Assessing the Costs of Alliance Withdrawal on Trade Determination: A Lesson from Mauritania

Abstract

ABSTRACT This paper assesses the consequences of Mauritania’s exit from the West African regional trade agreement with respect to the region and in comparison, to the general effects on the performance of trade determinants. The selected trade determinants include alliances and regional trade agreements (RTA)-which are bilateral factors envisaged to foster international trade. Using a gravity model, the paper adopts PPML vis-à-vis difference-in-impact technique to evaluate the changes in performance of trade determinants from pre-exit to post-exit periods. The magnitude of impact of RTA on trade determination is reduced upon the exit of Mauritania, prompting overall negative difference-in-impact. But similar result is not statistically significant with specific consideration of Mauritania and West African region even though the coefficients reduced in post-exit. The impact of non-reciprocal general system of preference (GSP) significantly reduced as Mauritania exited ECOWAS. It is established that not all alliances influence trade positively. Overall, military alliance produces negative difference-in-impact; imbued with mixed reactions from other variables. It is therefore affirming that the exit of an alliance and regional trade agreement would require assessing their performance relative to trade determination. Alternative negotiation for trade preference is suggested if exit is unavoidable; thereby providing meaningful and useful lesson for implementation of alliance or RTA entrance and exit.