Bilateral trade flows between U.S TPP countries: Country Pair Analysis

The Trans-Pacific Partnership (TPP) is a proposed regional free trade agreement (FTA) among 12 countries: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam. The TPP by eliminating more than 18,000 taxes and other trade barriers on American products across the 11 other countries is expected make it easier for American entrepreneurs, farmers, and small business owners to sell Made-In-America products abroad. This paper attempts to examine the factors that affects trade creation and trade diversion between the US and TPP countries using the gravity model by applying both panel pooled data from 1991 to 2015 to four gravity equations (agricultural related products, bulk agricultural products, consumer oriented agricultural products, and intermediate agricultural products) in each case. The factors include traditional trade variables GDP of US (exporting country), GDP of importing countries, FTA’s, border, language, real exchange rate, arable land and population for U.S. Three models (One-way random effect, the two-way random effect and pooled) were applied to each of the four products. In all, the pooled model showed the highest predictive power and with consistent parameters. Similarly, considering the specific products, consumer oriented and intermediate products are the most sensitive to these factors while bulk agricultural products are the least. Keywords: Bilateral trade, Gravity model, TPP, FTA’s

Issue Date:
Jan 18 2017
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Conference Paper/ Presentation
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 Record created 2017-04-01, last modified 2018-01-23

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