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Do Democratic Agreements Foster Bilateral Trade Flows ?

Siroën, Jean-Marc; Duc, Cindy; Granger, Clotilde (2005), Do Democratic Agreements Foster Bilateral Trade Flows ?, ETSG 2005 Dublin Seventh Annual Conference, 2005-09, Dublin, Irlande

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Type
Communication / Conférence
Date
2005
Conference title
ETSG 2005 Dublin Seventh Annual Conference
Conference date
2005-09
Conference city
Dublin
Conference country
Irlande
Pages
17
Metadata
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Author(s)
Siroën, Jean-Marc cc
Duc, Cindy
Granger, Clotilde
Abstract (EN)
For several years, preferential trade agreements have been oriented towards initiating a deep integration process. As a result, treaties include clauses concerning the harmonization of regulations, policies and standards. In order to join the European Union, a future member must be a stable democracy that respects human rights, the rule of law and the protection of minorities. The inclusion of such a clause can be interpreted as a political choice to promote democracy. But it can also be viewed as a pre-condition for implanting a "deep integration" process : only democracies are able to drive the harmonization process of rules and standards. If democratic constraints imply deeper integration, we can expect that such agreements will have a higher impact on trade inside the area concerned by the agreement. The aim of this paper is to verify that preferential trade agreements (PTAs), which are bound by a democratic constraint, have a higher positive effect on trade inside the area, than non-constraining agreements. To achieve this, we use an Anderson and van Wincoop (2003) type of gravity model, and we differentiate between PTAs according to whether or not they include a democratic clause. Whereas trade between democratic countries is higher than trade between autocratic countries, empirical evidence shows that the inclusion of a democratic clause fosters bilateral trade between the partners has no significant effect relative to no PTA, and is neutral relative to a non-democratic PTAs between South countries.
Subjects / Keywords
Free Trade Agreements; Gravity Model; Democracy
JEL
P16 - Political Economy
F13 - Trade Policy; International Trade Organizations
F15 - Economic Integration
O19 - International Linkages to Development; Role of International Organizations

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