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Can South-South trade Liberalisation Stimulate North-South Trade?

Marco Fugazza and Frédéric Robert-Nicoud
Journal of Economic Integration
Vol. 21, No. 2 (June 2006), pp. 234-253
Stable URL: http://www.jstor.org/stable/23000611
Page Count: 20
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Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
Can South-South trade Liberalisation Stimulate North-South Trade?
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Abstract

This paper uses a combination of Ethier (1982) and Melitz's (2003) models to show that liberalizing trade among developing countries, so-called South-South trade, could contribute to improve the access to international markets of developing countries' would-be exporters. Lower trade barriers among developing countries has the effect of lowering the price of intermediate inputs and eventually allows exporters in those countries to serve international markets. We also compare unilateral and multilateral South-South trade liberalization and find that the latter unambiguously reduces the price of intermediates in all participating countries, whereas the former has ambiguous effects.

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