Are the New Trading Blocs Building or Stumbling Blocks ? A Gravity Model Using Panel Data

Working Paper Gate 09-33We will be asking ourselves if the trading blocs created or renewed since the end of the 1980s favor the multilateralization of trade, and so constitute building or stumbling blocks. In a gravity model using panel data, we estimate a set of three regional dummies representative of intra-bloc trade, extra-bloc exports and extra-bloc imports. Taking the resulting three coefficients as a starting point, we propose an original typology of trade creations / diversions and of trading blocs. In applying it to our results, all the groups chosen as well as the Economic and Monetary Union, are shown to be building blocks. No trade diversion is noted, with the exception of an export diversion brought about by North American Free Trade Agreement