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17 J. Common Mkt. Stud. 1 (1978-1979)

handle is hein.journals/jcmks17 and id is 1 raw text is: Journal of Common Market Studies Volume XVII, No. i September 1978 THE EFFECTS OF ECONOMIC INTEGRATION ON TRADE By DAVID G. MAYES* Department of Economics, University of Exeter ABSTRACT This article provides a critical analysis of the models and methods which have been used to estimate the effects of economic integration on trade and suggests the most fruitful lines of further development. Both the problem of the examination of the effects of past events and problems in the prediction of future changes are tackled. In particular the drawbacks of the method of estimation of the effects of previous integration as a residual from models which explain what would have happened had the integration not taken place are shown. It is concluded that the most fruitful avenue of approach lies in the estimation of models which provide an economic explanation of trade flows and their changes, and can hence be used for both the explanation of the effects of previous integration and the prediction of future events. Over the past twenty years a vast literature has sprung up attempting to explain what happens to trade when countries reduce or abandon some or all of the barriers to free trade between them. Although the subject is by no means so new the upsurge in interest stems from the formation of trading areas in many parts of the world. The irony of the situation is however that despite such an accumulation of effort there is widespread disagreement between investigators as to the most appropriate method of analysis. To some extent this disagreement stems from the pursuance of different aims; however, most of it revolves round the lack of any yardstick against which to measure the accuracy of any results. Furthermore, since most estimates belong to different time periods and are recorded in different units of measurement it is extremely difficult to make meaningful empirical comparisons between the results. It is therefore the purpose of this article to appraise the methods of analysis which can be used and to see which differences have any bearing on the quantitative results so that conclusions can be drawn on the most profitable line of further advance. * I am grateful for the helpful comments of John Black, John Kay, Frank Oliver, Paul Richards and the SSRC International Economics Study Group on earlier versions of this paper.

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