Regionalization of Textile Trade: Evidence from the EU,NAFTA, AFTA,and SAPTA

This study examines the integration effects of four regional trading agreements (RTAs) respectively the EU, NAFTA, AFTA, and SAPTA on textile fabric trade from 1990–2005. A modified gravity model for analyzing textile trade was first generated by the fixed-effects method. Regional dummy variables were then used to identify trade creation and trade diversion effects arising from the RTAs. The results indicated that neither trade creation nor trade diversion effects existed in the EU textile trade. Trade creation in terms of imports was identified in NAFTA and SAPTA. There is no indication of shifting textiles trade from the rest of the world to the member countries with the implementation of these two free trade areas (FTAs). On the contrary, trade diversion was recognised some years after AFTA's enactment. It represents a movement towards free trade and is beneficial for the welfare of the world. This article provides empirical evidence on how textiles trade influenced by the formation of RTAs and elimination of quotas on textiles products.     

Impact of RTA and PTA on Bangladesh’s Export: Application of a Gravity Model

As part of its growth strategy, Bangladesh instituted a trade liberalization process in the early 1990s which gained momentum in later years. Trade grew from 24.4 to 45% of GDP between 1980–81 and 2007–08, an indicator of increased liberalization as well as the growing importance of the external sector in Bangladesh. Apart from its unilateral liberalization, Bangladesh participates in three different regional trade agreements (RTAs): the South Asian Free Trade Agreement (SAFTA), the Asia Pacific Trade Agreement (APTA) and the Bay of Bengal Initiative for Multisectoral Technical and Economic Cooperation Free Trade Area (BIMSTEC FTA). In addition, Bangladesh signed preferential trade agreements (PTAs) with the member countries of the Developing 8 (D8). Because of the growing importance of RTAs, this study investigates their contribution to the export flows from Bangladesh using the gravity model that has become the primary tool for estimating the trade effects of regional integration. Regression results of bilateral exports for 40 countries from 1992–2009 indicate two crucial aspects. Firstly, all the RTAs consistently maintained statistically significant negative signs, except the BIMSTEC FTA and SAFTA, which showed insignificantly positive and insignificantly negative effects respectively. Secondly, the intensity of negative effects and the level of significance have shown a declining trend as the status of those blocs has changed from political or economic cooperation agreements to preferential agreements and from preferential agreements to free trade agreements. Thus, the intensity of tariff liberalization and the degree of sectoral coverage seem to be the important determinants of the RTAs’ performance. Therefore, experts expect that full-fledged implementation of FTA provisions and the elimination of all tariff and non-tariff barriers might result in a higher degree of integration.     

Regional Trade Agreements and the Pattern of Trade: A Networks Approach

This paper uses a complex network approach for the analysis trade effects from regional trade agreements on world trade flows. We use bilateral trade data to compute the network community structure for every year between 1970 and 2000. We compare this to null community structures that emerge from various models based on regional and geographical classifications, the implementation of RTA's and gravity models of trade. Our results show that RTA formation appears to have a cyclical pattern on the world trade network community structure. We document periods where bilateral trade flows and the structure of the world trade network are consistent with those predicted by formation of RTAs. These cycles occur in 1980–86 and 1990–96. At the same time, we document periods in which the pattern in the world trade network is not explained by RTA formation. Two periods, 1986–90 and 1997–2000, show a pattern of bilateral trade flows that moves away from the prediction that results from assuming RTA formation as the driving force in the determination of the world trade network structure. Factors contributing to the latter parts of the cycle during our sample period include formation of regional trade networks in East Asia that account for a significant portion of world trade but are not formalised by RTAs in force.     

