Regional Trade Agreements in Mediterranean Area: Econometric Analysis by Static Gravity Model

Since the mid-1980s, there was the rise of a new wave of economic regionalism in the world economy with the spread of free trade agreements (FTAs). A key objective of free trade involves developing commercial exchanges between member countries. The gravity model is a vital tool to explain the bilateral trade data against the variables of the relative size of the pair of countries implicated in the trade: distance, common border, and language and models for each of the FTAs. This article focuses on studying the influence of FTAs in the Mediterranean countries in which we integrate the role of regional dummy EU (15), EMU (euro zone), the AMU and AGADIR agreement in trade flows. The use of regional variables are designed to determine whether its FTAs contribute to the creation of trade diversion. This study examines a cross-section and panel of 27 countries for 1980–2011. The results show the existence of a strong relationship between the factors of FTAs and trade flows.