THE IMPACTS OF REGIONAL FREE TRADE AGREEMENTS AND EXCHANGE RATE VOLATILITY ON WORLD VEGETABLE AND FRUIT TRADE FLOWS

• Main Authors: David Karemera, Louis Whitesides, Gerald Smalls
• Format: Article
• Language: English
• Published: International Journal of Food and Agricultural Economics 2017-10-01
• Series: International Journal of Food and Agricultural Economics
• Subjects: exchange rate volatility; gravity models; trade creation and trade diversion; vegetable and fruit trade; ASEAN; EU; MERCOSUR; NAFTA
• Online Access: http://www.foodandagriculturejournal.com/Vol5.No4.pp25.pdf

The study objectives are to identify determinants of commodity trade flows and analyze the effects of major Regional Free Trade Agreements on specific vegetable and fruit trade. The RFTAs are evaluated to identify the extent to which free trade associations lead to trade expansion. Using panel data from 1999 to 2008 covering 48 countries, the study found that per capita income, population, and per capita production capacity are significant determinants of fruits and vegetable trade flows. The results show that NAFTA and EU enhanced vegetable and fruit trade through trade creation and limited trade diversion. The ASEAN association generated insignificant trade expansion. The effects of the MERCOSUR association are inconclusive and generally commodity-specific. The findings reveal that the exchange rate uncertainty significantly impairs commodity flows. However, unlike previous findings, our study suggests that the negative impact is not uniform and may vary by sector, commodity, and exchange rate uncertainty measures.