Free Trade Agreement Research Paper

7. Dai M, Yotov YV, Zylkin T. On the trade diversion effects of free trade agreements. Econ Lett. (2014) 122:321-5 doi: 10.1016/j.econlet.2013.12.024 The nodes that constitute the final demand play the role of wells in the economic network of goods flows, which leads to a rapid saturation of the TIout with an increase in maxa. In contrast, these nodes become sources of cash flow where no convergent TIin behavior is observed. This is shown in Figure 6, which shows the distributions of TIout and TIin for different αmax values. This is to take into account all the pairs of countries that have traded a BTA during the period studied. It turns out that TIin values do not converge for economically reasonable path lengths. In addition, we observe in Figure 7 that the BTA impact indices in country inputs tend to have smaller values, with an increase in αmax.

Figures 7A,B show the input-BTA effect indices in all countries for αmax = 1 (αmax = 10). For example, there is a trend towards smaller values in Europe, Australia, Algeria and Central America. This general trend occurs because loops within a country of the trading network become more important for TIin for higher αmax values. The probabilities of these national loops decrease with the time that international trade has increased over the study period [19]. Figure 8 shows an example of the series from Algeria to the European Union. With the increase in the maximum length of the paths, the BTA impact index decreases, as national loops have become less likely in recent years.