Regional economic integration and trade: an empirical evaluation of NAFTA and EU

Generally, trade flows of commodities are determined on the basis of the principle of comparative advantage in a free trade system. The objectives of this study are to evaluate factors affecting the export flows and to provide a comprehensive analysis of the effects of trade enhancing and resisting factors used by exporting countries on world trade. The gravity model has been used to evaluate bilateral trade flows of 93 commodity-level trade flows over 1996 to 2001 between pairs of countries. Our results show that North American Free Trade Agreement (NAFTA) is more effective in increasing export flows than European Union (EU), and the effects of regional economic integrations are more effective for agricultural commodities than non-agricultural commodities.