Research & Publications

Journal Articles

Expanding RTAs, Trade Flows, and the Multinational Enterprise

2009, Journal of International Business Studies

Michele U. Fratianni, Chang Hoon Oh

Abstract

We test the relationship between the size of regional trade agreements (RTA) and openness by using a gravity equation with multilateral trade factors. Our sample includes eleven RTAs, seven with constant membership and four with expanding membership. Regional trade bias declines with the size of the club; three of the four expanding RTAs have already surpassed their ‘optimal’ size. We also explore the link between openness of the RTA and the geographic strategy of the multinational enterprise. We find strong evidence in favor of the regionalization strategy, which has been enhanced by the presence of RTAs.

Citation

Michele U. Fratianni and Chang Hoon Oh, "Expanding RTAs, Trade Flows, and the Multinational Enterprise", Journal of International Business Studies, 2009, 40(7):1207-1227.

Keywords

regional trade agreements, trade creation, trade diversion, multinational enterprise