Economic Integration Agreements Research Articles

Russia’s Participation in the Development of Transport and Logistics Highways of the EAEU Member States

Aim. An overview analysis of the prospects for trade and economic relations in the EAEU, the SCO countries and other interested states, coupled with interests in the geo-economic and geopolitical Eurasian space in the conditions of artificial escalation of local tensions by the collective West.Tasks. Search and evaluation of optimal routes for the development of traditional and new transport and logistics highways, their branched corridors from the perspective of strengthening economic integration agreements, security and interaction of the Eurasian Union with the SCO countries.Methods. The article uses methodological tools of spatial economics, economic, geographical and geopolitical analysis of the interests of states, analysis and synthesis of interests and synergy of interests of the participating states of global Eurasian projects.Conclusions. The study showed the possibilities of new and old transport magistral (the highway) systems (TMS), both through Kazakhstan and through the development of a unique alternative — the Northern Sea Route (NSR) with the construction of a completely new infrastructure and their maintenance. The issues of TMS on the BAM and Trans-Siberian railway were touched upon. An assessment of alternatives to TMS in terms of cost and time is given. The potential opportunities of the expanding TMS and cargo traffic along the Caspian-Caspian corridor, both overland from the east (Turkmenistan — Kazakhstan — Russia) and the western shore of the Caspian Sea (Iran — Azerbaijan — Russia), as well as along waterways along the same “North — South” corridor, are indicated.Results. An assessment of effective routes has been carried out; strategic objectives have been identified for newly opened transport and logistics highways, which are defined as “new lye routes” through the territories of the EAEU and neighboring interested states (China, India, Pakistan, Afghanistan, Iran, etc.), which gradually plan to enter into closer relations from participating observers relations in the international division of labor.

Ekonomik Entegrasyon Anlaşmalarının Türkiye'nin Yüksek Teknolojili Ürün İhracatına Etkisi: ASEAN Örneği

It is seen that there have been great changes in the economic system and understanding in the phase from the settlement of humanity to the present day. The adventure of finding the technique of survival has been the key for states to dominate each other and become developed countries centuries later. Especially after World War II, there has been an increase in efforts to establish economic integration and to apply technology to industry in various parts of the world, especially in Europe. When this situation is evaluated in terms of Turkey, the fact that its exports of high-tech products, which is one of the indicators of development, is stuck between 2% and 4% and that it has a foreign trade deficit among the economic integrations of which it is a member, reveals that the understanding of establishing economic integration needs to change. Therefore, in this study, the impact of economic integration agreements between Turkey and ASEAN, the world's fifth largest economy, on Turkey's exports of high-tech products is analyzed with a panel gravity model covering the years 2007-2020 in line with the purpose of the study. As a result of the study, it is found that economic integration agreements with ASEAN positively affect Turkey's exports of high-tech products.

Gravity, globalization and time-varying heterogeneity

As data availability improves, the gravity model of international trade is used to study the flow of trade over increasingly long periods of time. This puts pressure on the standard assumption that constant bilateral fixed effects are sufficient to control for unobserved heterogeneity. When looking across decades rather than years, changes in the economic landscape will affect both explanatory and dependent variables, thus biasing the results. The paper begins by providing evidence of time variation in the unobserved heterogeneity using a novel econometric test. It then presents a new way of estimating the gravity model that can identify and control for unobserved heterogeneity as it varies over country pairs and time. This approach substantially enhances the precision of the estimated parameters, enabling a detailed analysis of the impact of different types of economic integration agreements on trade on an annual basis. This heightened precision also demonstrates the diminishing importance of distance and allows our model to accurately depict the evolution of trade over time. The pattern in the unobserved heterogeneity closely resembles the ascent and the deceleration of globalization. The paper closes with some preliminary analysis into the factors that underlie the unobserved heterogeneity.

