Does It Matter Who You Sign With? Comparing the Impacts of North-South and South-South Trade Agreements on Bilateral Trade
Free trade agreements lead to a rise in bilateral trade regardless of whether the signatories are developed or developing countries. Furthermore, the percentage increase in bilateral trade is higher for South-South agreements than for North-South a...
| Main Authors: | , |
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| Format: | Policy Research Working Paper |
| Language: | English |
| Published: |
2012
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| Subjects: | |
| Online Access: | http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20110406081055 http://hdl.handle.net/10986/3392 |
| Summary: | Free trade agreements lead to a rise in
bilateral trade regardless of whether the signatories are
developed or developing countries. Furthermore, the
percentage increase in bilateral trade is higher for
South-South agreements than for North-South agreements. In
this paper, the results are robust across a number of
gravity model specifications in which the analysis controls
for the endogeneity of free trade agreements (with bilateral
fixed effects) and also takes account of multilateral
resistance in both estimation (with country-time fixed
effects) and comparative statics (analytically). The
analytical model shows that multilateral resistance dampens
the impact of free trade agreements on trade by less in
South-South agreements than in North-South agreements, which
accentuates the difference implied by the gravity model
coefficients, and that this difference gets larger as the
number of signatories rises. For example, allowing for lags
and multilateral resistance, a four-country North-South
agreement raises bilateral trade by 53 percent while the
analogous South-South impact is 107 percent. |
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