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Do RTAs Increase Bilateral Trade in the MENA Region?

Roesmara Donna, Duddy and Widodo, Tri and Adiningsih, Sri (2018): Do RTAs Increase Bilateral Trade in the MENA Region?

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Abstract

Middle East and North Africa (MENA) is an area with some special character, i.e. not easy to realize the process of integration and the country with abundant natural resources have better trade performance. This study aims to analyze the effects of RTAs to the trade of countries in MENA regions. The Gravity Model used to test the effects of democracy on trade. Estimation is done with several models, i.e. FE, RE, MLE, and PPML. The effects of RTAs on trade in MENA regions are varies. AA (Agadir Agreement) affects without trade creation, but trade diversion (1.41 percent) in the block and creates exports and imports with countries outside the block. The AMU (Arab Maghreb Union) affects through trade creation (4.07 percent) in blocks and imports diversion from outside into blocks. COMESA (Common Market for Eastern and Southern Africa) affects through trade creation (7.09 percent) in the blocks and export and import diversion from outside into blocks. The GAFTA (Greater Arab Free Trade Region) affects through trade creation (2.57 percent) in the blocks and export and imports creation outside the block. While the GCC (Gulf Cooperation Council) affects through export and import creation (2.59 percent). From this results can be concluded that RTAs increase bilateral trade in MENA region through several ways and various effect.

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