euro’s Trade Effects,” Working Paper, 594, European Central Bank, Hesse, 2006.
- V. Vicard, “On Trade Creation and Regional Trade Agreements: Does Depth Matter?” Review of World Eco- nomics, Vol. 145, No. 2, 2009, pp. 167-187. doi:10.1007/s10290-009-0010-9
- I. Park, “Regional Trade Agreements in East Asia: Will They Be Sustainable?” Asian Economic Journal, Vol. 23, No. 2, 2009, pp. 169-194. doi:10.1111/j.1467-8381.2009.02008.x
- Y. Decreux, C. Milner and N. Peridy, “Some New In- sights into the Effects of the EU-South Korea Free Trade Area: The role of Non-Tariff Barriers,” Journal of Eco- nomic Integration, Vol. 25, No. 4, 2010, pp. 783-817.
- L. Xuepeng, “Testing Conflicting Political Economy Theories: Full-Fledged Partial-Scope Regional Trade Agreements,” Southern Economic Journal, Vol. 77, No. 1, 2010, pp. 78-103. doi:10.4284/sej.2010.77.1.78
- J. Korinek and M. Melatos, “Trade Impacts of Selected Regional Trade Agreements in Agriculture,” OECD Trade Policy Working Paper, No. 87, 2009.
- A. Vamvakidis, “Regional Trade Agreement or Broad Liberalization: Which Path Leads to Faster Growth?” IMF Economic Review, Vol. 46, No. 1, 1999, pp. 42-52.
- S. Coulibaly, “Evaluating the Trade Effect of Developing Regional Trade Agreements: A Semi-Parametric Approach,” Journal of Economic Integration, Vol. 24, No. 4, 2009, pp. 709-743.
- R. A. Frankel and A. Rose, “The Endogeneity of the Op- timum Currency Area Criteria,” The Economic Journal, Vol. 108, No. 449, 1998, pp. 1009-1025. doi:10.1111/1468-0297.00327
- H. Katayama and M. Melatos, “The Nonlinear Impact of Currency Unions on Bilateral Trade,” Economics Letters, Vol. 112, No. 1, 2011, pp. 94-96. doi:10.1016/j.econlet.2011.03.022