Impact of Trade Agreements on Trade Performance: A Gravity Approach

Impact of Trade Agreements on Trade Performance: A Gravity Approach

With the proliferation of trade agreements, an important issue, which arises, is its impact on the trade performance. A burgeoning number of trade agreements anticipate a net trade creation over trade diversion. The present paper tries to examine whether trade agreements affects trade performance especially bilateral export flow among the three major trade blocs, namely, NAFTA, EU and AFTA. It also tries to examine how far a 'weak' preferential arrangement like SAPTA behaves after providing the preferential treatment to its members. A gravity model is used to estimate the impact of regional bias in export flow among the member countries. The result shows that being a member of a trading arrangement has a positive impact on the bilateral export flows of the Asian trading arrangements.