IDEAS home Printed from https://ideas.repec.org/p/wbk/wbrwps/1847.html
   My bibliography  Save this paper

Outsiders and regional trade agreements among small countries : the case of regional markets

Author

Listed:
  • Gupta, Anju
  • Schiff, Maurice

Abstract

Standard theory says that a country's welfare is unaffected by being excluded from a small regional trade agreement. But for most products,"small"countries and regional trade agreements do have some measure of market power. Such market power can arise if (1) supply is geographically concentrated; (2) tastes differ; (3) there is product differentiation (such as quality); (4) transport costs are high; (5) the principal importing countries impose quantitative restrictions; and (6) there is hysterisis because of irreversible costs. The authors show, based on two case studies, that regional trade agreements among small countries may have negative welfare implications for outside countries. In the first case, they find that Argentina's cattle and beef exports to Peru fell when Peru formed a regional trade agreement (the Andean Pact) with various countries, including Colombia, and exporter of the same products. Argentina also lost because of the higher unit price it received on its exports to Peru. Interestingly, Venezuela's entry into the Andean Pact (that is, the formation of a larger bloc) seems to have resulted in a welfare gain for the outside country (Argentina). In the second case, rather than examine whether formation of the Central American Common Market (CACM) had a negative impact on outside countries (for which they lacked data), they examine the impact of the CACM's breakdown on member countries. Although the CACM has essentially been trade-diverting for manufactures, it seems to have been trade-creating for white maize, with both importing and exporting member countries gaining from the regional trade agreement. So, one would expect that a breakdown of the CACM, which resulted in member countries becoming relatively more"outsiders"to the bloc, may have led to a decline in the welfare of both the exporting and importing member countries. This is supported by the data, and implies that if one of the five member countries had been left out of the CACM, it would have been worse off where white maize was concerned.

Suggested Citation

  • Gupta, Anju & Schiff, Maurice, 1997. "Outsiders and regional trade agreements among small countries : the case of regional markets," Policy Research Working Paper Series 1847, The World Bank.
    • Handle: RePEc:wbk:wbrwps:1847
    as

