Deep Integration: Free trade agreements heterogeneity and its impact on bilateral trade

Jaime Ahcar and Jean Siroen
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Jaime Ahcar: LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique

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Abstract: Regional trade agreements (RTAs) have surgedin a context of stalled multilateral trade negotiations. Their impact on international trade and on development have been well documented while scant attention have been paid to empirical studies exploring their heterogeneity in the scope of deep integration. We intend in this paper to determine if deeper RTAs promote trade more effectively than less ambitious agreements. We proceed to generate credible indicators of deep integration exploiting two recently available data sets from the World Trade Organization (WTO) and the World Trade Institute (WTI), and then we test their significance in a gravity model for International Trade.Treating additive indicators as factor variables, as well as our innovative use of Multiple Correspondence Analysis MCA to get distilled indicators of deep integration allowed us to givenew insight and to confirm recent findings on the field of deep integration.We find that deeper agreements increase trade more than shallow ones, whereas the provisions they include are within or outside of the WTO domain. Therefore, if we accept the hypothesis that trade liberalization contribute to a better allocation of resources, then trade policy makers should favour deeper RTAs to enhance economic development.

Keywords: Deep integration; gravity model; regional trade agreements; trade liberalization; international trade; economic development (search for similar items in EconPapers)
Date: 2015-06-22
Note: View the original document on HAL open archive server: https://hal.science/hal-01485694v1
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Published in 64th Annual Meeting of the French Economic Association (AFSE 2015), Jun 2015, Rennes, France

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Working Paper: Deep integration: free trade agreements heterogeneity and its impact on bilateral trade (2014)
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