The impact of regional trade agreements on agrifood trade flows: Agricultural vs. food products, developed vs. developing countries

Regional trade agreements (RTAs) have become increasingly prevalent since the early 1990s. However few studies exist on the effects of RTAs on agrifood trade and very little differentiate trade in raw agricultural products from trade in processed food products. This paper focuses on the agrifood trade. We consider nearly all countries (180 countries over 4 time periods: 2001, 2004, 2007, 2011) and all RTAs in force in agrifood trade. Then we distinguish trade in raw agricultural products and trade in processed food products in order to compare the trade impacts of RTAs in both sectors. Using a gravity model, we introduce dummies for controlling for the multilateral resistance terms and we use the Poisson-Pseudo Maximum Likelihood (PPML) estimation method to deal with zero trade flows. We find a clear positive impact of RTAs on trade between involved countries. As expected, the trade impact of RTA is lower in the case of food products relative to agricultural products. Finally our results show that the positive impact of RTAs on trade between involved countries is greater for South-South trade flows than for North-South trade flows.