The rapid increase in the number of bilateral and regional
free-trade agreements since 1995 is a striking development. The
proliferation of these agreements has raised questions about
whether they have, in fact, opened markets, created trade, promoted
economic growth, and/or distorted trade. This study uses panel data
from 1975 to 2005 and a gravity framework model to identify the
influence of reciprocal trade agreements (RTAs) on bilateral trade
in the world agricultural marketplace. A benchmark, Heckman
sample-selection and two generalized models, one of which accounts
for RTA phase-in effects, are used to gauge the impact on partner
trade of mutual as well as asymmetric RTA membership. Empirical
results show that RTAs increase agricultural trade between member
countries but decrease trade between member and nonmember
countries. Interestingly, RTAs were found to be particularly
effective at expanding agricultural trade and opening markets in
developing countries when developing-country trading partners are
part of the same agreement.
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