THE RUPTURE OF THE HUB-SPOKE EFFECT OF BILATERAL TRADE FLOWS WHEN RULES OF ORIGIN ARE RELAXED: THE CASE OF AGADIR AGREEMENT COUNTRIES.

Abstract

This paper aims at shedding light on the extent to which the Agadir Association agreement has fostered inter regional trade between the EU_26 and the Agadir_4. It analyzes the remarkable variation in the spatial/sectoral structure of exports, and the extent to which it has been induced by the Agadir agreement itself or due to the adoption of RoO PANEURO diagonal cumulative scheme. The dataset covers a timeframe from [2000 - 2014] designed to account for sector specific final and intermediate exports through a bilateral gravity model and through tbe Poisson Pseudo Maximum Likelihood Estimator PPML. The methodological approach is considered to be a two-fold one which starts by screening final export and intermediate flows through conducting a ‘Hierarchal Cluster Analysis’. Second step proceeds by exposing the export flows of the 3 clusters to treatment with diagonal RoO through ‘The Double Differences Approach’ DID benchmarked to equally comparable control groups. Across all scenarios applied a remarkable significance of the interaction term combining both treatment effects and time, for the coefficients of 11 out of the 13 sectors were detected and it further asserted that treatment with diagonal RoO contributed to increasing intra-Agadir’s_4 final and intermediate exports and exports to E.U._26.