RTAs' Proliferation and Trade‐diversion Effects: Evidence of the ‘Spaghetti Bowl’ Phenomenon

This paper investigates the trade‐diversion effects of regional trade agreements (RTAs), so‐called spaghetti bowl phenomenon (SBP), in multilateral trade. The SBP is due to the proliferation of RTAs. Thus, I investigate the relationship between the number of RTAs concluded by a country and the additional trade value attributed to a RTA. Using bilateral trade data in a sample of 119 countries, from 1995 to 2012, my main finding reveals a negative trade effect between them, confirming the existence of SBP in multilateral trade. However, results could not conclude the evidence of a negative effect of overlapping RTAs, involving the existence of SBP, within North–North, North–South or South–South trade. But, the additional trade value attributed to a RTA concluded with EU countries or US seems to confirm significantly a trade‐diversion effect because of the number of RTAs signed by these countries.     

Do Trade Agreements Increase Food Trade?

In addition to multilateral trade agreements under the World Trade Organization (WTO), the world has seen a remarkable proliferation of regional trade agreements (RTAs) in the last two decades. This study investigates whether these multilateral and regional trade institutions increase food trade and bring the world into a freer flow of food. The gravity model of international trade is used for the empirical analysis. The model is developed in a large panel data setting and attempted to address some potential problems in the estimations including multilateral trade resistances, zero trade values and endogeneity. The results suggest that both the WTO and RTAs have delivered significant positive effects on trade among the participant countries, but not food. Only RTAs are found to have increased food trade among the participant countries. However, although on average the WTO is found to have negative implications on food trade, it facilitates the developing countries more than the developed countries.     

Proliferating Regional Trade Arrangements: Why and Whither?

This paper investigates why regional trade arrangements (RTAs) are proliferating extensively and how the effects of multiple RTAs, by interacting with each other, evolve over time. Our empirical analysis, based on an extended gravity model utilising a large panel dataset of 175 countries from 1948 to 1999, shows that RTAs on average increase global trade by raising intra‐bloc trade without damaging extra‐bloc trade. The net trade effects, however, heavily depend on the types of RTA strategic evolution over time, which we categorise as ‘expansionary’ RTAs, ‘duplicate’ RTAs or ‘overlapping’ RTAs. We find that countries excluded from an RTA can benefit more from duplicating a separate RTA than from joining an existing RTA. This result explains why the number of bilateral trade blocs, rather than the membership size of existing RTAs, is currently exploding. We also find that the net trade‐creating effects of RTAs are substantially lower for countries participating in overlapping RTAs. This result suggests that it is less likely that the currently proliferating RTAs will completely merge and lead the world economy to global free trade. Our empirical results are robust to controlling for the characteristics of countries that may influence the impact of RTAs.     

Is Regionalism an Increasing Feature of the World Economy?

Measuring the importance of regionalism in international trade is desirable but difficult. The number of regional trade agreements (RTAs) reported to the WTO or the proportion of world trade which is between countries in an RTA are frequently cited as evidence that regionalism is growing at an accelerating rate. This paper questions whether RTAs really are as important as the headline numbers suggest, or whether they just occupy an excessively large part of policymakers’ and economic journalists’ time. The main contributions are to analyse the number of RTAs and the share of world trade criteria in order to show why both are meaningless in the current world economy. The paper concludes that, although the extent of regionalism is difficult to measure and the desirability of individual RTAs is difficult to assess, the threat to the multilateral trading system does not appear to be as large as is often reported, because the long‐term dynamics of RTAs lead either to state formation, which is important but rare, or to ineffectiveness, which is the fate of the vast majority of RTAs.     

Trade Creation and Diversion Effects of Regional Trade Agreements: A Product‐level Analysis

This paper examines the impacts of regional trade agreements (RTAs) on trade flows at product level, with a particular focus on trade creation and diversion. Based on estimation of the gravity equation, dealing with the zero trade flows and endogeneity bias problems, we analyse the impacts of various types of RTAs involving 67 countries for 20 products during the 1980–2006 period. We find that RTAs among developing countries tend to cause trade diversion compared with RTAs among developed countries. Taking the higher external tariff rates of developing countries compared with developed countries into consideration, our results suggest trade diversion is likely to be caused by remaining high tariffs on imports from non‐members. In addition, we find the trade creation effect for many products in the cases of Customs Unions and plurilateral RTAs. These results imply that trade creation would be caused by various factors besides the reduction in tariff rates. Based on these results, we draw a policy implication that external tariff rate reduction is an important factor in avoiding trade diversion in the formation of RTAs, in particular for RTAs among developing countries, while a large number of members and the common external tariff appear to be important for generating the trade creation effect.     