Perspectives on Engagement of Non-State-Actors in Regional Integration in SADC Region’s AfCFTA Context

The role of Non-State Actors (NSAs) in the SADC regional integration was approved by the Council of Ministers in 2022. The Council gave the NSAs the mandate to participate in the regional integration agenda and contribute into SADC policy development, roll out, monitoring and evaluation. Ironically, there are no clear systematic mechanisms providing for NSAs’ engagement within the SADC structures and processes despite existence of SADC institutions. The coming in of the AfCFTA agreement sought to create a single African market thereby creating opportunities for NSAs. To date no noticeable increase in Africa intra-trade has been recorded. The study therefore, examines the perspectives on engagement of Non-State-Actors in the context of Regional Integration focusing on SADC region. The findings show that state actors are not involving non-state actors as they discuss regional economic integration agreements. The researcher recommends that valuable additions to regional economic integration and strengthening should be premised on an environment where policies and regulations are formulated from a consultative and inclusivity of NSAs. It is concluded that, when NSAs explore regional markets or create regional value chains, they facilitate regional economic integration from the bottom-up approach through their activities.

How the African Continental Free Trade Area impacts firms’ export survival: Some lessons from Kenya

The potential benefits of the African Continental Free Trade Area (AfCFTA) have taken center stage in recent policy and scholarly debates. We contribute to this discussion by drawing insights from our assessment of the current levels of export survival across the following agreements: the Common Market for Eastern and Southern Africa (COMESA), the East African Community (EAC), and the overall economic integration agreement (EIA). Using monthly firm-product-destination customs transaction data from Kenya for the period January 2006 to December 2017, we find that the average duration of trading is longer under an agreement than when there is no agreement in place by 1.12 months. The mean duration of exporting under EAC exceeds that of COMESA by 1.47 months. The probit regression results with random effects reveal that trade agreements reduce the hazard rate for exports. However, the effect differs depending on the agreement’s depth and extent: The effect is negative for the EAC and positive for the COMESA. We also find that the ‘timing’ effect differs depending on the nature of the agreement. Overall, while the AfCFTA may expand market access, it might not guarantee low failure rates for exporters.

Economic integration and survival of Ghana’s manufactured and agriculture raw material exports

The paper investigates the effects of economic integration agreements on the survival of Ghana's manufactured and agriculture raw material exports. Using annual trade data for Ghanaian manufactured and agriculture raw material product exports from 1988 to 2018 and a discrete-time proportional hazard model, we found that economic integration agreements enhance the survival of manufactured products and agriculture raw material exports. The Non-Reciprocal Preferential Trade Agreement is the most survival-enhancing. In addition, economic integration agreements strengthen the survival of existing active export relations but decrease the survival of export relations initiated after the agreement was signed. We also found that the average duration of manufactured products and agriculture raw material exports is 9.041 and 8.817 years, respectively. The study recommends that the Ministry of Trade and Industry should continue negotiating for Non-Reciprocal Trade Agreements.

Economic Integration Agreements and Export Survival in Ghana

This study examines the effect of regional integration—specifically, that of the Economic Community of West African States (ECOWAS) as an economic integration agreement—on the survival rate of Ghana’s exports. It employs a discrete-time complementary log–log hazard model with a random effects estimation technique and Kaplan–Meier estimates of the survival function, using data spanning from 1996–2018. The findings from the study indicate that ECOWAS has a significantly negative impact on the hazard rate of Ghana’s exports, implying that ECOWAS as an economic integration agreement increases the survival rate of Ghana’s exports for both aggregate exports and commodity-specific ones. Additionally, the heterogeneity effect of other economic integration agreements on Ghana’s export survival was found to increase the survival rate of exports. From a policy perspective, efforts to ensure the smooth operation of trade agreement contracts among member countries within the ECOWAS sub-region are necessary for the long-lasting export survival of Ghana’s exports.

