What Does Reciprocal Trade Agreement Meaning

Since the late 2000s, empirical work on the determinants of trade flows has increasingly relied on a theoretically motivated equation of gravity, controlling both multilateral resistance conditions and unsured bilateral heterogeneity with three sets of fixed effects: export time, import time and a pair of countries (cf. B[20], [21], [22], [23], [24],-[25], [26], [27], or [28]). Secretary Hull`s first efforts were to reach reciprocal trade agreements with Latin American countries, a region considered crucial to U.S. trade and security, where rival powers (particularly Germany) have gained ground at the expense of American exporters. However, until September 1939, Hull was only able to negotiate agreements with three out of ten South American countries, because the trade agenda was opposed by Latin Americans, who opposed the most favoured national requirement to abandon all bilateral agreements with other countries. Pressure from Congress, in the name of special interests, to ensure that Latin American countries do not have unrestricted access to the U.S. market, these countries would have been seriously hampered in their efforts to sell their raw materials abroad if they had abolished bilateral agreements with European countries that absorb much of their exports. The gravitational equation has become the most important econometric approach for the ex-post study of the “partial” (or direct) impact of economic integration agreements on bilateral trade flows as a whole. After taking into account multilateral resistance conditions, with fixed effects that alter time and control of endogenous distortion using panel data techniques [6], [6] find that free trade agreements significantly increase countries` bilateral trade flows using five-year data from 1960 to 2000 for 96 countries.

After this empirical strategy and the same set of data, [7] goes even further by comparing the effects of North-South and South-South trade agreements on bilateral trade and showing that free trade agreements lead to an increase in bilateral trade, whether the signatory countries are developing or industrialized countries. In particular, they note that the percentage increase in bilateral trade is higher in the South-South agreements than in the North-South agreements.

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