Formation of interdependent regional trade agreements and production networks

Production networks (PNs) can be defined as a determinant of trade partnership. Deepening PNs may generate positive welfare effects and lead to a proliferation in the formation of interdependent regional trade agreements (RTAs). This paper theoretically develops the link between PNs and the formation of RTAs and empirically investigates the link by applying a qualitative choice model estimation methodology (probit) with panel data that covers bilateral country‐pairs among 147 countries between 2000 and 2010. We find that the RTA formation has been strongly driven by deepening PNs between members as well as with third countries. We also find that production network‐driven RTA interdependence is member specific.     

全球价值链分工下区域贸易协定能降低服务贸易成本吗

全球价值链分工下服务的作用愈发凸显,服务贸易的新形式丰富了区域贸易协定影响服务贸易成本的渠道。本文从中间投入和最终需求两个维度分析了区域贸易协定对不同类型服务贸易成本的影响效果和机制。结果表明:单纯签订区域贸易协定对服务贸易成本的抑制作用并不显著,提高区域贸易协定的深度将显著降低服务贸易成本。区域贸易协定可以显著降低中间投入服务贸易成本,对最终需求服务贸易成本的抑制效应不显著。区域贸易协定的服务贸易自由化效果存在非对称性,北北型区域贸易协定对服务贸易成本的抑制效应强于南北型。北北型区域贸易协定可以通过减少监管分歧和货物贸易自由化效果外溢两条途径降低服务贸易成本,南北型区域贸易协定则仅可以通过货物贸易自由化的外溢效应来降低服务贸易成本。因此,中国应积极与发达国家开展高质量区域贸易协定谈判,通过提高区域贸易协定深度充分发挥其服务贸易自由化效果。     

Effects of world market oriented regional integration on developing countries

The inward-oriented wave of regionalisation in the mid-sixties in the so-called developing countries was judged, twenty years later, to have been a failure almost everywhere. Since the beginning of the nineties a new trend towards regionalisation has been emerging, this time more strongly oriented towards world markets. Do the new regional integration agreements complement the economic and development policy effects aimed at by the structural adjustment programmes of the international financial institutions? What effects do they have on the economic development and the industrialisation of the countries involved?     

Third‐country Effects of Regional Trade Agreements

Does regionalism negatively impact non‐members? To answer this question, we examine the effect of regional trade agreements (RTAs) on imports from non‐members and the tariffs that they face. Using data from six RTAs in Latin America and Europe, we do not find evidence that implementation of the regional agreements is associated with trade diversion from third countries to regional members. Using detailed industry data on preference margins and most‐favoured nation (MFN) tariffs for three trade agreements in Latin America over 12 years, we find that greater preference margins do not significantly reduce imports from third countries. We also look at the effect of preferences on external tariffs. We find evidence that preferential tariff reduction tends to precede the reduction of external MFN tariffs in a given sector, offering evidence of tariff complementarity. Overall, the results suggest that regionalism does not significantly harm non‐members.     

The value of market access and national treatment commitments in services trade agreements

This paper looks at market access and national treatment commitments for services in the General Agreement on Trade in Services (GATS) and in 95 regional trade agreements (RTAs) involving the countries that are covered in the OECD Services Trade Restrictiveness Index (STRI). The objective is to quantify the impact of legal bindings on trade in services that result from a reduction in the uncertainty faced by exporters. Bilateral bindings indices are created for five broad service sectors (professional services, computer services, telecoms, financial services and transport services). They indicate how close the sector is from a fully bound regime with no possibility to introduce any new trade barrier, by comparing commitments with the actual trade regime. These bilateral indices are then tested over the period 2000–2014 in a structural gravity model. Despite differences across sectors, the results confirm that the legal bindings typically found in services trade agreements tend to have a positive impact on exports even if no actual liberalisation takes place.     

