Trade Creation and Trade Diversion Effects in the EU-South Africa Free Trade Agreement

by Kwentua, Gregory Emeka

Abstract (Summary)
This study examines trade creation and trade diversion effects in the EUSAFTA using the standard gravity model of bilateral trade flows. The estimation of the gravity equation was carried out using the OLS analysis. In order to ascertain the overall trade creation and trade diversion effects explanatory variables such as GDP, distance and dummy variables were incorporated into the estimation equation to explain bilateral trade flows and exports respectively. The main focus was on the estimation of trade creation and trade diversion effects, resulting from participation in selected regional and preferential trade agreements like EU, COMESA, SACU and EUSAFTA. Additionally, the overall effects of regional and preferential trade agreements are positive and significant indicating that trade agreements, induce and generate huge trade volume among member countries. The trade creation effects of (SACU) were negative. This study demonstrates that participation in Regional and Preferential Trade Agreements stimulates trade between member countries. They also stimulate trade with non-member countries, perhaps as a result of an income effect.
Bibliographical Information:

Advisor: John Westra; Wes Harrison Jr.; P.Lynn Kennedy

School:Louisiana State University in Shreveport

School Location:USA - Louisiana

Source Type:Master's Thesis

Keywords:agricultural economics agribusiness


Date of Publication:01/23/2006

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