Does It Matter Who You Sign With? Comparing the Impacts of North-South and South-South Trade Agreements on Bilateral Trade

Free trade agreements lead to a rise in bilateral trade regardless of whether the signatories are developed or developing countries. Furthermore, the percentage increase in bilateral trade is higher for South-South agreements than for North-South agreements. In this paper, the results are robust across a number of gravity model specifications in which the analysis controls for the endogeneity of free trade agreements (with bilateral fixed effects) and also takes account of multilateral resistance in both estimation (with country-time fixed effects) and comparative statics (analytically). The analytical model shows that multilateral resistance dampens the impact of free trade agreements on trade by less in South-South agreements than in North-South agreements, which accentuates the difference implied by the gravity model coefficients, and that this difference gets larger as the number of signatories rises. For example, allowing for lags and multilateral resistance, a four-country North-South agreement raises bilateral trade by 53 percent while the analogous South-South impact is 107 percent.

Bibliographic Details

Main Authors:	Behar, Alberto, Cirera i Criville, Laia
Language:	English
Published:	2011-04-01
Subjects:	ABSOLUTE VALUE, AGGREGATE TRADE, AGRICULTURE, BARRIERS TO IMPORTS, BILATERAL TRADE, BLOC TRADE, BUSINESS ENVIRONMENT, CHANGES IN TRADE, COMMODITIES, COMMODITY, COMMON MARKET, COMPARATIVE ADVANTAGE, COMPETITION FRAMEWORK, COMPETITION POLICY, CONSUMERS, COST REDUCTIONS, COUNTRY DUMMIES, CURRENCY, CURRENCY UNION, CUSTOMS, CUSTOMS UNION, CUSTOMS UNIONS, DATE OF ENTRY INTO FORCE, DEVELOPED COUNTRIES, DEVELOPING COUNTRIES, DEVELOPING COUNTRY, DEVELOPMENT ECONOMICS, DEVELOPMENT POLICY, DEVELOPMENT STRATEGIES, ECONOMETRIC ANALYSIS, ECONOMIC GEOGRAPHY, ECONOMIC INTEGRATION, ECONOMIC REFORM, ECONOMIC RELATIONS, ECONOMIC SIZE, ECONOMIC THEORY, ECONOMICS RESEARCH, ECONOMIES OF SCALE, ELASTICITY, ELASTICITY OF SUBSTITUTION, EUROPEAN UNION, EXCHANGE RATE, EXCHANGE RATE REGIMES, EXCHANGE RATES, EXPORTS, EXTERNAL TARIFF, EXTERNAL TARIFFS, FACTOR ENDOWMENTS, FEDERAL RESERVE, FEDERAL RESERVE BANK, FINANCIAL SUPPORT, FLEXIBLE EXCHANGE RATES, FREE TRADE, FREE TRADE AGREEMENT, FREE TRADE AGREEMENTS, FREE TRADE AREA, FREE TRADE AREAS, FREE TRADE ASSOCIATION, FREE TRADE ZONES, FUTURE RESEARCH, GDP, GLOBAL ECONOMIC PROSPECTS, GLOBAL ECONOMY, GLOBAL MARKET, GLOBAL TRADE, GRAVITY EQUATION, GRAVITY MODEL, GRAVITY MODELS, HARMONIZATION, IMPACT OF TRADE, INEQUALITY, INTELLECTUAL PROPERTY, INTELLECTUAL PROPERTY RIGHTS, INTERNAL TRADE, INTERNATIONAL BANK, INTERNATIONAL ECONOMICS, INTERNATIONAL TRADE, LIBERALIZATIONS, LOW-INCOME COUNTRIES, MARKET ACCESS, MATURE MARKETS, MIDDLE-INCOME COUNTRIES, MULTILATERAL TRADE, MULTILATERAL TRADE LIBERALIZATION, MULTIPLIERS, NATIONAL INCOME, OPPORTUNITY COST, OUTPUT, PARTICULAR COUNTRIES, POLICY RESEARCH, POLITICAL ECONOMY, POTENTIAL BENEFITS, PREFERENTIAL AGREEMENTS, PREFERENTIAL TRADE, PREFERENTIAL TRADE AGREEMENT, PREFERENTIAL TRADE AGREEMENTS, PREFERENTIAL TRADING ARRANGEMENTS, PROTECTIONIST, REAL GDP, RED TAPE, REGIONAL AGREEMENTS, REGIONAL INTEGRATION, REGIONAL TRADE, REGIONAL TRADE AGREEMENTS, REGIONAL TRADE ARRANGEMENTS, REGIONALISM, REGIONALIZATION, RESTRICTIVE RULES OF ORIGIN, SIGNATORY COUNTRIES, TARIFF SCHEDULES, TECHNOLOGY TRANSFER, TOTAL FACTOR PRODUCTIVITY, TRADE AGREEMENT, TRADE AGREEMENTS, TRADE BARRIER, TRADE BARRIERS, TRADE CONCESSIONS, TRADE COSTS, TRADE CREATION, TRADE DIVERSION, TRADE EFFECTS, TRADE FACILITATION, TRADE FLOWS, TRADE INTEGRATION, TRADE LIBERALIZATION, TRADE MORE, TRADE PARTNERS, TRADE POLICY, TRADE POLICY REFORMS, TRADE VOLUME, TRADE VOLUMES, TRADING BLOCS, TRADING SYSTEM, TRANSFER OF TECHNOLOGY, TRANSPORT COSTS, UTILITY FUNCTION, VOLUME OF TRADE, WELFARE GAINS, WORLD DEVELOPMENT INDICATORS, WORLD ECONOMY, WORLD TRADE, WORLD TRADE ORGANIZATION,
Online Access:	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20110406081055 https://hdl.handle.net/10986/3392
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