ASSESSING REGIONAL TRADE ARRANGEMENTS: ARE SOUTH–SOUTH RTAs MORE TRADE DIVERTING?

It has generally been argued that regional trade agreements (RTAs) among developing countries may induce potential adverse effects on trade patterns among RTA members and between them and third countries. Using an expanded gravity model this paper estimates for a number of regional trade arrangements among developing countries the gross trade creation and diversion effects resulting from RTA formation. This paper brings evidence in favor of the idea that South-South RTAs, and African RTAs in particular, are not more trade diverting than other RTAs. This evidence suggests that increased trade with both regional partners and third countries in the case of South-South RTAs might be explained by the removal of “invisible” trade barriers as a result of trade facilitation measures favored by RTA formation.