7. Dai M, Yotov YV, Zylkin T. On the impact of free trade agreements on trade diversion. Econ Lett. (2014) 122:321-5. doi: 10.1016/j.econlet.2013.12.024 Latin America, in particular, has seen a backlash in recent years against economic reforms put under pressure by the West, which have led to a number of populist leaders and left-wing politicians. Their rise is partly related to resentment about the effects of privatization and other market reforms promoted by Washington and to rising inequality and poverty. But Holtz-Eakin, of CFR, says it`s wrong that the region is aiming for free trade. "Failure is not in the ability to effectively conduct international transactions," he says. "Failure lies in competent governance." It is essential to take into account the increase in the (indirect) effects of trade flows in order to take into account the possible existence of high reciprocal dependence on production between sectors that are not direct suppliers or consumers, but are still members of the same supply chain. These addictions occur. B, for example, when two branches have the same trading partner, i.e.
when the i and k industries are connected by a length 2 path. In particular, in a scenario where I buy products (entries) of k and sell goods to i, the node i could be affected by a shortage of k supply, which is transmitted further than j [34-36]. In order to further assess the impact of these higher-order dependencies, we are studying the role of the maximum length of the max path in defining IT. 14. Whalley J. Why are countries seeking regional trade agreements? Frankel JA, Editor-in-Chief. The regionalization of the global economy. Cambridge, MA: National Bureau of Economic Research; University of Chicago Press (1998). 63-90. This study provided quantitative evidence that, in most cases, BTAs lead to a strengthening of TL between the partners concerned in the first years after the agreement came into force. This finding further reinforces the conclusions drawn from previous studies on direct trade flows in the gravity model.
However, our analysis goes beyond these studies by taking into account indirect effects, which are also transmitted through cross-sector input-exit connections. A positive impact index of the BTA may indicate that one of the main objectives of the negotiation process for the country concerned was to facilitate access to the partner`s internal market. The origins of such a positive index can then be twofold: on the one hand, the reduction of trade barriers allows to identify new market opportunities that lead to an increase in trade volumes between the contracting parties above average.