The Trade Effects of Regional Agreements and Economic Integration Processes in Europe, South America, and North America

  • Oscar David Lopez Saint Thomas University, Colombia
  • Alexander Carvajal Saint Thomas University, Colombia

Abstract

This article seeks to understand the effects of trade creation and diversion in regional agreements and integration processes in Europe, South America, and North America. Through a systemic literature review, and based on the economic theory of integration, it analyzes the impact of tariff barriers on trading volume through the world, as well as the impact of barriers removals in member and non-member countries that participate in these trade agreements. As hypothesis, it can be stated that the trade effects generated by economic integration processes vary depending on the endogenous conditions of the industries in member countries, in addition to the consolidation phase of the integration processes. For this purpose, a qualitative descriptive methodology, based on an analysis of literature, is used to determine the trade creation and deviation effects of agreements in Europe (European Union), South America (MERCOSUR and CAN), and North America (NAFTA).

Author Biographies

Lecturer and researcher from Saint Thomas University, Colombia. Master in Foreign Affairs.

Lecturer and researcher from Saint Thomas University, Colombia. Master in Applied Statistics

References

Anderson, J. and Wincoop, E. (2003) ‘Gravity with Gravitas: A solution to the Border Puzzle’. The American Economy Review online publication 20 March, doi: 10.1257/000282803321455214

Balthas, N. C. (2001) ‘The common agricultural policy, past, present and future’. European Economic and Political Issues III. F. Columbus, ed. Chapter 7: 97-116. Nova Science Publishers Inc. New York 2001.

Bauman, R. (1993) ‘Integración y desviación de comercio’. Revista CEPAL 51: 133-149.

Bauman, R. (2008) ‘Integration in Latin American- Trends and Challenges’. Economic Commission for Latin American and the Caribbean Revista CEPAL 28(1). https://www.cepal.org/en/publications/37936-integration-latin-america-trends-and-challenges (January, 2008)

Bayoumi, T. and Eichengreen, B. (1995) ‘Is regionalism simply a diversion? Evidence from the evolution of the EC and EFTA’. National Bureau of Economic Research online publication October, doi: 10.3386/w5283.

Bhagwati, J. (1971) ‘Trade-diverting customs unions and welfare-improvement: A clarification. The Economic Journal online publication September, doi: 10.2307/2229850.

Bhagwati, J. and Panagariya, A. (1996) ‘Preferential Trading Areas and Multilateralism: Stranger Friends or Foes?’. Washington: Columbia University AEI press Discussion papers no 9596-04.

Bohara, A. K., Gewande, K. et. al. (2004) ‘Trade Diversion and Declining Tariffs: Evidence from Mercosur’. Journal of International Economics 64(1), doi: 10.1016/j.jinteco.2003.07.004 (October, 2004).

Bulmer-Thomas, V. (2001) ‘Regional Integration in Latin America and the Caribbean’. Bulletin of Latin American Research, 20(3). https://www.jstor.org/stable/3339734.

Cheong, J and Wong, K. (2007) ‘Economic Integration, Trade Diversion and Welfare Change’. Washington: University of Washington working paper no 34/5.

Cîndea, L. and Cîndea, M. (2012) ’The euro effect on International trade’. Procedia- Social and Behavioural Sciences 58, doi: 10.1016/j.sbspro.2012.09.1109.

Coulibaly, S. (2004) ‘On the assessment of trade creation and trade diversion effects of developing RTAs’. Lausanne: University Lausanne Working paper No45.

Coulombe, S. (2004) ‘International Trade Diversion: The Canada-United States Agreement and The L curve’. The B.E. Journal of Economic Analysis and Policy, De Gruyter 4(1). https://ideas.repec.org/a/bpj/bejeap/vtopics.4y2004i1n16.html (July, 2004).

Drabik, D., Pockrivcak, J. et al. (2007) ‘Trade Creation and Diversion in the Enlarged EU market: Evidence for agricultural Trade in Slovakia’. Czech Journal of Economics and Finance, 57 (9-10): 433-447.

Susanto, D., Rosson, P. et al. (2007) ‘Trade Creation and Trade Diversion in the North American Free Trade Agreement: The Case of the Agricultural Sector. Journal of Agricultural and Applied Economics, 39(1). https://doi.org/10.1017/S1074070800022793 (28 April, 2015).

European Commission. (1996) ‘Trade Creation and Trade Diversion’. The Single market review series, 4(3): 15-23.

Freund, C. and McLaren, J. (1999) ‘On the Dynamics of Trade Diversion: Evidence from four Trade Blocs’. Washington: Board of Federal Reserve, International Finance Discussion Papers 637

Gil, S., Llorca, R. et al. (2008) ‘Assessing the enlargement and deepening of the European Union’. The world economy, Willey Blackwell 31(9). https://ideas.repec.org/a/bla/worlde/v31y2008i9p1253-1272.html.

Haveman, J., Nair-Reichert, U. et al. (2003) ‘How Effective Are Trade Barriers? An Empirical Analysis of Trade Reduction Diversion and Compression’. MIT press 85(2), https://doi.org/10.1162/rest.2003.85.2.480.

