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Regional integration and the challenge of overlapping memberships on trade

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Abstract

Despite a plethora of policy and scholarly discussions on how overlapping memberships affect the implementation of rules of origin meant to facilitate trade within regional trade agreements (RTAs) of developing countries, there has yet to be any theory development or empirical test to verify these claims. This article re-examines these previous discussions and articulates and empirically tests a theoretical model on the effects that overlapping memberships have had on intra-RTA trade. Using measures of overlapping memberships at both the RTA and country levels of analysis, I find that overlapping memberships in RTAs involving developing countries have had a negative effect on intra-RTA trade levels. These findings shed light on steps developing countries can take to address overlapping memberships and strengthen regional integration at a time when there is a push for north–south trade agreements such as those the European Union is negotiating with several of these developing countries.

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Notes

  1. Previous discussions on the effect of overlapping memberships have focused on the RTA as a unit (Rocha 2003; Khandelwal 2004).

  2. Interestingly, Milner and Kubota (2005) and Milner and Mukherjee (2009) argue that the process of democratic transition in developing countries has led to the opening up of domestic group lobbying, which has facilitated the input of such groups in economic liberalisation policies.

  3. A specific example is that of Mauritius, a member of SADC, where the Minister of Foreign Affairs, International Trade and Cooperation noted that SADC's RoOs are stringent and an impediment to intra-SADC trade (Mauritius Government 2005).

  4. Genna (2002) developed the integration achievement score (IAS) that evaluates the depth of economic and political integration. This dataset includes a select case of RTAs with three or more member-states. The 20 cases that are obtained from this selection are the ones that have only developing countries as member-states.

  5. I provide a list of these RTA in the Appendix.

  6. Total intra-RTA trade includes both intra-RTA imports and intra-RTA exports.

  7. A related measure to capture the importance of the RTA market is that of Haftel (2007), who uses intra-RTA trade as a percentage of total trade all RTA members conduct with all other states (including other RTA members). The dependent variable used in this analysis not only captures the importance of the RTA market, but also the rate at which this importance increases (or decreases) yearly.

  8. The coding scheme for this variable should not be seen to lessen the potential impact of overlapping memberships on the change in intra-RTA trade share. This variable is meant to show that membership in one (or more) additional RTAs results in additional rules of origin that can have adverse effects on intra-RTA trade.

  9. IAS has been used in other studies on the depth of regional integration, including Feng and Genna (2003), Genna and Hiroi (2004) and Genna (2011).

  10. Due to a lack of trade statistics for some member-states in the DOTS dataset, these states are excluded from the analysis. For instance, intra-RTA trade statistics for all SADC members are not available, leading to the exclusion of all member-states of this RTA in the multilevel analysis.

  11. Summary statistics for these variables are provided in the appendix.

  12. While critics of overlapping memberships note that they are detrimental to trade creation, some have argued that perhaps overlapping memberships are the inevitable path towards the multilateral trade liberalisation that the WTO has yet to produce (Baldwin 2006).

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  1. School of Humanities and Social Sciences, Nazarbayev University, 53 Kabanbay Batyr Ave, Astana, 010000, Kazakhstan

    Mwita Chacha

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Chacha, M. Regional integration and the challenge of overlapping memberships on trade. J Int Relat Dev 17, 522–544 (2014). https://doi.org/10.1057/jird.2013.13

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