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TOWARD A PAN‐ARAB FREE TRADE AREA: ASSESSING TRADE POTENTIAL EFFECTS OF THE AGADIR AGREEMENT
Author(s) -
PÉIDY Nicolas
Publication year - 2005
Publication title -
the developing economies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.305
H-Index - 30
eISSN - 1746-1049
pISSN - 0012-1533
DOI - 10.1111/j.1746-1049.2005.tb00948.x
Subject(s) - gravity model of trade , complementarity (molecular biology) , economics , international economics , international free trade agreement , international trade , panel data , trade barrier , economic integration , bilateral trade , free trade agreement , estimation , free trade , trade creation , trade diversion , econometrics , geography , genetics , management , archaeology , china , biology
On February 25, 2004, a free trade agreement (FTA) was concluded between Jordan, Egypt, Morocco, and Tunisia, as a first step toward the implementation of a larger Pan‐Arab FTA. This paper proposes an estimation of the trade potential among these countries. Based on new developments of the gravity equation, we estimate a static and dynamic panel data model, using respectively the Hausman and Taylor, and the Arellano, Bond, and Bover's estimators. Results show that trade flows remain dramatically low between these countries, as a result of high trade costs. In particular, the estimated border effects clearly reflect a significant trade integration deficit in this area. However, there is only a limited export potential between these countries, due to the lack of trade complementarity between them. As a consequence, the Agadir Agreement may only have limited trade effects.