Working Paper
On the dynamics of trade diversion: evidence from four trade blocs
McLaren, John; Freund, Caroline L. (1999)
This paper studies the dynamics of trade reorientation experienced when a country joins a regional trade bloc. We find that the joining country's trade orientation toward bloc countries typically rises along an `S'-shaped path. We estimate the size, speed, and timing of this adjustment path for a `typical' joining country, for four trade agreements. We find that, in the European Union (EU), the incumbent bloc countries' share of the joining country's trade typically rose by eighteen percentage points over the course of the adjustment; that this took twelve years; and that the adjustment began ...
International Finance Discussion Papers , Paper 637