An inquiry on regional trade integration and trade potentials

Jaime Rafael Ahcar Olmos

Décembre 2015

Université Paris-Dauphine

Sous la direction de Jean-Marc Siroën

Regional trade agreements (RTAs) have surged in a context of stalled multilateral trade negotiations. This doctoral thesis intends to advance scientific knowledge in the field. Thus, thanks to a gravity model theoretical framework, three chapters of applied empirical econometrics analysis have been completed.
The first chapter examines the effects of RTAs, the Generalized System of Preference (GSP) and World Trade Organization memberships on bilateral trade flows. I put into practice different econometric specifications and estimation methods, notably (PPML), which is the one that better seems to contend with well-known biases and endogeneity problems.  I conduct this research with an international trade gravity model estimated across 153 countries from the year 1980 to 2012. I consistently found a strong positive impact of regional trade agreement RTAs on most specifications and low or non-significant results for WTO membership.
The second chapter, co-authored with my supervisor Jean-Marc Siroën, explores the effect of heterogeneity of RTAs in the scope of deep integration. We intend to determine if deeper RTAs promote trade more effectively than less ambitious agreements. We make use of two recently available data sets from the World Trade Organization (WTO) and the World Trade Institute (WTI-DESTA) to generate credible indicators of deep integration. Additive and Multiple Correspondence Analysis derived indicators for the depth of the agreements are then computed and their significance is tested in a gravity model. We find that deeper agreements increase trade more than shallow ones, whereas the provisions they included are within or outside of the WTO domain.
The third chapter investigates the existence of trade potentials between Colombia and the EU. I obtain in-sample predictions after the estimation of a gravity model with the Poisson Pseudo Maximum Likelihood estimator. I control for unobserved omitted variable bias by the inclusion of exporter and importer time varying fixed effects, and run a series of sensitivity analysis. Untapped trade potentials are found between Colombia and a group of EU countries in both directions of the trade flows. Exports from Colombia have a gap to bridge with Austria, Czech Republic, Finland, France, Germany, Hungary, Poland and Sweden. In the other direction, Sweden, Ireland, Finland and Poland have an interesting margin to gain in the Colombian market.


Key words:International Trade, Regional Trade Agreements RTA, Gravity Model, Deep Integration, Trade Potentials.