The Role of History in Bilateral Trade Flows

Barry Eichengreen and Douglas A. Irwin

in The Regionalization of the World Economy

Published by University of Chicago Press

Published in print November 1997 | ISBN: 9780226259956
Published online February 2013 | e-ISBN: 9780226260228 | DOI:
The Role of History in Bilateral Trade Flows

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The rise of regionalism continues to pose challenges for specialists in international trade. One classic question is that concerning the aggregate welfare effects of regional trade liberalization. Another is the political economy of regionalism: how liberalization on a regional basis affects the welfare of nations and domestic interest groups, and how their self-interested actions shape the global trading system. A third question is how important regional arrangements have actually been for the pattern of trade. The gravity model of international trade has been the workhorse for empirical studies of this question to the virtual exclusion of other approaches. The idea that past trade patterns influence current trade flows is intuitively plausible. The relative importance of lagged trade and current commercial policy in explaining the pattern of trade is an empirical question. This chapter analyzes the impact of history on trade and examines the impact of the two principal trade liberalization initiatives of the early postwar period: the General Agreement on Tariffs and Trade and the European Economic Community.

Keywords: history; bilateral trade; gravity model; trade flows; General Agreement on Tariffs and Trade; European Economic Community; lagged trade; commercial policy; trade liberalization; international trade

Chapter.  13486 words. 

Subjects: International Economics

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