The effects of regional trade agreements (ATRs) on countries? welfare are controversial. In this article, we evaluate these effects using stock market returns from an up-to-date dataset that spans 200 RTA ads, 80 savings and 20 years. We measure the impact of news on ATRs on domestic stock market returns after adjusting these returns for international stock market movements. We then link these unusual returnees to the characteristics of the RTA members and to the agreements themselves. We find strong evidence of the natural trading partner hypothesis; Stock markets rise more strongly when RTAs are signed between countries that already have high trading volumes. Stock markets also rise more strongly when the poorest countries sign RTRs and when RTAs are signed with smaller partners. Nor do we find evidence that capital markets expect a significant impact on trade diversion. Deep trade agreements are an important institutional infrastructure for regional integration. They reduce business costs and set many rules in which economies are active.
If designed effectively, they can improve political cooperation between countries and thus promote international trade and international investment, economic growth and social well-being. Studies by the World Bank Group find that the use of the term “regional” should remind us that trade agreements are international – member states of a trade pact do not need to be in neighbouring countries. As a result, regional trade agreements can cover large geographic areas. Regional trade agreements have the following advantages: trade agreements open many doors. With access to new markets, competition intensifies. Increasing competition is forcing companies to produce better quality products. It also leads to greater diversity for consumers. If there are a variety of high quality products, companies can improve customer satisfaction. Under the GED project, we believe that regional trade agreements may have a positive impact on countries outside the agreement`s jurisdiction.
Based on the Transatlantic Trade and Investment Partnership (TTIP) as a case study, we have developed “5 Steps to Inclusive TTIP for All!”, in which we explain how to use TTIP as a model for spreading the benefits beyond the borders of the signatories to an agreement. A free trade agreement removes all barriers to trade among members, which means that they can freely move goods and services between them. When it comes to dealing with non-members, each member`s trade policies continue to come into force. Businesses in Member States benefit from increased incentives to trade in new markets as a result of the measures contained in the agreements. The pros and cons of free trade agreements affect employment, business growth and living standards: environmental protection measures can prevent the destruction of natural resources and crops. Labour laws prevent poor working conditions. The World Trade Organization imposes rules on free trade agreements. We find no evidence of the expected effects on trade diversion. Regional trade agreements are multiplying and changing their nature.