Trade Impacts of Selected Regional Trade Agreements in Agriculture

This paper provides an in-depth examination of the trade effects of three regional trade agreements (RTAs) – the ASEAN Free Trade Agreement (AFTA), the Common Market for Eastern and Southern Africa (COMESA) and the Southern Cone Common Market (MERCOSUR) -- in the agricultural sector. Results from a gravity model suggest that the creation of AFTA, COMESA and MERCOSUR have increased trade in agricultural products between their member countries. There is no robust indication of trade diversion with respect to imports from outside the region. The agreements are therefore net trade creating. There is no robust indication however that there has been strong trade creation with non-members in the case of any of the RTAs under study. In some cases, lack of transport and communications infrastructure, in addition to supply constraints, lessens the effect of the RTA on trade flows. Trade costs such as transport and logistics seem to remain important factors in determining agricultural trade flows. In some RTAs, countries have a comparative advantage in exporting many of the same agricultural products, thereby decreasing the impact of the preferential market access. A number of implications for South-South RTAs can be drawn from examining these very different agreements.