The ties that bind: geopolitical motivations for economic integration

Economic determinants of economic integration agreements have received ample attention in the economic literature. Political motivations for such agreements have been mostly studied as functions of domestic politics or in the context of conflict. In this paper the author suggests a different narrative. Economic integration may be used as an instrument of foreign policy, where political considerations influence the choice of contracting partners. He sketches a simple model that exhibits the proposed mechanism in which a big country chooses between alternatives for integration in terms of economic and political welfare gains, while a small country is indifferent between possible partners for integration. In the empirical part the author uses a novel dataset on political events to test the predictions of the model and finds evidence for the hypothesis that there is more to economic integration than “just trade”. Geopolitical considerations play a determining role in the choice of the contracting partner country and the depth of economic integration.

Expecting Brexit

The Brexit vote precipitated the unraveling of the United Kingdom's membership in the world's deepest economic integration agreement. This article reviews evidence on the realized economic effects of Brexit. The 2016 Brexit referendum changed expectations about future UK–EU relations. Studying its consequences provides new insights regarding the economic impacts of news and uncertainty shocks. Voting for Brexit had large negative effects on the UK economy between 2016 and 2019, leading to higher import and consumer prices, lower investment, and slower real wage and GDP growth. However, at the aggregate level, there was little or no trade diversion away from the European Union, implying that many of the anticipated long-run effects of Brexit did not materialize before the new UK–EU trade relationship came into force in 2021.

Exploring the impact of economic integration agreements through extreme bounds analysis

AbstractThis article provides an empirical strategy guided by the data to estimate the effects of Economic Integration Agreements (EIAs) on trade flows and their transitional dynamics. The strategy uses Extreme Bounds Analysis (EBA) to guide the choice of lags and leads in the effects without researchers' discretion involved. We show that arbitrarily selected year intervals and starting year can result in non‐robust estimates of transitional dynamics of the effects of EIAs on trade flows. The empirical strategy follows two steps: EBA first sifts lags and leads of EIAs robustly related to trade flows from candidates, then these are included in the gravity equation to estimate the effects of EIAs on trade. We find that various lags and leads are robustly and positively related to trade flows, and the lag and lead structure depends on the level of integration. Our results show that EIAs have a long‐term effect of 63% on trade flows. Under the richer lag and lead structure, deep‐integration agreements beyond the level of free trade agreements have a much higher impact on trade flows than free trade agreements do (132% vs 31%). The estimates of effects of EIAs obtained from EBA‐based estimation have a smaller contemporaneous effect and larger phased‐in effects compared to previous studies relying on the subjective choices of year intervals while similar results are observed with the decomposed EIAs.

International trade and standards harmonization: The case of tractors and the OECD Tractor Codes

AbstractAlthough the trade effects of public and private standards—particularly for food safety and environmental quality—in agricultural markets have been well documented, much less is known about standards harmonization and international trade in tractors, a crucial input to agricultural production in most countries. We analyze the trade impacts of the long‐lived OECD Tractor Codes—an integrated system of standardized tractor tests for performance and safety, certification, and mutual recognition agreements established in 1959. We hypothesize that this system increases tractor trade between members and possibly among members and nonmembers because it: (1) reduces duplication of tests across import markets, (2) lowers transaction costs of tractor trade disputes, (3) enhances manufacturers' risk management, and (4) boosts farmer demand through greater trust resulting from intergovernmental organization certification. Using bilateral COMTRADE data for 1962–2018, we estimate a structural gravity equation using Poisson pseudo‐maximum likelihood methods to account for zero trade. After controlling for economic integration agreements and OECD membership, our benchmark analysis suggests trade is roughly one‐third larger if both partners are members, a finding that is robust to considerations of gradual adjustment costs and reverse causality. We further find that this effect varies by countries' timing of accession and, to a lesser extent, level of economic development, though trade creation effects are inconclusive. A counterfactual analysis indicates that manufacturers and farmers in nonmember countries, including several middle‐income and low‐income countries, would benefit from membership. Our results have important implications for standards harmonization and international trade in agricultural machinery.