Haveman, J., Nair-Reichert, U. et al. (1998) ‘Trade Reduction, Diversion and Compression: Empirical regularities in the effects of protective measures. West Lafayette: Purdue University Discussion Papers 98-007.

Johnson, H. (1974) ‘Trade-Diverting Customs Unions: A Comment’. Economic Journal 84(335) online publication September doi:10.2307/2231045.

Kandongan, Y. (2005) ‘Trade Creation and Diversion Effects of Europe's regional liberalization agreements. Michigan: William Davidson Institute working paper number 746.

Karemera, D. and Ojah, K. (1998) ‘An industrial Analysis of Trade creation and diversion effects of NAFTA’. Journal of Economic Integration, 13(3). https://www.jstor.org/stable/23000519.

Krishna, P. (1998) ‘Regionalism and Multilateralism: A political Economy approach’. The quarterly journal of economics 113(1): 227-251.

Kokko, A., Matä, T. et al. (2005) ‘European Integration and Trade diversion’. SIEPS Swedish institute for European studies 7: 6-59

Lipsey, R. (1957) ‘The Theory of Customs Unions: Trade diversion and welfare’. Economic New Series 24(93): 40-46.

Magee, C. (2004) ‘Trade Creation, Trade Diversion, and Endogenous regionalism’. Econometric Society 2004 North American Summer Meetings 289. https://ideas.repec.org/p/ecm/nasm04/289.html.

Magee, C. (2008). ‘New measures of trade creation and trade diversion’. Journal of International Economics 75(2), doi: 10.1016/j.jinteco.2008.03.006.

Mildner, S. and Schmucker, C. (2013) ‘Trade Agreement with Side Effects?’ Stifnung Wissenschaft und Politik. German Institute for international and security affairs. SPW 18. https://www.files.ethz.ch/isn/166748/2013C18_mdn_schmucker.pdf .

Mondschein, L. (2011). ‘The European Union and regional trade agreements: Helping or Hurting the Inner six’. Bachelor Thesis. Pittsburgh: Division of economics. http://www.antolin-davies.com/thesis/mondschein.pdf.

Muhammad, K. and Yucer, A. (2009) ‘Impact of regional trade agreements: Trade Creation and Trade diversion in western Hemisphere’. International Journal of Economic Issues 3(2). https://basepub.dauphine.fr/handle/123456789/10626.

Pandey, S. (2006) ‘Spaghetti Bowl Phenomenon and Crucifixion of Multilateralism: Task ahead for WTO’. Press University Jodhpur 10. doi: 10.2139/ssrn.951392

Prehn, S., Brümmer, B. et al. (2012) ‘An extended Viner Model: Trade creation, diversion and reduction’. DARE Diskussionsbeitrag 1212: 5-18.

Rajapatirana, S. (1994) ‘The evolution of trade treaties and trade creation: lessons for Latin America”. Policy, Research working paper; no. WPS 1371. Washington, DC: World Bank. http://documents.worldbank.org/curated/en/880061468753259901/The-evolution-of-trade-treaties-and-trade-creation-lessons-for-Latin-America

Richardson, M., 1993. Endogenous protection and trade diversion. Journal of International Economics 34 (3 – 4), 309 – 324.

Robertson, R. and Stevadeordal, A. (2009) ‘Gravity, Bilateral Agreements and Trade Diversion in the Americas’. Cuadernos de Economia vol 46(133). doi: 10.4067/S0717-68212009000100001.

Rodney, T. and Walsh, B. (2002). ‘The Effect of a Common Currency on Trade: Ireland Before and After the Sterling link’. European Economic Review (46): 1125-2351.

Saryan, S. (1998) ‘Could Regional Economic Cooperation generate trade creation and trade diversion effects without altering Trade policies of members? Preliminary Results from a Gravity application to BSEC’. Bilkent University, Department of Economics Discussion Paper no 98-10.

Sorgho, Z. (2016) ‘RTAs Proliferation and Trade Diversion effects: Evidence of the Spaghetti Bowl Phenomenon’. The World Economy, 39(2). doi: 10.1111/twec.12295.

Shujiro, U. and Okabe, M. (2013) ‘Trade Creation and Diversion effects of regional trade agreements: A product-level analysis’. The World Economy 37(2). doi: 10.1111/twec.12099.

Viner, J. (1950) The Custom Union Issue. New York: Carnegie Endowment for international Peace.

Yeats, A., Amjadi, A. et al. (1997). ‘Did Domestic Policies Marginalize Africa in International Trade?’ Washington: World Bank document 16313.
Keywords International trade, Economic integration, Trade creation, Trade deviation, trade agreements
Compartir
How to Cite
Lopez, O., & Carvajal, A. (2020). The Trade Effects of Regional Agreements and Economic Integration Processes in Europe, South America, and North America. Latin American Journal of Trade Policy, 3(8), 32 - 48. doi:10.5354/0719-9368.2020.57980
Published
2020-12-31