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Trade Creation, Replacement, and Destruction in Regional Trade Agreements: Micro‐level Evidence for the UK

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  • Sourafel Girma
  • Richard Kneller
  • Mauro Pisu

Abstract

Empirical questions surrounding the effect of regional trade agreements on international trade have typically been answered with reference to macro‐level gravity equations. Prominent within this has been whether they create or divert trade. In this paper, motivated by the recent development of theories of export‐platform FDI, we use micro‐level data to explore the part of trade diversion that follows from FDI. Using information on acquisition FDI in the UK manufacturing sector between 1988 and 1998 we find evidence of trade creation, replacement, and destruction from FDI external and internal to the EU.

Suggested Citation

  • Sourafel Girma & Richard Kneller & Mauro Pisu, 2008. "Trade Creation, Replacement, and Destruction in Regional Trade Agreements: Micro‐level Evidence for the UK," Review of International Economics, Wiley Blackwell, vol. 16(1), pages 142-158, February.
    • Handle: RePEc:bla:reviec:v:16:y:2008:i:1:p:142-158
    DOI: 10.1111/j.1467-9396.2007.00732.x
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    Cited by:

    1. Ahmed, Saira & Ahmed, Vaqar & Sohail, Safdar, 2010. "Trade agreements between developing countries: a case study of Pakistan - Sri Lanka free trade agreement," MPRA Paper 29209, University Library of Munich, Germany.
    2. Al Faithrich C. Navarrete & Virgillio M. Tatlonghari, 2018. "An empirical assessment of the effects of the Japan–Philippine Economic Partnership Agreement (JPEPA) on Philippine exports to Japan: a gravity model approach," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 7(1), pages 1-20, December.
    3. Ahmed, Saira & Ahmed, Zafar & Sohail, Safder & Sarfraz, Irfan & Shafqat, Mohammad & Mamoon, Dawood & Saadia, Hissam, 2012. "Lessons Drawn From Pakistan-Sri Lanka FTA," MPRA Paper 81488, University Library of Munich, Germany.
    4. Magnus Lodefalk, 2016. "Temporary expats for exports: micro-level evidence," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 152(4), pages 733-772, November.

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