Trade creation and trade diversion of economic integration agreements revisited: a constrained panel pseudo-maximum likelihood approach

For PPML estimation of high-dimensional structural gravity panel models it proves useful to exploit the equilibrium restrictions imposed by the system of multilateral resistances. The main advantage of this approach lies in the functional dependence of the parameters of all dummy variables on the structural trade cost parameters. Moreover, the delta method is used to establish confidence intervals of counterfactual changes. Using the constrained panel PPML estimator for a panel of 65 countries in the period 1994–2012 indicates significant trade creation of economic integration agreements with average ranging in between 12.2 and 30.3% in 2012. Results also point to substantial domestic and international trade diversion, where the former dominates the latter.

Classification of International Preferential and Regional Trade Agreements

The article is devoted to comprehensive generalization of features/characteristics of international trade agreements/treaties which introduce/fix certain trade advantages in the tariff and non-tariff spheres. The article identifies fifteen classification features/characteristics of the analyzed international agreements. The features are divided into groups: those simultaneously inherent in all/any mentioned international trade agreements/treaties; those inherent only in international economic integration agreements/treaties; those inherent just in preferential international trade agreements/treaties. Practical relevance: The classification gives an opportunity to suggest some definitions/terms, which take into consideration/involve some separated particulars, namely those of preferential trade agreements, international economic integration agreements, which also include regional trade agreements.

Economic Disintegration? Political, Economic, and Legal Drivers and the Need for ‘Greening Embedded Trade Liberalism’

This contribution uses the examples of Great Britain’s withdrawal from the EU (Brexit) and US withdrawal from multilateral trade and environmental agreements for exploring political, economic, environmental, social, and legal reasons driving the backlash against economic integration agreements. In both examples, populist battle-cries for ‘taking back control’ and for lowering regulatory standards were followed by governmental attempts at evading parliamentary control over executive foreign policy powers to violate, or withdraw from, multilateral agreements. Anglo-Saxon neo-liberalism, President Trump’s mercantilist power politics, authoritarian state-capitalism (e.g. in China), and European ordo-liberalism reflect systemic divergences that may justify broad interpretations of WTO ‘exceptions’ (e.g. for WTO trade remedies and climate change mitigation). Europe’s multilevel, democratic constitutionalism protecting ‘social market economies’ was comparatively more effective in limiting protectionism and carbon emissions inside Europe’s common market. The EU’s ‘new green deal’ for a carbon-neutral ‘green economy’ was made possible by stronger, social, and democratic support based on ‘constitutional interpretations’ of Europe’s ordo-liberalism assisting adversely affected workers, producers, traders, investors, and other citizens to adjust economic and environmental activities to climate change mitigation. EU leadership for WTO-consistent climate change rules requires ‘greening embedded liberalism’ by interpreting the WTO ‘sustainable development’ objectives in conformity with the 2015 Paris Agreement, the UN ‘sustainable development goals’, and human rights (e.g. as legal basis for climate change litigation in Europe).

Diversion Effect of Economic Integration Agreements

Signing Economic Integration Agreements has proliferated during last three decades. A country signs more and more agreements. Owning the agreements not only generates trade creation but also trade diversion. The diversion effect of Economic Integration Agreements (EIAs) on the probability of products survival and export growth in a market is found in current paper. Using the probit function for 149 countries in SITC 4-digit level from 1962 to 2000, we find the hazard rate of product ceasing increases if a country signs any other EIAs other than its partner (both importer and exporter), and the export growth decreases in the case of an importer owns any other EIA other than its partner.