    Download full text from publisher

    File URL: http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/1997/11/01/000178830_98101904061492/Rendered/PDF/multi0page.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Winters, L. Alan & Amjadi, Azita, 1999. "Transport Costs and “Natural” Integration in Mercosur," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 14, pages 497-521.
    2. Balassa, Bela, 1974. "Trade Creation and Trade Diversion in the European Common Market: An Appraisal of the Evidence," The Manchester School of Economic & Social Studies, University of Manchester, vol. 42(2), pages 93-135, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Julio Nogués, 2003. "Mercosur's Labyrinth and World Regionalism," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 40(121), pages 452-459.
    2. Alexander Milnikov & Tatiana Papiashvili & Irakli Rodonaia, 2008. "Economic Growth in Georgia: Historical Perspectives and Prognosis," IBSU Scientific Journal, International Black Sea University, vol. 2(1), pages 33-44.
    3. Nigel Nagarajan, 1998. "MERCOSUR and Trade Diversion: What Do The Import Figures Tell Us?," European Economy - Economic Papers 2008 - 2015 129, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lucian Cernat, 2001. "ASSESSING REGIONAL TRADE ARRANGEMENTS: ARE SOUTH–SOUTH RTAs MORE TRADE DIVERTING?," International Trade 0109001, University Library of Munich, Germany.
    2. HERRERO-OLARTE, Susana, 2024. "Productivity And Regional Trade, The Relationship In South America," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 24(1), pages 37-56.
    3. Helena Marques, 2008. "Trade And Factor Flows In A Diverse Eu: What Lessons For The Eastern Enlargement(S)?," Journal of Economic Surveys, Wiley Blackwell, vol. 22(2), pages 364-408, April.
    4. Mauricio Mesquita Moreira, 2006. "IIRSA Economic Fundamentals," IDB Publications (Working Papers) 9201, Inter-American Development Bank.
    5. Fernando Borraz & Leandro Zipitría, 2013. "Fijación de precios minoristas: el caso de Uruguay," Investigación Conjunta-Joint Research, in: Laura Inés D'Amato & Enrique López Enciso & María Teresa Ramírez Giraldo (ed.), Dinámica inflacionaria, persistencia y formación de precios y salarios, edition 1, chapter 9, pages 209-348, Centro de Estudios Monetarios Latinoamericanos, CEMLA.
    6. Eric Tremolada Álvarez (editor), 2013. "Repensando la integración y las integraciones," Books, Universidad Externado de Colombia, Facultad de Finanzas, Gobierno y Relaciones Internacionales, edition 1, volume 1, number 85, June.
    7. Robert J. R. Elliott & Kengo Ikemoto, 2004. "AFTA and the Asian Crisis: Help or Hindrance to ASEAN Intra‐Regional Trade?," Asian Economic Journal, East Asian Economic Association, vol. 18(1), pages 1-23, March.
    8. Gonzalo Armienta [y otros] & Eric Tremolada Álvarez (editor) Author-Email, 2020. "Conjuntos geopolíticos, regionalización y procesos de integración en el siglo XXI," Books, Universidad Externado de Colombia, Facultad de Derecho, number 1215, August.
    9. Bond,Eric W., 1997. "Transportation infrastructure investments and regional trade liberalization," Policy Research Working Paper Series 1851, The World Bank.
    10. Schmieding, Holger, 1988. "The dynamics of trade diversion: Observations on West Germany's integration into the Little European Common Market 1958-1972," Kiel Working Papers 334, Kiel Institute for the World Economy (IfW Kiel).
    11. Richard Outrata & Michaela Gajdošová & Saleh Mothana Obadi, 2004. "Zahraničnoobchodný efekt vstupu Slovenska do colnej únie Európskej únie [Foreign trade effect of Slovakia accession to the EU custom union]," Politická ekonomie, Prague University of Economics and Business, vol. 2004(3), pages 330-343.
    12. Mesquita Moreira, Mauricio, 2006. "IIRSA Economic Fundamentals," IDB Publications (Working Papers) 2415, Inter-American Development Bank.
    13. Helena Marques, 2010. "Migration Creation and Diversion in the European Union: Is Central and Eastern Europe a ‘Natural’ Member of the Single Market for Labour?," Journal of Common Market Studies, Wiley Blackwell, vol. 48(2), pages 265-291, March.
    14. Dell'Aquila, Crescenzo & Sarker, Rakhal & Meilke, Karl D., 1999. "Regionalism And Trade In Agrifood Products," Working Papers 14591, International Agricultural Trade Research Consortium.
    15. Chris Milner & Oliver Morrissey & Evious Zgovu, 2009. "EU-ACP Economic Partnership Agreements and ACP Integration," Discussion Papers 09/05, University of Nottingham, CREDIT.
    16. Combes, Pierre-Philippe & Lafourcade, Miren, 2003. "Core-Periphery Patterns of Generalized Transport Costs: France, 1978-98," CEPR Discussion Papers 3958, C.E.P.R. Discussion Papers.
    17. Ghosh, Sucharita & Yamarik, Steven, 2004. "Are regional trading arrangements trade creating?: An application of extreme bounds analysis," Journal of International Economics, Elsevier, vol. 63(2), pages 369-395, July.
    18. Oliver Morrissey, & Evious Zgovu, 2007. "The Impact of Economic Partnership Agreements on ACP Agriculture Imports and Welfare," Discussion Papers 07/09, University of Nottingham, CREDIT.
    19. Barbero, G., 1976. "Agricultural Development and Regional Economic Integration," 1976 Conference, July 26-August 4, 1976, Nairobi, Kenya 182351, International Association of Agricultural Economists.
    20. Dunning John H. & Lundan Sarianna M. & Eckes Alfred E. & Bryant Sarah K. & Unger Michael L. & Shelburne Robert C. & Cernat Lucian, 2001. "Global Economy Quarterly, Issue 3," Global Economy Journal, De Gruyter, vol. 2(3), pages 1-109, December.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:1847. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Roula I. Yazigi (email available below). General contact details of provider: https://edirc.repec.org/data/dvewbus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.