对发展中国家的特殊和差别待遇——以WTO有关区域贸易安排的规定为视角

特殊与差别待遇,是世贸组织处理发展中成员方经济发展问题时必须遵循的一项基本原则。但是,世贸组织有关区域贸易协定的现有规范却缺乏对发展中国家的特殊考虑,这不利于发展中国家参与区域经济合作,促进其经济发展。多哈部长宣言授权成员方在区域贸易协定的谈判中考虑发展问题,但是发达成员和发展中成员在此问题上存在争议,尚未达成共识。发展中国家应当积极参与谈判,争取保留授权条款,同时在24条中引入特殊和差别待遇。作为交换条件,发展中国家可以接受就南南型区域贸易协定向世贸组织进行通知并由其进行审查。     

Carbon,Trade Policy and Carbon Free Trade Areas

This paper discusses both the potential contribution that trade policy initiatives can make towards the achievement of significant global carbon emissions reduction and the potential impacts of proposals now circulating for carbon reduction motivated geographical trade arrangements, including carbon‐free trade areas. We first suggest that trade policy is likely to be a relatively minor consideration in climate change containment. The dominant influence on carbon emissions globally for the next several decades will be growth more than trade and its composition, and in turn, the size of trade seemingly matters more than its composition given differences in emission intensity between tradables and non‐tradables. We then note that differences in emissions intensity across countries are larger than across products or sectors and so issues of country discrimination in trade policy (and violations of MFN) arise. We next discuss both unilateral and regional carbon motivated trade policy arrangements, including three potential variants of carbon emission reduction based free trade area arrangements. One is regional trade agreements with varying types of trade preferences towards low carbon‐intensive products, low carbon new technologies and inputs to low carbon processes. A second is the use of joint border measures against third parties to counteract anti‐competitive effects from groups of countries taking on deeper emission reduction commitments. A third is third‐country trade barriers along with free trade or other regional trade agreements as penalty mechanisms to pressure other countries to join emission‐reducing environmental agreements. We differentiate among the objectives, forms and possible impacts of each variant. We also speculate as to how the world trading system may evolve in the next few decades as trade policy potentially becomes increasingly dominated by environmental concerns. We suggest that the future evolution of the trading system will likely be with environmentally motivated arrangements acting as an overlay on prevailing trade and financial arrangements in the WTO and IMF, and eventually movement to linked global trade and environmental policy bargaining.     

Do deeper regional trade agreements enhance international technology spillovers?

We examine whether regional trade agreements (RTAs) enhance international technology spillovers using a panel of patent citation data for 114 countries/regions for the period 1991–2007. We use patent citations as a proxy for technology spillovers. The focus of this study is on whether the depth of regional integration matters for technology spillovers among member countries/regions of RTAs. The depth of integration is measured by the extent to which an RTA includes legal obligations outside the current mandate of the World Trade Organization. We find that the depth of integration actually influences technology spillovers and that a deeper integration in a broad sense has a greater impact on technology spillovers than do technology‐related provisions.     

Failure of the WTO Ministerial Conference at Cancun: Reasons and Remedies

This paper first discusses four general developments in the world trading system that have made it increasingly difficult in recent years for nations to reach multilateral agreements aimed at further liberalising international trade, namely: (1) the increased technical complexity and disruptive domestic economic effects of the issues being negotiated; (2) the shift in relative bargaining power among the negotiating participants in favour of the developing countries; (3) the proliferation of bilateral and regional free trade agreements in contrast to multilateral agreements, and (4) the increased emphasis on achieving ‘fairness’ rather than reciprocity in trade liberalisation. Differences in negotiating positions of the participants on the major specific negotiating subjects of the Doha Round, such as new rules covering investment, competition policy, government procurement policy, and trade facilitation, agricultural liberalisation, changes in anti‐dumping and countervailing duty rules, the tariff‐cutting rule to increase access to non‐agricultural markets, and further liberalisation in the services sector, are then considered as well as the likelihood of reaching compromises on these matters. Finally, the possibilities of reaching acceptable balances of concessions and gains are considered for such key participants as the Group of 20 developing countries, the European Union, the United States and other industrial countries.     

