Trade effects of regional trade agreements on Taiwan: an empirical study using gravity model

Since the early 1990s, the major trading partners of Taiwan consecutively signed Regional Trade Agreements (RTAs). Taiwan, however, is not a member of those RTAs. What trade effects do those RTAs have on Taiwan ? Do they affect trade relations of Taiwan with its trading partners? Most previous studi...

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Bibliographic Details
Published in:Academia economic papers 2012-03, Vol.40 (1), p.35
Main Authors: Liu, Zong-Shin, Lai, Mei-Ying, Chen, Chih-Huan
Format: Article
Language:English
Subjects:
Commercial treaties
Economic theory
Exports
Great Depression
International trade
North American Free Trade Agreement
Studies
Trade agreements
Trade relations
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Summary:Since the early 1990s, the major trading partners of Taiwan consecutively signed Regional Trade Agreements (RTAs). Taiwan, however, is not a member of those RTAs. What trade effects do those RTAs have on Taiwan ? Do they affect trade relations of Taiwan with its trading partners? Most previous studies merely evaluate the average trade effects of RTAs, which cannot be applied to correctly assess the trade effects on Taiwan. This study is the first to construct a parsimonious gravity model, focusing on the trade between Taiwan and its trading partners, and uses panel data covering 21 countries from 1980 to 2008 to empirically investigate the trade effects on Taiwan of five RTAs signed between its trading partners. The major findings are summarized as follows: NAFTA, EU and ANZCER have significant import diversion effects on Taiwan, where NAFTA also exhibits an export diversion effect. In contrast, both AFTA and CEPA have positive effects on imports from and exports to Taiwan. Regarding the net trade effects, both AFTA and CEPA can enhance trade relations with Taiwan, but NAFTA, EU and ANZCER do the opposite. Moreover, most RTAs are found to have significant trade effects on Taiwan since they went into force, and each member of all RTAs has different trade effects on Taiwan. According to the results, it should be helpful for expanding external trade if Taiwan could sign bilateral FTAs with the U.S.A. and ASEAN countries.
ISSN:1018-161X
1810-4851