Assessing South-South Regional Integration: Same Issues, Many Metrics

Not only has the number of RTAs increased over time, but so also has the complexity of issues surrounding their formation, as well as the metrics used to assess them. Despite sustained research efforts, and irrespective of the approach adopted, the economic merits or demerits of regional integration arrangements remain essentially an empirical matter. Given the importance of this issue and the ambiguity that persists with regard to the economic impact of many RTAs among developing countries, the present paper uses a gravity model to analyse ex post the trade effects of seven South-South RTAs (AFTA, Andean Community, CARICOM, COMESA, ECOWAS, MERCOSUR, SADC), and a CGE model for an ex-ante analysis of a Framework Agreement on Trade Preferential System (FATPS) among the member States of the Organization of the Islamic Conference. The gravity results have shown that with the exception of the Andean Community and MERCOSUR, which seemed to have reduced trade with non-members, the other South-South RTAs examined are not only trade-creating but also trade-expanding, increasing overall trade, even with third countries, sometimes quite significantly. In the case of FATPS, the ex-ante static CGE results suggest that, despite some potential for trade diversion, the net effect is trade creation.

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