Using a gravity model for 35 countries, a new study by the International Institute of Social Studies finds that membership in ECOWAS and SADC regional agreements increases bilateral trade flows more than having preferential trade agreements with the EU. Furthermore, the study points out that the impact of simultaneous membership of some countries in multiple RTAs may undermine their effectiveness. It finds a positive impact if an additional membership complements the integration process of the original RTA which provides a lesson for the direction into which regional trade agreements could be broadened and strengthened. The results from this study also indicate that developing countries may be able to significantly improve their trade performance if they can focus on expanding and integrating regional markets and use this ‘internal market’ as a training ground to improve their efficiency and competiveness in order to compete favourably at the global level.
April 11, 2011