What is the cause of growth in regional trade: Trade liberalisation or RTAs? the case of agriculture

This study seeks to assess whether movement toward similar trade policies among neighbouring countries contributed to changes in patterns of trade growth, and whether the formation of regional trading arrangements are associated, exante or ex-post, with the evolution of such a trade pattern. The rest of the paper is organised as follows. In the next section, we summarise recent growth trends in world vs. regional trade using traditional methods. Then, in Section 3, we use the TCD approach to estimate the underlying long-term trends in rates of growth in intra-and extra-regional trade flows. The results of the analysis for each of the four blocs, NAFTA, Mercosur and the EU are summarised in Section 4. Our main finding is that the pursuit of more outward-oriented policies has been the major stimulus for increasing intra-regional agricultural trade, which in turn encouraged the formation of regional trading arrangements several years hence.