In 1997, fourteen Arab countries concluded an agreement, aimed at achieving the Greater Arab Free Trade Area (GAFTA) by 1.1.2007 at the latest. This paper provides a first ex-post appraisal of the GAFTA agreement's trade effects. Based on new theoretical developments of the gravity equation, we estimate a panel data model which covers trade within the GAFTA area as well as with 35 other reference countries, over the period 1988-2005. Several estimators are presented, especially transformed fixed-effects, Hausman and Taylor as well as a GMM dynamic estimator. As a main finding, the calculation of gross trade creation shows that regional trade has increased by 20% since GAFTA has been implemented.
In the past ten years, emerging countries have considerably increased their production of cars. Although their share in world exports is still below 10%, these countries are now ready to conquer international markets, since they can produce on a large scale at very low production costs compared with the Northern standards. Given the lack of literature on this topic, the main contribution of this paper is to investigate the export potential of emerging countries in the automotive industry. Based on new developments in the gravity equation, an original world trade model is applied to the car industry. The export potentials are calculated from the residuals of the model with the out-sample technique. The main results show that several large emerging countries enjoy a very significant export potential. These are mainly China, Mexico, Brazil, Russia, Iran, Thailand as well as Indonesia. The growing influence of these countries has strong implications for the Triad. Indeed, Japan, Germany and small European countries have already surpassed their export potential. In fact, only North American countries still exhibit a significant export potential, because their export level is currently low in comparison to what it should be given their huge economic size.
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