Comparing Apples to Apples: Estimating Consistent Partial Effects of Preferential Economic Integration Agreements

The dominant paradigm of the estimation of causal partial effects of preferential economic integration agreements (PEIAs) on trade costs and trade flows is to rely on a selection on observables, with propensity‐score matching being the leading example. Conditional on some score of joint determinants of PEIAs and trade flows, causal partial effects of PEIAs on trade are obtained from a simple conditional mean comparison of trade between members and non‐members. Key for this approach to obtain consistent estimates is that the score used to form comparison groups is balanced: similarity of country pairs in the PEIA propensity core means similarity in all the observables. Otherwise, the effects may be biased, misascribing effects of differences in individual observables to PEIA membership. We employ a remedy for this bias through entropy balancing, demonstrate that there is an upward bias of PEIA effects on trade flows from lack of covariate balancing, and quantify the bias of the effects.

The Eurasian Economic Union – keeping up with the EU and China

ABSTRACT Among the numerous Eurasian regional organisations (ROs) founded since the collapse of the Soviet Union, the Eurasian Economic Union (EAEU) sticks out as the first comprehensive economic integration agreement, in which member states give up sovereignty in the area of external trade. For the first time, Russia foregoes its veto power in one of the bodies of the EAEU. This is especially puzzling given that all EAEU member states are non-democratic regimes, which usually do not enter agreements that limit their room for manoeuvre and opportunities to control rents. This article investigates the reasons for why Russia opted for the deepening of regional integration and relinquished sovereignty to the regional level. The article contends that autocratic states create ROs to mitigate threats to regime survival and stability. If the leading state, which initiates and sponsors the creation of ROs, perceives threats to its survival as grave enough and the RO promises adequate remedies, it will be willing to agree to compromises and side payments. Drawing on a sample of speeches and official statements as well as on a series of elite interviews, the analysis proves that the EAEU is a means of regime survival in light of Russia’s perceived encirclement by China and the EU.

Trade creation and trade diversion of economic integration agreements revisited: a constrained panel pseudo-maximum likelihood approach

For PPML estimation of high-dimensional structural gravity panel models it proves useful to exploit the equilibrium restrictions imposed by the system of multilateral resistances. The main advantage of this approach lies in the functional dependence of the parameters of all dummy variables on the structural trade cost parameters. Moreover, the delta method is used to establish confidence intervals of counterfactual changes. Using the constrained panel PPML estimator for a panel of 65 countries in the period 1994–2012 indicates significant trade creation of economic integration agreements with average ranging in between 12.2 and 30.3% in 2012. Results also point to substantial domestic and international trade diversion, where the former dominates the latter.

Two-sided heterogeneity, endogenous sharing, and international matching markets

This paper develops a multi-country, multi-sector, and multi-factor model of two-sided matching between heterogeneous workers and entrepreneurs in which agents in different countries can form cross-country teams. Sorting, matching, and sharing problems are all considered in a unified framework. Equilibrium is characterized by endogenous sharing rules, which break away from competitive marginal productivity theories of factor returns. I illustrate that a bilateral economic integration agreement can affect the welfare of agents in an unrelated third country, and that a reduction in the cost of sector-specific matching can increase welfare for all agents without conflicts of interest.

Classification of International Preferential and Regional Trade Agreements

The article is devoted to comprehensive generalization of features/characteristics of international trade agreements/treaties which introduce/fix certain trade advantages in the tariff and non-tariff spheres. The article identifies fifteen classification features/characteristics of the analyzed international agreements. The features are divided into groups: those simultaneously inherent in all/any mentioned international trade agreements/treaties; those inherent only in international economic integration agreements/treaties; those inherent just in preferential international trade agreements/treaties. Practical relevance: The classification gives an opportunity to suggest some definitions/terms, which take into consideration/involve some separated particulars, namely those of preferential trade agreements, international economic integration agreements, which also include regional trade agreements.

