What Is Non-Reciprocal Agreement

Since it was developed independently by [14] and [15] more than five decades ago, the gravity model has become the main econometric framework for estimating ex post the „partial“ (or direct) effects of different types of economic integration agreements on bilateral trade flows. Our estimation strategy follows that of [6] and [16]. In particular, we control multilateral resistance conditions by integrating fixed effects on export time and import time. [17] pointed out that the gravity model theory implies that not only bilateral trade costs (bilateral trade resistance), but also trade costs relative to the rest of the world (multilateral opposition to trade) are relevant to predicting bilateral trade flows. In addition, we control endogeneity through bilateral fixed effects. This issue has received a great deal of attention in the empirical literature of the gravitational equation, as [6] has found that trade agreements are not exogenous. They showed that the ex post estimate of the partial effects of free trade agreements (EEAs) was warped, mainly due to the self-selection of pairs of countries in the agreements (due to the level of trade that exists), and found that this self-selection bias can be significantly reduced if some specific effects are used or when differentiated data are used. The gravitational equation has become the most important econometric approach for the ex-post study of the „partial“ (or direct) impact of economic integration agreements on bilateral trade flows as a whole. After taking into account multilateral resistance conditions, with fixed effects that alter time and control of endogenous distortion using panel data techniques [6], [6] find that free trade agreements significantly increase countries` bilateral trade flows using five-year data from 1960 to 2000 for 96 countries. After this empirical strategy and the same set of data, [7] goes even further by comparing the effects of North-South and South-South trade agreements on bilateral trade and showing that free trade agreements lead to an increase in bilateral trade, whether the signatory countries are developing or industrialized countries.

In particular, they note that the percentage increase in bilateral trade is higher in the South-South agreements than in the North-South agreements. Baier SL, Bergstrand JH (2004) Economic determinants of free trade agreements. J Int Econ 64:29-63 The dissemination of non-reciprocal agreements undermines efforts to promote free trade, while reciprocal agreements are trade because they do not operate in the current international trading system (Bhagwati 2008; Mr. Ozden and Reinhardt, 2005). The Doha Development Agenda recognises the central role that international trade can play in promoting economic development. Indeed, the increase in exports from developing countries to the markets of industrialized countries has been seen as a key element for developing countries in identifying the potential benefits of globalization. In recent decades, developed countries have granted developing countries preferential access to their markets through non-reciprocal trade agreements.

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