Does Regional Integration Promote the Multilateralization of Trade Flows?

Does Regional Integration Promote the Multilateralization of Trade Flows?: a Gravity Model Using Panel Data

We will be asking ourselves whether the trading blocs created or renewed since the end of the 1980s favor the multilateralization of trade, and so constitute building or stumbling blocks with regard to trade flows. In a gravity model using panel data, we estimate a set of three regional dummies representative of intrabloc trade, extra-bloc exports and extra-bloc imports. Taking the resulting three coefficients as a starting point, we propose an original typology of trade creations / diversions and of trading blocs. By applying this to our results, all the groups chosen as well as the Economic and Monetary Union, are shown to be building blocks. No trade diversion is noted, apart from an export diversion brought about by the North American Free Trade Agreement.