Economic Disintegration? Political, Economic, and Legal Drivers and the Need for ‘Greening Embedded Trade Liberalism’

Abstract This contribution uses the examples of Great Britain’s withdrawal from the EU (Brexit) and US withdrawal from multilateral trade and environmental agreements for exploring political, economic, environmental, social, and legal reasons driving the backlash against economic integration agreements. In both examples, populist battle-cries for ‘taking back control’ and for lowering regulatory standards were followed by governmental attempts at evading parliamentary control over executive foreign policy powers to violate, or withdraw from, multilateral agreements. Anglo-Saxon neo-liberalism, President Trump’s mercantilist power politics, authoritarian state-capitalism (e.g. in China), and European ordo-liberalism reflect systemic divergences that may justify broad interpretations of WTO ‘exceptions’ (e.g. for WTO trade remedies and climate change mitigation). Europe’s multilevel, democratic constitutionalism protecting ‘social market economies’ was comparatively more effective in limiting protectionism and carbon emissions inside Europe’s common market. The EU’s ‘new green deal’ for a carbon-neutral ‘green economy’ was made possible by stronger, social, and democratic support based on ‘constitutional interpretations’ of Europe’s ordo-liberalism assisting adversely affected workers, producers, traders, investors, and other citizens to adjust economic and environmental activities to climate change mitigation. EU leadership for WTO-consistent climate change rules requires ‘greening embedded liberalism’ by interpreting the WTO ‘sustainable development’ objectives in conformity with the 2015 Paris Agreement, the UN ‘sustainable development goals’, and human rights (e.g. as legal basis for climate change litigation in Europe).

EU economic integration agreements, Brexit and trade

The effects of regionalism on trade have been extensively evaluated within a gravity model framework. With the expected exit of the United Kingdom (UK) from the European Union (EU), the prospect of regional disintegration has brought about a new impetus to studying trade policy effects. Using actual and forecast data for a panel of bilateral imports between the EU15 and the rest of the world, this paper examines the trade effects of EU economic integration agreements (EIAs), their evolution over time and the related counterfactual Brexit trade policy scenarios. Distinct trade effects are obtained for the EU trade related agreements; positive, significant and of similar magnitude for the EU and free trade agreement (FTA) coefficients, but negative and significant (and smaller in magnitude) for the regional economic partnership agreements (EPAs). The subperiod results suggest the positive coefficients of EU and FTA membership tend to diminish over time, implying earlier membership of EIAs came with greater trade benefits. Finally, in generating the predicted values for the trade effects of three alternative counterfactual Brexit scenarios (hard Brexit, hard Brexit plus, global Britain), the findings suggest an asymmetric effect depending on the perspective of the UK versus the EU. Whereas the UK’s trade would decline substantially with all three country groups (the EU, the FTAs and regional EPAs) and rise substantially with the rest of the world, only minor percentage changes are predicted for EU bilateral trade.

Do economic integration agreements affect trade predictability? A group effect analysis

AbstractRecent theoretical findings in the trade literature suggest that economic integration agreements (EIAs) not only increase the level of trade but also make it more stable and predictable. This paper proposes a Hausman–Taylor quantile regression approach to identify the causal effect of EIA membership on trade predictability. The proposed methodology accounts for group effects in the gravity equation and is computationally efficient. Our results corroborate the theoretical findings that EIAs make trade more stable and predictable and this conclusion is even stronger for deeper EIAs.

Trade in Services in the African Continental Free Trade Area: Prospects, Challenges and WTO Compatibility

ABSTRACT This article engages with the recently adopted agreement for the African Continental Free Trade Area (AfCFTA) in the area of services. While services trade had heretofore stood at the queue of African trade pacts, the AfCFTA breaks new grounds by negotiating goods and services concurrently, signalling a paradigm shift and a commitment to a deeper integration of the continent. Upon Members’ implementation of the Protocol on Trade in Services, whose aim is to establish a single market in services, the region will be the largest economic integration agreement ever concluded since the birth of the World Trade Organization (WTO). This paper sets out to analyse the provisions of the Protocol and how they contribute to achieving the objective of attaining a single market where services (alongside goods, people and capital) move unrestricted.