RTAs' Proliferation and Trade-Diversion Effects: Evidence of the 'Spaghetti Bowl' Phenomenon
CREATE Working Paper 2015-2
24 Pages Posted: 9 Jun 2015
Date Written: June 8, 2015
Abstract
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 an 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 multilateral trade. However, results could not conclude 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 an 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.
Keywords: Regional Trade Agreements, Spaghetti Bowl Phenomenon, Gravity equation, Trade diversion
JEL Classification: F11, F12, F15
Suggested Citation: Suggested Citation