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How has regionalism in the 1990s affected trade?

Author

Listed:
  • Soloaga, Isidro
  • Winters, L. Alan
Abstract
The authors apply a gravity model to data on annual non-fuel imports for 58 countries for the years 1980-96, to quantify the effects on trade of recently created or revamped preferential trade agreements (PTAs). They modify the usual gravity equation to identify the separate effects of PTAs on intra-bloc trade, members'total imports, and members'total exports. They also formally test the significance of changes in the estimated coefficients before and after the blocs'formation. Their estimates give no indication that the"new wave"of regionalism boosted intra-bloc trade significantly. They found convincing evidence of trade diversion only for the European Union and the European Free Trade Association. For the same blocs they also observed"export diversion", which would be consistent with these blocs'imposing a welfare cost on the rest of the world. Trade liberalization efforts in Latin America have had a positive impact on the imports of bloc members (Andean Group, Central American Common Market, Latin American Integration Association, and MERCOSUR). Increasing propensities to export generally accompanied increasing propensities to import, suggesting that general trade liberalization had a strong effect. The exception was MERCOSUR, for which import and export propensities displayed opposite movements, with exports performing worse than expected over the mid-1990s. Although MERCOSUR members have undoubtedly liberalized since the mid-1980s, these results suggest that their trade performance has been influenced more by competitiveness than by trade policy.

Suggested Citation

  • Soloaga, Isidro & Winters, L. Alan, 1999. "How has regionalism in the 1990s affected trade?," Policy Research Working Paper Series 2156, The World Bank.
    • Handle: RePEc:wbk:wbrwps:2156
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    References listed on IDEAS

    as
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