Has Regionalism Delivered for Developing Countries?
Chapter 7: Anticipatory Effects of Regional Integration: The Case of ASEAN
Kreinin 02 chap 6 24/9/02 12:22 pm Page 124 7. Anticipatory effects of regional integration: the case of ASEAN INTRODUCTION 1 How trade is reoriented through policy change has always been an important question in international economics. In particular, over the past few decades, the effects of regional trading arrangements (RTAs) on trade flows have been debated vigorously. As a second-best policy change, the implications of RTAs for partner and non-partner countries are theoretically ambiguous, as they lead to both trade creation and trade diversion; hence empirical modelling of these policy changes is essential. While the applied modelling of trade creation and diversion has become quite sophisticated, almost all paradigms that consider the trade effects of RTAs are static in nature, that is, they focus on the one-time price effects of RTAs. However, the effects over time of regional economic integration may be far more important. In a recent attempt to capture empirically the effects of RTAs, Freund and McLaren (1999) model the changes over time in trade orientation caused by RTAs.2 In particular, they consider the importance of anticipatory changes in the behaviour of economic agents. Using the case studies of the EU, NAFTA, MERCOSUR and EFTA, they find fairly convincing evidence that an acceding country’s trade orientation towards its RTA partners rises over time along an ‘S’-shaped path. For example, the adjustment to the RTA policy shock of an ‘average’ EU member lasted 12 years, with the process beginning four years before the date of accession. Weaker...
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