Regionalism in the Nineties: What Effect on Trade?

CEPR Discussion Paper Series Number 2183

Posted: 26 Oct 1999

See all articles by Isidro Soloaga

Isidro Soloaga

Universidad Iberoamericana Ciudad de México

L. Alan Winters

University of Sussex; IZA Institute of Labor Economics; Centre for Economic Policy Research (CEPR)

Date Written: June 1999

Abstract

The paper applies a gravity model to 1980-1996 annual non-fuel imports data for 58 countries to quantify the effects of recently created or revamped PTAs on trade. We modify the usual gravity equation to identify separate effects of PTAs on intra-bloc trade, members' total imports and their total exports. We also innovate by formally testing the significance of changes in the estimated coefficients before and after blocs' formation. Our estimations show no indication that the 'new wave' of regionalism boosted intra-bloc trade significantly. Regarding trade diversion, we found convincing evidence of it only for EU and EFTA (and for the same blocs also, we observed exports diversion, which would be consistent with their imposing a welfare cost on the ROW). Trade liberalization efforts in Latin America had a positive impact on bloc members' imports (ANDEAN, CACM, LAIA and MERCOSUR), although MERCOSUR's exports decreased in the last part of the sample.

JEL Classification: F13, F15

Suggested Citation

Soloaga, Isidro and Winters, L. Alan Alan, Regionalism in the Nineties: What Effect on Trade? (June 1999). CEPR Discussion Paper Series Number 2183, Available at SSRN: https://ssrn.com/abstract=176728

Isidro Soloaga (Contact Author)

Universidad Iberoamericana Ciudad de México ( email )

United States

HOME PAGE: http://www.iberoeconomia.mx\IsidroSoloaga

L. Alan Alan Winters

University of Sussex ( email )

Sussex House
Falmer
Brighton, Sussex BNI 9RH
United Kingdom

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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