In Search of Optimised Regional Trade Agreements and Applications to East Asia

We quantitatively analyse the trade effects of enhanced trade facilitation with extended gravity equations. Our findings confirm that RTAs comprised of countries equipped with better trade facilitation are more likely to be trade‐creating, less likely to be trade‐diverting, and are thus more likely to lead the world economy toward global free trade. We also find that (i) the traditional gains from shallow integration through eliminating tariff barriers will be greater for South‐South RTAs in East Asia such as an ASEAN‐China RTA, provided that the tariff‐reducing schedule is strictly fulfilled, (ii) the gains from deeper integration through enhancing trade facilitation will be greater for North‐North RTAs in East Asia such as a Japan‐Korea RTA, and (iii) the gains from a combined trade liberalisation strategy through tariff reductions and enhanced trade facilitation will be greater for North‐South RTAs in East Asia such as a China‐Korea and an ASEAN+3 RTA.     

Impact of Environmental Regulations on Trade in the Main EU Countries: Conflict or Synergy?

In an increasingly integrated world with declining trade barriers, environmental regulations can have a decisive role in shaping countries’ comparative advantages. The conventional wisdom about environmental protection is that it comes at an additional cost on firms imposed by the government, which may erode their global competitiveness. However, this paradigm has been challenged by some analysts. In particular, Porter and van der Linde argue that pollution is often associated with a waste of resources and that more stringent environmental policies can stimulate innovations that may overcompensate for the costs of complying with these policies. This is known as the Porter hypothesis. While there is a broad empirical literature on the impact of trade on environment, the empirical literature on the impact of environmental regulations on trade flows is relatively scarce, very heterogeneous and presents mixed results. The innovative feature of this paper is its attempts to estimate, in a gravity setting, augmented with a proxi of environmental stringency, the impact of three major multilateral environmental agreements (MEAs) on 15 EU countries’ bilateral exports. According to our estimates, in the period 1988–2008, to be member of MEAs had a positive average impact on EU‐15 bilateral exports. This evidence can be partly explained by a possible trade diversion effect with respect to countries that did not sign MEAs and a corresponding trade creation effect among members of the environmental agreements. Furthermore, evidence coming from interaction effects estimates seems to show that for exporting countries, having signed the United Nations Framework Convention on Climate Change and the Montreal agreements partly mitigates (by the amount of the estimated coefficient) the negative impact of having a relatively more stringent environmental regulation on bilateral trade. This result could have important policy implications for the future international trade–environmental negotiations.     

Supplementary Trade Benefits of Multi-Memberships in African Regional Trade Agreements

ABSTRACT

Few papers have investigated the trade effects of multi-memberships of Regional Trade Agreements (RTAs), but none has done this in an Africa-wide manner. This paper investigates the supplementary trade effects of multi-memberships of RTAs after controlling for single-membership for all African RTAs. We use (1) overall number of RTAs by country pair; (2) dummies of number of RTAs; and (3) number of RTA memberships by countries within each RTA grouping, in a panel of 53 African countries from 1995 to 2014. The gravity models are estimated with the Eicker-White robust covariance Poisson Pseudo-Maximum Likelihood (PPML) which is superior to previous ones. All the estimates concur that multi-memberships have significant additional intra-Africa trade benefits which increase with the number of memberships. The implication is that although RTAs enhance trade in Africa, it is only a second-best to a complete integration of the African continent. A complete dismantling of politically induced trade barriers and even inter-RTA boundaries within Africa will yield significant intra-Africa trade benefits. The results support the ongoing efforts in Africa in pursuing a “one Africa” vision. Such efforts have to transcend regional integration and pursue the ideal of an integrated Africa for the full trade benefits to be realized.